Augustín did not test his assumptions before applying them to Emilia’s pricing model and rebranding strategy. Running experiments to test his assumptions is important because it allows him to determine if his assumptions are actually true; and if not, allows him to pivot away before going forward in a direction that can have potentially disastrous consequences. The board should have asked him to prove his assumptions, but he also should not have gone forward without testing them, especially as he is not even part of the target demographic that he is making assumptions about.
If he had conducted experiments to test his assumptions, he could have discovered that customers value discounts and feel more loyal to brands that offer occasional discounts—they value great bargains and sometimes love buying things not because they really need them but because they are a great bargain. If he had known this, we would have decided that adopting a no-discounts strategy was a bad idea and avoided much of the 211 million euros in loss that resulted as a result of the new strategy. If I was recently consulted to advise Augustín, I would advise him to interview many Emilia’s current customers and the younger customers he is hoping to target about his ideas and assumptions for the pricing model strategy. These interviews would reveal valuable insights about the users he is hoping to impact and help him best determine the next course of action to save Emilia.
