Augustín, the president of the retailer Emilia, strongly believed in his strategy shift in pricing model. Emilia was a clothing company that had a customer base mainly made up of middle and older age women. The problem was that these middle/older age women would purchase clothes at Emilia only if they thought they were getting a deal: a super sale or discounted prices. However, Augustin did not run A/B testing on his sales populations before putting forth his theory. He wanted to abandon the no-discounts strategy, but he didn’t truly grasp customer behavior.
Augustin didn’t like constantly pushing sales campaign after sales campaign. Augustin wanted to push the narrative of moving towards younger customers.
Augustin mistakenly did not identify his customer segment well. His predicted change was also not accurate, since the customers did not behave how he expected them to. Augustin’s hypothesis could’ve been “younger customers are more willing to pay full price” or “after pivoting, we will attract new younger customers”. Augustin should have thought about how this would affect his current customer base: “in the wost case scenario, if all our current customers leave, how will we attract new younger customers?”
If I was to start advising Emilia, I would first make talk Augustin into making this transition take more time. We would need to validate all aspects of shifting the entire company’s focus to younger customers. We could elongate his strategy over more years such that customers don’t realize what’s happening. I would also advise to lean into existing channels of sending out coupons to further incentivize our current customers to stay.
