As the president of the retailer Emilia, Augustín did not run any tests to validate the assumptions on which his strategy shift in pricing model depended. Creating prototypes and testing assumptions is important because it gives information about whether customers (or potential customers) will really act the way you think they will. It gives insight into what they think and how they will behave in reaction to some change. This is different from using past data to validate assumptions because they only apply to the past and do not offer reliable predictions for the future. Had Augustín run some low-stakes tests for hablar claro instead of diving into it head-on, he would have realized that customers did not like the approach and that they would begin to favor Emilia’s competitors in the long run. Testing could also reveal approaches that customers did like, and once they found something that seemed promising, they could test that assumption, and so on. In short, prototyping and testing, which was nonexistent before Augustín’s launching of such a large-scale project, should have been a much larger priority before committing to the shift.
If I were recently consulted to advise Augustín, I would recommend that his team go out to interview customers of not just Emilia but also of their competitors to find out what the customers like or dislike about the stores they shop at and what might prompt them to be more active at Emilia or convert to an Emilia shopper. I would also advise him to run A/B tests with sections of a few stores to see if some of his ideas led to more sales. These are smaller-scale actions that would not affect the image or fundamental workings of the entire company, and they would serve as validation for any further assumptions and testing to be done before Augustín’s team could be sure that they wanted to go ahead and convert ten percent of their stores to a new format.
This store conversion would not be the definitive end of the testing, either, as they would ideally run some more interviews and tests to ensure that there wasn’t anything major they would want to change before expanding the strategy shift to more stores. With this kind of approach, even if they failed, it would not be because they did not try to understand their customers or attempted a change using a method that ignored the importance of validating assumptions.
