Augustin’s decision relied on several erroneous assumptions; The most significant one that was the detriment to his revenue was when he believed that young customers would not mind the higher prices if they were in an environment catered towards them. He saw discounted price as the norm as “ridiculous” and that people should become “educated” to accept non-marked-down prices. However, as Shari Rudolph explains in the “Experts Respond” section, many people have bought something “not because it’s needed but because it is an incredible bargain”. Initially, Emilia had used “door-breaker” prices as the primary selling point for customers. Thus, by revolutionizing the approach of Emilia and getting rid of this defining characteristic, Augustin is assuming that the reward of having a better store environment and selling to youth outweighs the loss of discounted prices. He did not test this assumption beforehand and relied on his own opinion instead of hard data. If he had implemented experience prototypes that tested this assumption– for instance, by only using the strategy of no discounts but a revamped store front on only one of Emilia’s stores– he would have discovered leading signals that discouraged eliminating the discounts. By testing his strategy on a smaller cohort of customers, he would have been able to adjust the strategy to be more profitable, saving the company millions of dollars in euros and then some.
I would advise Augustin to combine discounted prices with another point of perceived value for younger consumers. I like the idea of revamping the store’s look by making it more “hip”, and straying away from the “old lady” association Emilia has had in the past. However, Augustin must recognize that customers like a good deal, and still offer the low price-value proposition to not exclude their previous customers in their new strategy. By doing so, Augustin would be able to revolutionize Emilia without losing the aspects key to their initial growth and survival.
