IKEA case study and strategic marketing plan
Why is the styling and design of IKEA products so popular?
IKEA was created by Ingvar Kamprad 60 years ago. The Swedish company was based on the idea that as long as the price was right, customers would be prepared to travel out of town locations, queue, collect their purchases and assemble the furniture themselves (Doole and Lowe 2005). The mission of IKEA was formulated by its founder. IKEA”s mission is to offer wide variety of functional furniture for the house, of a quality and at a price affordable by a majority of people. The core principles of IKEA that seeks to achieve the mission are quality and economy. The principle of quality is applied at three points in the life of the IKEA products – creation, range and use.
1. Creation – IKEA designs its own products. Each product has a name rather tan a code because IKEA wants its products to be part of the family.
2. Range – Each item for sale in the stores, whether furniture or other products, is part of a coherent whole, designed in accordance with the expectations of a specific segment which can be young or old, high or low income, modern or classic, etc.
3. Use – IKEA furniture is submitted to three types of trial which test strength and workability as well as surface and resistance (Dupuis and Dawson 1999).
IKEA’s designs and styles are very popular to its customers because it is able to blend quality, stylish designs and affordability. These characteristics make IKEA products very attractive to the customers. The IKEA design approach according to McDermott (2007) retains a strong Scandinavian identity seen in the use of natural wood, minimalist shapes, high technology, new materials and strong colors (as shown in the photos below). The company has extended the image of 20th-century Scandinavian Modernism and ensured that is has become an immensely widespread domestic living style.
Boliden Chair and Footstool
Bjursta Glass Door Cabinet
Besta TV/Storage Combination
Mandal Bedframe with Storage Boxes
Leksvik Wardrobe with Three Doors
Mikael Computer Workstation
Beddinge Resmo Sofa Bed
(all photos were taken from www.ikea.com/us)
IKEA’s design is made synonymous with middle-class taste and thereby becomes the vehicle by which visible signs of affluence are made accessible to people of modest means. Of special relevance is the fact that the IKEA emphasis on design gives expression to the centrality of style in the contemporary marketplace. IKEA products could be roughly described as interior European modernism done in Scandinavian style. But the company’s genius consists in joining the attractions of design to practicality and affordability along with versatility. By this means, it captures a broad demographic of consumers who can buy into a trendy middle-class lifestyle while gaining the satisfaction of purchasing highly functional and practical products at minimal cost (Dunn 2008). Therefore, the bottom line is this: the reason why IKEA products are so popular is because of its formula for creating furniture pieces. This formula consists of modern-contemporary style and design, affordability, functionality and affordability.
Does IKEA’s blend of style and pricing have appeal to mainstream US consumers?
Yes, IKEA’s blend of style and pricing have appeal to mainstream US consumers. In order to illustrate this further, let me discuss IKEA’s segmentation strategy.
Market segmentation is defined as the process of partitioning different groups of consumers that require differentiated products and/or marketing mixes (Applbaum 2004, p. 32). According to Mochis (1994) market segmentation refers to subdividing the market into several groupings, with each group being recognized for its preferences regarding products/services and methods of delivery (p.41). A market segment is a section of a market which possesses one or more unique features that both give it an identity and set it apart form other segments (Proctor 2000). Segmentation enables marketers to divide prospective customer groups into segments that consist of people with similar demographic, psychographic or usage patterns (Locke 2001).
IKEA uses demographic bases for segmenting its markets. Demographic segmentation according to Sternthal and Tybout (2001) includes age, sex, family, life cycle, job type/socioeconomic and group income level. IKEA is visited mostly by females with average age of 38. Recently the company is targeting young couples who own houses and apartments and who are willing to experiment (in terms of price, design and material) when it comes to furniture. IKEA’s target base includes students, young adults, urban professionals and first-time furniture shoppers. IKEA is committed to the young customer and the young at heart. The core market is the customer with limited budget who appreciates IKEA’s product line, displays, and prices.
How do you account for IKEA’s growth and popularity: value or image?
IKEA”s growth and popularity can be attributed to both value and image. The customers of IKEA visits the stores and purchase different items because of the products’ value (in terms of quality, style, affordability, functionality and durability). At the same time, IKEA is able to exude an image of relaxed, informal, yet efficient service in every store. The IKEA image is a light, natural wood, which is crisp white. Signature colors are yellow and blue and are ubiquitous (Michman and Mazze 2001).
IKEA’s marketing strategy has been to build on Swedish home-based stereotype of clean and efficient service. Its furniture is well designed, modern, functional, durable, of high quality, and its price competitive. Its image and value attracts customers. The IKEA brand image is built on associations with cost-consciousness, design sensibility, unconventionality and environmental awareness. For many customers, these associations form a basis of a general outlook and set of priorities for life in general. The IKEA values that underlie the brand can be categorized as economic, social, and environmental. These values differentiate the IKEA brand. IKEA’s marketing focuses on customer value by communicating how customers can co-create solutions to real-life problems at home and thus promote a better life. Advertising in the catalogue, brochures, and the website all communicate this value proposition. The focus is not entirely on furniture, but also on the value that can be realized by customers who utilize the offered resources in a personalized fashion to provide solutions to their own distinctive real-life problems (Edvardsson and Enquist 2009).
What can IKEA do to sustain growth after it loses some cachet?
Let us consider Ansoff’s (1995) matrix. Ansoff’s strategy is composed of four components. These are product/market scope, growth vector, competitive advantage, and synergy. Ansoff identified four generic growth strategies:
- Market Penetration
- Market Development
- Product Development
The market penetration strategy amounts to increasing sales of existing products while at the same time trying to maintain current margins of profitability on sales. When the market is expanding this may be accomplished through active marketing in order to get more first-time users to buy the product or to increase product usage of existing buyers or to increase product usage of existing buyers or to increase the frequency of use (Proctor 2000).
A new product can be defined in several different ways. A product can refer to a physical entity or a cluster of expected customer benefits. From the point of view of a business, a product innovation may represent a change in, or addition to, the physical entities that make up its product line. From a market perspective, the term refers to a new or revised set of customer perceptions about a particular cluster of benefits (Proctor 2000).
Finding new markets may not guarantee success for the firm. A firm can also achieve growth in developing market. Market development strategy involves developing new markets by duplicating the business operation, with minor adaptive changes. The firm can undertake a market expansion strategy. In market expansion, the same expertise and technology and sometimes even the same plant and operations facility can be used. There is therefore potential synergy and resulting reductions in investments and operating costs. Geographic expansion may involve changing from regional operation to a national operation, moving into another region, or expanding to another country (Proctor 2000).
Diversification involves moving simultaneously into new products and new markets. It is a risky strategy but with careful selection of the right kind of businesses, considerable improvements in profitability can be experienced. Diversification can take place into related or unrelated products. A related diversification is one in which the new business has meaningful commonalities with the core business. These provide potential to generate economies of scale or synergies based on exchange of skills and resources. A diversification strategy can be implemented by an acquisition (or merger), new business venture or strategic alliance (Proctor 2000).
One particular strategy that IKEA is exploring is diversification. To try and maintain growth, IKE is considering diversification outside of the furniture market. The company considers developing a chain of hotels, named Swedish Inns. The company (Inter Ikea Holding) plans to create a joint venture with Allegiance Hotel Group. Swedish Inns would be economical hotels, entirely fitted out by IKEA; they would be promoted through the IKEA catalog and the first ones would be situated close to the distributor’s outlets (Dupuis and Dawson 1999).
Speculate on what will happen at IKEA stores as they are tailored to fit local tastes.
Tailoring of IKEA stores and products to fit local tastes will have a negative effect on IKEA.
IKEA is a successful multinational business because it has introduced a highly differentiated product into a traditional industry and has now built up a globally recognized brand name for high-quality, inexpensive, and attractive furniture. It has combined the generic strategies of differentiation, low cost, and niching and has outsourced both production and delivery components of the value chain (Rugman and D’Cruz 2003).
Let us consider IKEA”s competitive advantage. In the case of IKEA, sustainable competitive advantage was achieved because of the company’s added quality services. Potential purchasers try to find suppliers that offer them the greatest added value. As an added value and as a way to attract customers, IKEA offers superior customer service. IKEA meets customers with catalogs, tape measures, pens, and notepaper. The shortage of salespeople affords customers the opportunity to shop in freedom and to take notes. IKEA also offers services to parents while they shop such as the supervision of toddlers, infant-changing rooms, and attendants who warm baby bottles. Snack bars sell Swedish specialties at low prices. The strength of IKEA is its ability to shift a variety of cost burdens to the customer that might be found desirable or perceived as an added value. It is also important to consider IKEA’s positioning strategy. Positioning refers to the decisions and activities intended to create and maintain a firm’s product concept in the customer’s minds. Market positioning amounts to arranging for a product or service to occupy a clear, distinctive and desirable place relative to competing products – in the minds of target customers (Proctor, 2000). Positioning is the process of distinguishing a company or product from competitors along such dimensions as product characteristics or values that are meaningful to consumers. Positioning strategy aids customers in evaluating product attributes that are of significance or value to them (Michman et al 2003).
IKEA’s positioning strategy is founded on its philosophy ‘Your partner in better living’. IKEA’s positioning strategy is Differentiation. Differentiation, according to Kotler (2000) is the act of designing a set of meaningful differences to distinguish the company’s offering from competitor’s offerings. The five dimensions of Differentiation are:
- Product – physical products vary in their potential for differentiation.
- Services – when the physical product cannot be differentiated easily, the key to competitive success nay lie in adding valued services and improving quality.
- Personnel – companies can gain a strong competitive advantage through having better-trained people.
- Channel – companies can achieve competitive advantage through the way they design their distribution channels’ coverage, expertise, and performance.
- Image – buyers respond differently to company and brand images. Identity comprises the ways that a company aims to identify or position itself or its products, whereas image is the way the public perceives the company or its products (Kotler, 2000).
IKEA partners with its customers in ensuring that the customers save money by offering stylish, functional, low-cost home furnishings that customers must assemble themselves. Making the customers assemble their own furniture enables IKEA to save money on manufacturing and distribution, which they then pass on to customers in the form of lower prices at retail. To compensate for the customer having to do-it-themselves, IKEA offers other services that make this proposition attractive. These extra services include in-store child-care and play areas, restaurants, and longer hours of operations. Lastly, let us look at IKEA’s marketing mix.
Achieving a favorable position in the minds of the consumers and making the product or service attractive to the target market entails careful formulation of the marketing mix. Getting the right mixture of the product, promotion, price, and distribution is important in marketing. The goal of the marketing mix is to portray an image for the product or service that will match with how the organization wants the product or service to be visualized in people’s minds. Marketing mix according to Kotler (2001) is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.
Product – The products or services of an organization help in creating an image of the firm in the mind of the consumer. This image is reflected in the customer’s perceptions and feeling about its products or services. The product is the element in the marketing mix that includes all of the issues surrounding the development of the product or service
Price – where market demand and the cost of producing the product or service come together and determine the profitability or lack of it
Promotion – Promotion consists of all of the methods of communicating the product offering to the target market, such as advertising, publicity, and sales promotion
Place – Place is the task of getting the goods to market
IKEA’s products reflect modern Scandinavian designs that are stylish, functional, and durable.
IKEA offers much more to the customers than just low prices. IKEA offers a new division of labor. If the consumer is willing to take over a part of the traditional role of the manufacturer and the retailer – assembly and delivery – IKEA promises well designed products at very competitive prices (Hougaard and Bjerre 2003).
IKEA employs different sales and promotion activities to attract customers. It offers discounts and exciting rewards and freebies to its loyal customers.
The stores of IKEA are very distinct in design and format. Upon entering an IKEA store the customer can see a play of bright blue and yellow colors (Sweden’s national colors) in its exteriors. Furniture viewing is done on the main floor where they are arranged in realistic settings. The store staff allow the customer to do their own shopping. The customer takes note of the names of their desired items and then pick them up on the store’s lower level. The furniture items are placed in boxes and then the customer takes their purchases home in their own vehicles and assemble the furniture themselves. Each IKEA store has a restaurant, a grocery, a play area for children and a nursery room. The store is arranged so that customers have to pass through all departments to reach the exits (Lowenstein 1997).
IKEA’s management philosophy and all its activities is founded on its mission of offering wide variety of functional furniture for the house, of a quality and at a price affordable by a majority of people. This mission is reflected by IKEA’s competitive advantage, positioning strategy and marketing mix. Tailoring IKEA’s stores and products to local tastes will cause IKEA to change its mission, to lose its competitive advantage and to redesign its positioning strategy and marketing mix.
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