- Augustín, the president of the retailer Emilia, strongly believed in his strategy shift in pricing model. However, what did he NOT do beforehand to validate his idea (hint: it’s also discussed in “The Experts Respond” footnotes)? Why is that important? What could have gone differently (e.g., what findings could he have discovered earlier, before losing 211 million euros in revenue), and why?
- Pretend that you were recently consulted to advise Augustín – what course of action would you recommend, and why? (“The Experts Respond” section might also help!)
As the president of Emilia, Augustín should not have relied on his intuition and instead should have conducted user interviews to understand his customers and therefore reject his idea. In the section titled “The Experts Respond”, Shari Rudolph, the vice president and the chief marketing officer of Gabriel Brothers asserts, “Augustín’s strategy is based on a lot of assumptions that were not prototyped and tested. The board should have asked him to prove his assumptions—not through data, because data reflects only the past, but through experiments”. When reading this article, I highlighted these sentences specifically because it shows how even when you may have assumptions that you are confident of, it is still necessary to prototype and test these assumptions so that you can gather reliable data. If he had gathered insights about his customers, he likely would have discovered that customers value getting a good discount because of the satisfaction that comes when finding a good deal. Taking the time to understand Emilia’s customer base would have allowed him to discover that what his customers value immensely was what he was taking away.
If I was recently consulted to advise Augustín, I would echo what Rudolph suggested in the “The Experts Respond” section, with the main strategy being avoiding the typical “desperation discounting that has undermined his company for years”. Instead, Augustín can realign his company’s model by combining price with another perceived value, as Rudolph suggests. For instance, Rudolph shared that advertising bundles could be a good approach to get customers to become loyal and associate these good values with the company.
Moreover, I would also suggest that Augustín spend more time in need finding and the user interview process. I would want Augustín to conduct research on what customers find most appealing about Emilia: is it the low prices? Is it the promotions? The overall shopping experience? That way, Augustín can truly develop a solid understanding of what they value from Emilia and what would make them loyal to the store.
