Agustin acted irresponsibly when he decided to abandon Emilia’s discounts strategy overnight. Even worse, he resisted adapting to customers’ responses after disappointing initial results. He basically seems to be trying to impose his ideas.
As Mr. Mallo says, “This is a four-year plan, but it only works if the company survives”. That is, it is kind of an “all-in” trial that puts Emilia’s survival at risk – exactly what a test should avoid. He should instead aim to validate assumptions without putting the company at stake.
It seems clear that Augustin is trying to escape a discount-conditioned value proposition and leverage the idea of “pay what is worth, always”. This idea could be as valid as any other. But there are two rules that he should not forget.
First, is the fact that Emilia’s customer base seems to appreciate its c¡discount driven approach. They love bargains and it may indeed be the reason why they buy there, among others.
Second, the market rules. So, he should listen to the market: deploy a fast, low-cost test and iterate and he can scale conclusions to a broader audience.
Taking both into consideration, there are many ways in which could validate a new approach – start out with a certain location and change the pricing and communication for a certain period of time or launch a new brand within Emilia that won’t do any discount and track its performance vs heritage. Any way would allow Augustin to gather information, and market insights that would lower the risk of any future actions while increasing the chances of success.
The underlying problem seems that Augustin (with his star-like fashion background) acts more like a guru that tries to predict the future, than a responsible manager that actually tests the market. Yes, gut feeling works to a point, but you don’t want to rely 100% solely on gut feeling.
Overall, I agree with Shari when she says that a low-price value proposition would enable Emilia to capitalize on shoppers’ love of bargains – instead of pointlessly trying to resist them. Augustin could definitely try to build loyalty – f.e. leveraging discounts only for loyal customers and increasing purchase repetition – while avoiding low-price brand equity. I do believe that discounts are ok as long as how you deploy them to build customer excitement and loyalty makes sense. And of course, he should conduct a test, inexpensive and time-framed in a certain location before thinking of large strategy changes.
