The biggest thing that Augustin did not do was create and conduct tests to validate his idea. By blindly assuming that his idea would work, or specifically bring more benefits than losses in terms of customers, he ended up deterring the existing customer demographic with the seemingly condescending idea, as a board member noted in the case study. It was important that he prototyped and tested every assumption that came with his idea in order to actually get early signals that would have indicated if his idea would succeed. For example, one of the earlier tests that he could have done was run a line of non-discounted items for his offered low price, and then run a line of discounted items that were “discounted” to be at the same price. Certain aspects such as number of customers who bought the “discounted” items vs the non-discounted items could be measured, and stopping random customers and asking them for their thought process in buying would provide insight into why exactly they buy the way they do. This would at least help him and the company see the way the current customers do, and hopefully help generate ideas on how to retain their current customers while making changes to help the company. If another test provides an opportunity for customers to give feedback and suggestions, they may provide ideas on how to strike a good balance for the pricing shift. Overall, plentiful prototyping and testing of critical assumptions early on would have allowed Augustin and the executives of Emilia to see if they were going on the right path, or if they needed to pivot their strategy. They would have caught on to the fact that the shift made Emilia seem like it offered “less value than its competitors” early on, and found ways to change that before competitors could take advantage. Testing early would have at least given him the chance to adjust his ideas to make the change more easy on Emilia and minimize losses where possible.
If I were to advise Augustin, I would start with implementing a test just like I described above. His idea hinges on the fact that buyers would prefer a fixed, low price rather than seeing discounts. I would test this by selling items with identical prices, only some of them to be marked as discount. I would also test the lower prices against items of slightly higher price that are marked at a discounted price. I would collect the numbers on these purchases, as well as collect customer feedback on why they made their purchases and their thought process in doing so. With this information, I would then create different branches of testing for different couponing models, since that is clearly something the current customer base values. Trial tests could include testing no short-term sales, no mass coupon circulations, or fixed percentage discounts on particular items or seasons. All of these recommendations for smaller tests allow Augustin to see how he can compromise and retain the current customer base, while still seeing opportunities for where he can make changes in areas that don’t matter to the current base as much.
