Welcome to the faster future. The events of recent years have ushered in unprecedented changes, altering how customers engage with products and services. Many new behaviors and preferences are here to stay, challenging businesses to rethink their strategies.
Consumers are increasingly prioritizing sustainability and ethical considerations in their purchases. Digital transformation has forged closer yet more complex relationships between businesses and their customers. Strategic planning, without a nuanced understanding of these changes, risks becoming mere guesswork.
To thrive in this new environment, you need extraordinary levels of commercial creativity and agility. This is where the test-and-learn approach becomes invaluable. Through data-driven experiments, you can rapidly test hypotheses, learn from outcomes, and refine your strategies in real time.
This approach helps decipher the motivations behind customer actions. It also enables your business to continuously re-engineer its revenue engines, unlocking and amplifying growth.
What is a test and learn approach?
A test and learn approach involves experimenting with strategies to determine effectiveness and make data-driven decisions for improvement. This method allows you to test hypotheses, learn from outcomes, and refine strategies in real-time based on data analysis. The advantages of a test and learn approach over traditional methods include:
- Data-driven decisions: Rely on objective insights from data analysis, ensuring decisions are based on facts rather than assumptions.
- Agility: Quickly adapt and refine strategies based on real-time feedback, allowing for faster responses to changing market conditions.
- Continuous improvement: Continuously optimize your strategies, leading to better outcomes over time.
- Customer-centricity: Decipher customer motivations and behaviors, enabling you to tailor strategies to meet customer needs effectively.
- Risk mitigation: Identify potential pitfalls and reduce the risk of costly mistakes.
Why you need a test and learn approach
Deeper level customer insights
In an unwavering quest to comprehend "what" consumers desire, numerous businesses have overlooked the "why" that drives demand. Nowadays, it's crucial to gather customer insights reliably and quickly. This provides an opportunity to redirect your digital transformation efforts from automation and cost efficiency to experimentation, focusing on the customer and creating value.
Illuminate your crystal ball
Advanced analytics and Big Data have empowered businesses to refine their revenue and volume predictions with increasing accuracy. However, these predictions were based on a crucial premise: past data was indicative of future trends because demand was expected to stay fairly constant.
A fundamental change in demand undermines, if not nullifies, this premise. This significantly reduces the relevance of past data and the predictive instruments that relied on this data. In essence, you can no longer use extrapolation to improve your standing.
By using a test and learn approach, you can adjust and improve strategies based on real results. This is more effective than relying solely on past data.
This method allows for continuous improvement and adaptation. It enables you to be more agile, continuously optimize your strategies, and mitigate risks associated with outdated forecasting methods.
Revalidate your revenue model
Increased public consciousness and widespread transition to digital platforms significantly impact conventional pricing strategies. The acceptance of inefficient and wasteful ownership models is diminishing. Instead, we've reached a critical juncture for consumption-oriented or subscription models.
You can figure out which methods generate the most revenue by trying different prices, marketing, or sales techniques. This helps in fine-tuning your revenue models to maximize profitability.
Test the relevance of your go-to-market approach
Customers now have a wider range of choices and are more open to exploring them than they ever have been in the past. Personal and remote interaction, or some hybrid combination, have become viable alternatives in B2B and B2C. You might be extraordinarily skilled at performing tasks that are no longer desired or required.
A test and learn approach allows you to experiment and refine strategies in a controlled and data-driven manner. Real-time data from experiments allows for quick adjustments to your strategies based on market feedback.
Make sure your products have viable markets
The value perception and willingness to pay within existing customer segments have changed, and even created entirely new segments. This may have left your price-value relationships out of whack with what customers want and need now and in the future, and your successful products may have lost their competitive edges.
Running targeted experiments across different customer demographics can identify new market segments and ensure you are tapping into all potential revenue streams. Through iterative testing, you can refine your product’s value proposition to better match customer expectations and perceptions.
This involves tweaking features, benefits, and messaging to see what resonates most with your audience, enabling you to focus on what truly matters and discard or improve less impactful features.
By aligning your products more closely with the needs and wants of both existing and new segments, you ensure a better market fit and higher chances of sustained success.
Secure your future by shaping it
In the past, businesses created new technologies that consumers would eventually use in their daily lives. But that process has flipped around 180 degrees. The customer has spearheaded the change, cultivating innovative habits, altering perspectives, and setting new standards. Now, it's time for businesses to adjust.
Your company should embrace a demand revolution by initiating its own business revolution. Unless you have complete faith in your conventional business methods, you must innovate in aspects and fields you never thought of before.
Accelerate your boldest commercial plans
Many business leaders consider making significant changes to their business. This could involve exploring new revenue streams or altering the products and services they provide. But in our experience, the daunting query in such hypothetical debates has often been "what will be the outcome if we proceed with this?"
During times of consistent and foreseeable expansion, it's challenging to validate significant alterations and ambitious revenue strategies. Businesses almost always deemed it excessively hazardous to tamper with revenues and customers, so playing it safe was always the preferred choice. Futuristic concepts that businesses dream up on their strategy boards are often thwarted by the need for stability.
However, this era of stability has ended, at least for the time being. The daunting question for ambitious business ventures has now shifted to, "What will be the consequences if we don't proceed with this?"
Whether it involves transitioning to a subscription-based pricing model, introducing a product-as-a-service model, fully embracing personalized digital sales, or even drastically bundling or unbundling your offerings, these daring moves can now act as a source of competitive edge instead of a competitive threat. You might even find that ideas that didn't work out in a previous setting are worth revisiting.
Build a test and learn culture
The response to the perpetual query "what do customers desire?" has perhaps never been more ambiguous. Devising methods to predict trends with unprecedented speed, adaptability, and magnitude is crucial. This raises the idea of test and learn from a fashionable objective to a vital phase. Your organization should be permeated by it, from product creation to post-sales assistance and support.
Rather than pursuing validation of secure hypotheses, experiment with bold or daring ones. Utilize a test and learn approach to reconstruct your revenue foundation, commencing with a data recovery operation to comprehend what resources are available. Put business intelligence at the core of your strategy. This necessitates a blend of business innovation and adaptability to identify the correct signals and swiftly and efficiently modify your market entry strategy swiftly and efficiently.
Success is neither guesswork nor a qualitative “art.” This presents a series of hurdles that affect your entire company, from research and development to marketing to finance and sales. It will also necessitate their collaboration to stimulate innovative ideas and introduce functions to new areas of expertise. Encouraging employees to embrace a test and learn approach is crucial for fostering a culture of innovation, adaptability, and continuous improvement within the organization.
Some businesses are well-equipped to expedite their most ambitious plans, make test and learn a habit, transition their digital perspective to value generation, and establish a powerful creative leadership team. Others, however, are faced with a steep climb to reorient their organizations and launch a strong response.
Transition the digital perspective to “revenue increase” rather than “cost reduction”
Numerous companies have applauded the efficiency of “remote” and have gained substantial knowledge about the cost advantages of digitalization. However, the widespread shift to digital has opened up opportunities so extensive that they have pushed companies beyond their ability to cater to their customers. Many of you had only just started with digital transformation on the efficiency side. Now, you will have to answer a litany of digital questions that are much harder on the revenue side:
- What are the steps to implement dynamic and customized pricing effectively?
- What strategies can enhance the financial aspects of direct-to-consumer ecommerce?
- How can you restructure field sales to cater to a digitally-oriented customer?
How Simon-Kucher can help
We specialize in helping companies harness the power of a test and learn approach to drive growth and innovation. Our experts guide you through systematic experimentation and data-driven decision-making, ensuring your strategies are continuously refined and optimized.
We enable you to identify the most effective pricing strategies, enhance customer experiences, and stay ahead of market trends.
Transform uncertainty into opportunity, and make informed decisions that propel your business forward. Reach out to one of our experts.
