He did not test out his assumptions. His strategy was based on many assumptions that were not prototyped and tested. Testing assumptions is essential for finding out flaws in a strategy early on to avoid a cascade of failures. Usually, the assumptions should be tested with cheap and easy prototypes. Because there is no high demand for money and effort, the prototypes can be carried out very quickly. The designers can soon find out if a prototype failed and examine the reasons behind the failures. Then, they could pivot and test a new strategy.
For example, one of the assumptions behind Augustin’s strategy was that customers shop based on rational calculations more than emotions. In other words, it was assumed that all customers were rational buyers that would do the statistics and find out that “a random bucket of items will show that although some of them are slightly more expensive, overall,, Emilia is significantly cheaper than all its direct competitors” as said by Augustin. They could have tested it through an experiment. First, they could recruit a group of customers. Then, they put out two groups of items. Items in one group have a very high “original price” tag and are marked as “on sale” with lower prices. Another group of objects have similar quality and fashion but do not have sale tags, with overall lower prices on average. The designers can ask the customers how cheap they thought the items were and how they felt after the shopping. In the end, the designers can compare which items got sold more. They might find that although the second group had an overall lower price, people thought the first group was cheaper, felt better after buying the on-sale items, and bought more from the first group. Customers might shop based on whether they get a good feeling after purchasing instead of based on the actual money they spend. If the designers had found this assumption was wrong, they might not give up having sales entirely in the first place.
If I were recently consulted to advise Augustin, I recommend he start with baby steps. He could test out the impact of his changing the shop layout to make shopping at Emilia a socializing experience. Because the buildings have already been treated, the board can’t return to the old strategies. Augustin failed in his pricing strategy, but maybe his socialization strategy can still work. It would be interesting to see how the new storefronts work with the old best-price sales. He can start with small changes like changing best price weekends to event weekends, when not only will the price go low but also there will be performances or fun events that attract customers to the shops. There can be other ways to unpair Emilia and meager prices in customers’ minds.
spot on analysis