Introduction
Writing an introduction about IKEA may be equivalent to wasting the time of our readers. There probably isn’t anyone who hasn’t heard about IKEA. Founded in 1943 in Sweden, this home furnishing giant is the world’s largest furniture retailer and is recognized for its minimalistic Scandinavian style products. Most of the furniture available in IKEA are flat-pack, which means it’s not a ready-made product and needs to be assembled by the customer!
Sounds inconvenient and time consuming, right?
But that’s the actual USP of IKEA and the company has brilliantly tapped into human beings’ psychology to reap enormous benefits.
How?
IKEA’s brilliant business strategy will be revealed in this case study. But first let’s see where IKEA stands as a business.
IKEA as a Business
With a valuation of more than 21 billion dollars as of 2021, IKEA ranked as the seventh most valuable retailer globally and the most valuable furniture brand. The corporation is present in most major markets and runs 464 locations globally. Before the coronavirus (COVID-19) pandemic, there were about one billion consumer visits to IKEA stores every year.
Now let’s go back to that ‘how?’
How, just by understanding human psychology, IKEA built a global brand?
Let’s dig in.
IKEA’S Path to Success
Democratizing ownership, innovation, quality, affordability, digital transformation…
IKEA has left no stone unturned to reach every continent in this world. Started as a small store in Sweden by founder Ingvar Kamprad almost 80 years ago, IKEA reached this height by primarily prioritizing people and their psychological and emotional needs.
The IKEA Effect
Biological children tend to be preferred over adopted ones by many parents, and evolutionary reasons like passing on genes are undoubtedly part of the explanation. However, psychological factors related to identity and bonding also seem to be at play. Specifically, the act of procreation offers parents an immense sense of personal creation – they see the child as made from them, of them, imprinted with their shared heredity. This appears to foster an outsized perception of ownership and attachment, with the child viewed almost as a feature of themselves or their self-concepts given life.
Whether IKEA planned out their strategy envisioning this phenomenon, but certainly this is the working principle behind their strategy of letting people assemble their own furniture, atleast at the customers end. This is famously known as the IKEA effect. Let’s understand it more deeply.
The IKEA effect refers to the psychological phenomenon where people tend to value and love products more when they put in some effort to build or create them, compared to readymade products. The assembly process leads to feelings of personal ownership and attachment as people contribute their own labor. The effort invested makes their IKEA product seem more valuable. Constructing products piece-by-piece evokes a sense of achievement when finished, making purchasers proud of their handiwork in creating the final product. This user participation translates into brand loyalty and customers make repeat purchases to relive the experience.
Intriguing Store Design
Core to IKEA’s retail success is understanding that shopping behavior is driven largely by subconscious cues that signal value. IKEA hacks the subconscious by making home goods not just visible but completely envisageable in life context. With value pre-established at gut level, conversion becomes natural.
IKEA showrooms present complete living spaces brimming with furnishings rather than isolated products. Beds, lamps, tables are artfully arranged into naturalistic room vignettes. This taps into subconscious recognition of contexts we inhabit daily. With furniture shown fully styled in situ as part of mock home environments, the brain instantly perceives inherent worth and desirability. The dream of a beautifully outfitted home is made tangible. Subconsciously registering this, wish lists grow long before logical thinking kicks in!
Affordability and Quality
One of the major reasons behind IKEA’s huge popularity is its affordable products with decent quality standards. In the age of Apple we understand high quality is expensive and going for affordable items means compromising on quality. But IKEA managed to bring quality and affordability together. How?
The answer is by reducing manufacturing, delivery and labor cost.
IKEA’s furniture is partly made of wood and partly made of particle boards (recycled wood chips fused together), this reduces the total production cost. IKEA sells and ships its furniture in flat-packs which takes less space and attracts less transport cost. It is the customers who assemble furniture themselves and that reduces labor cost at IKEA’s end.
This multi-way cost reduction allows IKEA to offer furniture at an affordable rate and maintain quality standards without bothering about mounting costs. Besides, IKEA follows Scandinavian design language which is minimalistic in nature with no or less decorations. Such furniture is easier to make and also reduces production cost.
Food for Your Brain
“You can’t do business with someone on an empty stomach.”
IKEA’s founder Ingvar Kamprad used to say this when he was running a mail-order business selling pencils, postcards, and other merchandise. He is known for often offering free coffee and cakes to his regular customers. IKEA maintained this tradition till date, though the food is not free but is dirt cheap.
However, this is not about an empty stomach-it is about a happy brain. Human brain uses 20% of the total energy even when resting and the consumption rate goes up when we undertake some mental activity. Now imagine a scenario in a retail store like IKEA. A huge space with lots of sections, thousands of items with different prices, quality, color choices, discount level, and your kids throwing tantrums…that’s a lot of work for your brain. Soon, your energy will dry out and you will, either take a food break somewhere outside, or you will cut your marketing list short. Both are not good news for IKEA.
Food consumption stimulates the release of happy hormones like serotonin and dopamine. These hormones regulate your mood and manage feelings like motivation, attention and emotional reward. In a retail store scenario all of these emotions will direct you towards the purpose in hand, shopping. Happy customers always purchase more.
This is the reason every shopping mall has food courts. But these food courts are powered by big names like KFC, Burger King, Dominos etc. and are usually expensive. But in IKEA stores they serve Swedish dishes at cheap rates because selling food is not IKEA’s prime motto, food is the catalyst to keep happy hormones flowing and keep the shopping spree alive.
Conclusion
IKEA’s case study is a brilliant example that showcases the use of neuromarketing and positioning your business as per the psychological and emotional demand of people. IKEA is not just selling products; they have created an immersive experience where people co-create things with a boosted feeling of ownership.
