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- 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?
- Augustin’s strategy was based on a lot of experiments that were not prototyped or tested. Some of the assumptions he had were “customers need to be educated,”; “people will come to the physical store instead of just going online,”; “People will see the value in Emily even without discounts, etc.” Is it really important to do assumption testing before investing tons of money and resources in some strategy, as it can give early indicators of success? A lot of times, the executives think as themselves and not as customers, and hence assumption testing, especially with customers, is important in order to make sure the interests of the company are aligned with those of its customers.
- If Augustin had done testing and prototyping before the complete renovation and rebranding of Emilia, he might have discovered some of the facts that were not obvious to him. Stuff like maybe teenagers doesn’t want to shop at the same place as their mom. So making a store which can cater to both the age groups might prevent both from coming. Finally, a company needs to understand what its customers are like and what they want. What will they pay for? And often, this can be completely different from what the executives think.
- 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!)
- My advice to Augustín would be first to try to find the factors it can use to differentiate Emilia fro other competitors. As said in the expert’s respond section, Emilia should combine price with some other perceived value to differentiate its stores from competitors. For example, it could offer opening price points on key items (say, three T-shirts for $15) and continue to promote those bundles until customers come to rely on them and associate them with the company.
- Everyone wants a great deal. And Augustin should not try to resist it.
- Augustín doesn’t seem to be taking the point of view of his customers, who are looking primarily at what the brand can offer. Before he tries to lead them toward everyday low pricing, he must provide something to make the brand stand out.
