⚡Food, Furniture and Funky Tricks: The Combination that Makes IKEA Unbeatable
IKEA's super power is to get you to buy things you don't even want. Here's how it cracked the code to consumer psychology.
An annual revenue of 44.6 billion euros!
That's what you get when you mix the right amounts of furniture, food and psychology.
The creator of this master recipe?
IKEA, a furniture chain offering affordable furniture across 460 stores around the world.
We've often seen IKEA come up with crazy marketing ideas and innovative solutions.
What are these “crazy strategies” that IKEA uses?
How have these strategies helped IKEA increase sales?
How does IKEA manage to keep its products affordable?
We will answer these questions in today's piece. ReadOn…
🔍 IKEA's Store Maze
An average IKEA store covers 300,000 square feet (the size of five football fields)!
This is the layout of a typical store:
And here's how IKEA uses this layout to increase impulse purchases by 60%!
The fixed layout ensures that you will have to walk from one end to the other to make a purchase. And navigating the entire store exposes you to more items, increasing your chances of buying more stuff. This is called the Gruen Effect named after architect Victor Gruen, the creator of modern day shopping malls.
And while you're exploring, you can easily pick up small decor items that are inexpensive!
IKEA stores also have entire rooms to help you understand how the furniture would look in your house. This also helps increase purchases.
Suppose you want a sofa. You like one in a nice room decor arrangement. You notice that the cushions and the rug go really well with the sofa, so maybe you should buy them. Oh, and that side table is a must! Just like that, you've bought more than you planned to.
IKEA's also got you covered in case you get tired. The store is full of furniture: pick any and rest it out!
Now, going to IKEA is a full-day tiring affair. What about food? Worry not, IKEA got you! You can simply walk into its food court and cafeteria to eat. And now when you're happy with your stomach full, your chances of shopping increases!
Hidden psychology at play: the smell of food also calms down the synapses in your brain that are firing because you're spending money.
Now, these are strategies used by IKEA after people are in stores.
How does it manage to get people to come to the store in the first place?
✨ The Marketing Magic
IKEA's genius marketing strategies keep the company in the spotlight.
In 2020, IKEA Dubai launched a new campaign: using time as currency.
Since IKEA stores are huge, they're usually far away from residential areas. So, for most customers, it takes hours to reach IKEA.
IKEA saw this as yet another way to increase sales! It incentivised customers to come down to stores with discounts: The longer it takes, the higher the discount.
This got customers to travel more often to the store, spend more time and buy more all the while feeling that they were saving money.
And once customers got the IKEA experience, they would recommend it to their peers (IKEA has a Net Promoter Score of 25!).
And they would keep coming back to IKEA simply because its furniture is of good quality and affordable.
🔖IKEA's Pricing Hacks to Stay Affordable
In a world where companies are increasing prices due to inflation, IKEA has been reducing its prices over time:
IKEA has three major hacks to make its products cheaper without sacrificing on quality.
Hack 1: Instead of using wood for furniture, it uses particle boards (made out of wood chips and resin) that give furniture the strength of wood without high prices. This furniture is also lightweight, helping IKEA save money on transportation.
Hack 2: IKEA doesn't make too many versions of the same furniture. For instance, an IKEA chair will be available only in black and white. Making more of these chairs will lead to economies of scale instead of spending more money to create fewer chairs of different colours.
Hack 3: IKEA transports furniture without assembling it. These furniture parts can easily be stored in a small box, saving on packaging costs. This method is called "flat-packing" and reduces packaging used by 50%!
Another interesting thing that IKEA does is decide the price of a product before making it. The company and its designers then figure out how to achieve this price. That's how true innovation comes in!
👀 Other Tricks in IKEA's Closet
IKEA does not just have master marketing strokes, it also figured out a way to avoid taxes!
So much so that it managed to avoid taxes worth $1.1 billion during 2010-2016! How?
Turns out IKEA's parent company Ingka Holding is held by a non-profit organisation: Stichting Ingka Foundation.
The foundation is dedicated to offering great architecture and design at affordable prices, and donates $2 million every year towards this mission.
And IKEA can thank its founder Ingvar Kamprad for setting up this foundation.
In fact, most ideas that make IKEA iconic came from Kamprad.
He was the one who came up with the idea of selling food with furniture because you can't do business on an empty stomach.
He was the one who invented flat packing, helping the world save billions in packaging costs!
You see how revolutionary a founder's vision can be?
Until next time, ReadOn…
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