Validation is important because it provides a signal that informs us whether or not a strategy will work. Validation, which can be done through prototyping, can de-risk a project and test an assumption. Augustín could’ve performed multiple experiments that tested his pricing model and used those findings to figure out whether or not to roll out that pricing model. It could’ve prevented him from losing 211 million euros in revenue. I empathize with Augustín’s desire to get out of the discount rut but he should’ve been more intentional with determining how he was going to get out of it. It’s true that the board should’ve asked Augustín to prove the assumptions of his pricing model but I believe as the President, Augustín should’ve been more diligent with assumption testing, considering that this strategic shift is significant and has the potential to have negative, financial ramifications.
If I had to consult with Augustín, I would recommend he conduct an in-depth pricing analysis (i.e., Van Westendorp). This would involve a large number of customer interviews, which will determine customers’ willingness to pay and Emilia’s brand positioning. Through these experiments, Augustín will learn the value of discounts to Emilia’s brand. It may encourage Augustín to figure out how to establish brand loyalty and product differentiation because Emilia should not be overly reliant on discounting. The value proposition of Emilia should revolve around discounted pricing and the product itself, not just desperation discounting. Desperation discounting discredits the company as a whole. Other companies such as Walmart have succeeded in balancing price and product differentiation. I would advise Augustín to learn from existing, successful competitors as well. This competitor research, coupled with user research, may lead Augustín to launch a marketing or branding campaign to shift Emilia’s brand positioning, in addition to rolling out a new pricing model.
