Augustin failed to perform market and customer research before implementing his “straight-talk” campaign. As discussed in the case, Augustin had convinced the board to run the campaign without testing it first, which is interesting since the plan is a four-year plan. A company like Emilia, who had already been struggling, doesn’t have the ability to wait and see if it works—the experimentation is necessary to shift away from the old model, but experimentation should occur faster, on a smaller scale, and with a tight feedback loop from customers. Augustin should have paid more attention to the customer responses and rather than view them as “arrows in the back,” dug deeper and continuously reevaluated his strategy. This way, the company could have pivoted before losing 211 million euros in revenue and potentially finding a better long term strategy faster.
If I were consulting Augustin, my first step regardless of business strategy is to set up a clear experimentation framework to establish goals, OKRs, and timelines. I would go into the experiments with the mindset that the best strategy won’t come right away and that tweaks will be needed, but the iterations should be fast and flexible to not bog down the tuning process. I like what the experts recommend in that it’s not wise to pointlessly try to resist Emilia’s customers’ love of bargains and rather tap into it—just in a different way than before. Being more careful about the discounting scheme and testing out strategies such as a markdown cadence like Gabe’s, end-of-season sales, or having opening price points on key items. Especially with the opening price points strategy, having a handful of loss-leaders can latch customers in and build loyalty; Costco does this very well—luring customers with their food court offerings and low-priced gas to get them to become a member. All of these strategies should be run as experiments rather than going all in and seeing what happens.
