IKEA is not only a favorite Disneyland for adults, but also one of the most striking examples of effective marketing, in my opinion. We don’t notice such marketing, we just pay more often and more often, while being absolutely certain that marketing doesn’t work for us.
In this article I will show exactly on the example of IKEA, how it skillfully uses our psychology and not only that we buy and spend more.
- The basic marketing approach
- Disneyland for adults
- IKEA is a realized fantasy
- Marketing tricks
- IKEA really keeps prices low
- IKEA hates air – Smart packing
- The IKEA effect
- Meatballs are the best sellers of sofas
- Inexpensive little things at the entrance and the exit
The basic marketing approach
It is estimated that 60% of purchases at IKEA are impulse purchases. It is not so easy to check it, but in general it seems to be true. Let not in money, because it is unlikely that people often spontaneously buy expensive goods. But in pieces, at least in my case, almost 80-90% of goods can be safely attributed to purchased impulsively, without a prior plan.
Here I go to IKEA. Statistically, I most likely go for the BILLY shelving unit – they say it’s their best-selling item. I went for the rack and left with a rug, containers, light bulbs, batteries, a teddy cat, a milk freshener, a mug and a photo frame. And with frozen meatballs too, what without them. Inside himself also very likely carried meatballs (defrosted), or at least a hot dog.
Yes, even the creative director of IKEA said that only 20% of purchases in the store are based on real needs! That is, according to his estimates, 80% of purchases are impulse purchases.
Although, in my opinion, it is not quite correct to contrast purchases based on real needs and impulse purchases – because even impulse purchases satisfy some of our needs, for example, to please ourselves unexpectedly.
But that’s not the point. The point is that IKEA earns billions of euros on impulse, spontaneous, unplanned purchases.
In 2021, IKEA was selling for 42 billion euros. By comparison, that’s roughly equivalent to the annual GDP of Estonia, Latvia, Bolivia and Paraguay (separately).
If estimates of such a large share of impulse purchases are correct even in pieces, then it turns out that IKEA makes the lion’s share of money as if on a level playing field. This is especially interesting today, when traditional offline retail does not feel very good. But this place, of course, is not flat at all. The fact is that IKEA’s methods of doing business are quite unconventional, and perhaps that is the reason for the large share of impulse purchases.
Disneyland for adults
There is an apt expression that IKEA is a Disneyland for adults. Here you have meatballs and household goods under one roof, and there is a lot to see. And you can also buy a closet and then heroically assemble it! In general, the entertainment is quite a lot.
On the other hand, someone assesses IKEA as a “hell and a nightmare. Look at these hellish layouts, when you can not quickly go from one department to another, missing the unnecessary one. Let’s talk about layouts.
Retailers generally try to design stores with three characteristics in mind:
- Understandability: the store layout should be easy for customers to understand. They shouldn’t get lost in the store, even when items from different categories are deliberately placed in different corners.
- Accessible: Easy to navigate and navigate. Here are the rows along, here across, everything is simple, and all departments are accessible, even if you have to walk from one to another.
- Visibility: good visibility of the goods and their surroundings. A person sees as many departments and merchandise as possible at once – what is not visible is difficult to buy.
Thus, most retailers try to make clear and simple layouts and give customers the freedom to move around so they can explore the goods on their own.
Common configurations of retail spaces are: grid, track, free layout, and some kind of spine.
In such layouts, the customer does not follow a predetermined route, although it is of course thought through in the layout of the store, and its goal is to increase sales. But still, customers in these layouts walk around the store as they want, here they are free people, endowed with the right of freedom of movement. But not in IKEA!
In IKEA, customers follow a pre-determined, one-way path that winds its way through more than 50 departments in a maze. The area of an average IKEA store is almost 30 thousand square meters – about five soccer fields. The average shopper walks more than 1.5 kilometers in IKEA.
Want to buy a lamp? No problem, please take a walk around dishes, rugs, toilet brushes and shoe horns.
There are several goals being pursued here:
You’re forced to familiarize yourself with a broader range of merchandise
In most conventional stores, customers see about 33 percent of the items on sale. But IKEA is no ordinary store and leads customers through its entire catalog. It’s as if IKEA is making us an offer we can’t refuse: “Thank you for the $2 rug, but look at everything else, please. That is, it literally shows its entire assortment, and you do not have much choice – you have to look.
False sense of scarcity
When shoppers walk past items they doubt buying, they’re likely to just put them in the cart because they don’t want to wade through the maze in the opposite direction later, violating Ikea traffic rules and going against the flow, bypassing and tripping over other people.
Lifehack: Don’t take the cart! Or take something smaller: a bag, a basket. So the temptation to buy unnecessary things is much less, tested and proven. It is true, of course, not only for IKEA, but for any other store.
The sense of mystery
Turning every 15 meters. We don’t know what’s around the corner, but it’s interesting! It fuels our desire to go further. Of course, there is (almost) no choice, but we do not resist – we are interested. (Yes, I understand that “consciously” it pisses you off, but “subconsciously” it is interesting, only we are not able to understand it).
Alan Penn, a professor of architecture at University College London who has studied the layout of IKEA, generally calls it a psychological weapon to encourage unintentional consumption:
“Going to IKEA is a ‘sabotaging’ experience. You surrender control of yourself to the labyrinth. And by doing so, you are likely also handing over control of your wallet.”Alan Penn
IKEA uses a psychological principle called the Gruen effect-when the layout of a store is so confusing that it makes you forget the original purpose of the visit, and that includes impulse purchases.
Incidentally, it would be appropriate to recall here that the cognitive distortions that often determine irrational behavior and underlie mindless consumption have the greatest effect when we are tired.
IKEA is a realized fantasy
This is where you see what your life could be. You see how your room could look like.
You feel like you could walk into a promotional magazine and pick up dishes, sit on a couch, try out a work chair. It’s very tactile and enticing.Jeff Hardwick, author of the Grune Effect
Lost in this daze, you can easily fall prey to some of IKEA’s other tricks, too:
- Competently and ubiquitously placed mirrors.
First of all, who doesn’t love to look at themselves in the mirror? It’s a narcissistic pleasure, we enjoy it, and in that state, we’re more likely to buy. Secondly, when we see not just ourselves in the reflection, but ourselves in this interior, we begin to believe that this is where we belong. We sort of try the environment on ourselves.
- Immersing ourselves in the context.
The interior and the fact of having demo rooms is close to real life. Familiar surroundings encourage us to buy.
- Cheap indicator items.
IKEA places baskets filled with inexpensive items – plush toys, slippers, pillows – along the route, thereby reinforcing in you the idea that its prices are good value.
- Bait prices.
Sometimes a product is not needed to be bought, but just the opposite – not to be bought, but to emphasize the profitability of other products and raise their sales.
Let’s say there are two shelving units for sale: a budget one for $40 and one made of better materials for $80. But the difference is big – the second rack seems expensive. In that case, IKEA can add a third, intermediate option – at first glance completely pointless – made of the same materials as the first, but significantly more expensive.
It does make no sense to us, but not at all to IKEA: the other two options look much better against it: the first by its low cost, and the third – for $80 – is suddenly perceived as a great deal, because it is only $10 more expensive than the second, not as high-quality.
The techniques described above help explain why we buy more than we wanted to when we’re ALREADY in the store.
But what brings us to IKEA in the first place, and what ultimately dictates our purchasing decisions, is the attractiveness of the prices available.
IKEA really keeps prices low
IKEA has a “price first” philosophy: marketers determine the target price of a notional stool, and then designers tweak the shape, materials, manufacturing process, and packaging to achieve the target price.
And once the product hits store shelves, IKEA tends to maintain or even reduce its price.
Researchers at Boston University and Wharton Business School studied hundreds of IKEA catalogs in six different countries between 1994 and 2010 and found that many of the company’s products get cheaper over time.
For example, the incredibly popular Poäng chair, which sells 1.5 million units a year, cost $179 in 1994 ($340 adjusted for inflation). Today it costs $129.
- The BILLY shelving unit already mentioned cost $82 in 1985 and $50 today.
- The LACC table in 1985 was $25, today it’s $13.
IKEA seems to follow a “survival of the fittest” pricing model: if the price of a product cannot be reduced over time, it is usually discontinued.
IKEA hates air – Smart packing
And, of course, flat packaging. It cuts costs all along the value chain – the less air in the packaging, the lower the production, logistics and packaging costs.
Of course, there is nothing wrong with low prices and flat packaging, and you can’t call it tricks. The consumer seems to benefit – in the end, the product does cost less: logistics are more efficient, and assembly costs are passed on to the buyer. But there is a nuance here, and the name for it is the IKEA effect.
The IKEA effect
Obviously, products in flat packs are in disassembled form, which means that buyers have to assemble them themselves.
So here’s the thing: We value self-made items over pre-made ones. Even if we only screwed in a few screws, it is still more valuable to us than an item not assembled by us.
In a 2011 Harvard Business School study, one group of people were given instructions on how to assemble origami and paper, and then asked to name an acceptable price for the resulting figures. And the second group did not assemble anything, but also determined the price of the same origami. The first group estimated their creations 5 times more expensive than the second.
This is the effect of IKEA, a cognitive distortion, which makes us value more things created by us, regardless of the quality of the result.
And then there’s this story:
In the 1950s, manufacturers noticed that sales of powdered cake mixes were falling. All the consumer had to do was add water. But this process was too simple: it spared the effort and emotion of baking. When manufacturers abandoned egg powder and forced consumers to add fresh eggs to the mix, sales went back up.
Furniture and food are, of course, things of a different order. But at IKEA, they live in pleasant symbiosis.
Meatballs are the best sellers of sofas
Although IKEA is primarily a home improvement store, ~5% of their revenue comes from food. If you looked at the food part of IKEA’s business as a stand-alone company, it would be in the top 50 food chains by revenue.
But why do you need food courts in a furniture store?
When Ingvar Kamprad, founder of IKEA, first incorporated food courts into his stores in 1958, his rationale was simple: “It’s hard to do business with hungry people.”
As time has shown, by “doing business” he meant “selling them couches”. Of course, there is a clear link between food and furniture sales. In 2012, Italian researchers set out to determine the impact of IKEA food courts on furniture purchases. A survey of 700 shoppers showed that those who ate at the food court spent, on average, more than twice as much on home furnishings as those who didn’t. However, cause and effect may be mixed up here, but apparently the Italian scientists didn’t read my posts about how “after” doesn’t mean “because of” and correlation is not the cause, but it should be!
Chris Speer, a former IKEA restaurant manager, says that food courts themselves are not a very profitable enterprise, “I’ve been told clearly that profit is not what I should be aiming for in a restaurant.”
The real goal, he says, is to strengthen IKEA’s reputation as a low-price store.
Spear says that when he worked at IKEA, the company had the lowest-price policy for hot dogs within a 30-mile radius. Every quarter, management sent him out to evaluate the competition: if a hot dog at Costco was selling for $1.50, IKEA had to sell it even cheaper.
It is difficult for a person to assess the price level of a rarely purchased item, such as a sofa. Is 30,000 rubles for a sofa a lot or a little? А 50? А 100? We do not buy sofas every day, and without an understanding of market prices it is difficult to relate them to reality. But with a hot dog, everything is clear: 35 rubles is clearly inexpensive. And this “inexpensive” we automatically transfer to other IKEA products.
Yes, I understand that there are still limitations in the form of physical availability of money, but this does not cancel the fact that we do not know how to assess prices “in a vacuum” – we simply do not have such a device, and all prices are only anchors set by someone.
“IKEA may be selling some products at cost or even at a loss, but it’s worth losing money on omelets if it helps sell more sofas.”Chris Speer
Gerd Diwald, who once ran IKEA’s grocery operations in the United States, puts it this way, “We’ve always called meatballs ‘the best sofa seller. When you feed [customers], they stay longer, can talk about products and make buying decisions right in the store.”
But there’s another version (and probably both are fair): eating Swedish meatballs is the best way to get rid of guilt after unplanned and unnecessary purchases.
Speaking of “eating guilt.” I’m guessing that the stand of cheap ice cream and hot dogs is not randomly located on the exit. There is a “peak-end” rule, a cognitive distortion whereby we tend to evaluate a past event through how we felt at its most intense moment (“peak”) and at the end. For example, it would be rational to evaluate the quality of a vacation by some kind of average feeling, because there are good and bad moments during a vacation, and we have to take them all into account. But in reality, we would only evaluate by the most intense – negative or positive – and the final one. If interested in the details, google “Kahneman Fredrickson Peak Ending“.
Going back to the ice cream and hot dogs on the way out – we’re likely to have a negative experience immediately after the cash register regardless of what we bought or if we bought it at all. If we didn’t buy, there’s no reward for walking the mazes or we just didn’t get what we needed – that’s bad. If we bought, then we paid, and our brain perceives parting with the money the same way as losing it – again, bad.
Thus, it is in IKEA’s interest that we can have an alternative final experience, but necessarily a pleasant one – and a cheap ice cream or a hot dog seems like a great solution.
By the way, about the reward for walking the mazes. This is due in part to the fact that we factor in sunk costs, even though it’s completely irrational.
In short: people tend to justify continuing an activity because they have incurred costs (effort, time, money, other resources), even though the meaning of the activity itself has already been lost, or maybe it wasn’t there in the first place.
IKEA stores are usually located outside the city because of their area and the cost of rent/purchase. And we as buyers are affected by the sunk cost effect: if we have spent the time/money to get to IKEA, we don’t want to leave without a purchase, because we didn’t drive there for nothing. And it is irrational because the purchase will not return the time and money, but will require more money.
Here are a few examples that relate to the quality of service and certainly are not tricks. But it’s not all that simple.
Numerous details in the interiors
Demo rooms are very “densely” decorated: there are always some cushions, mats, lamps, laptops, etc. It is clear that a good store with high quality service should look like this. It creates an additional feeling of coziness, and you already want the same, but besides this you notice how well “this pillow” looks with “that plaid” – and here you have in your basket not only a pillow, but also a plaid.
Buy a whole room
You can simply ask the staff for a demo room filling list to get one – and they have such lists. Since the main barriers to consumption or purchase for us are barriers (including effort, time, money, etc.) and not potential benefits at all, any salesperson action to reduce such barriers is a step towards sales growth. After all, it’s much easier to get a ready-made list and buy everything at once than it is to choose, write down items, search the warehouse, etc.
You can sleep
Many furniture stores allow you to lie on their beds, but IKEA makes it perfectly official to sleep on them. In 2015, there was even a story when journalists suspected that IKEA had changed its policy in China – too many people liked to rest there on new beds and under air conditioning, but IKEA denied it, saying that it only suppresses rude behavior and disrespectful treatment of other visitors, and no one is prevented to sleep quietly after all.
But the point, of course, is not to actually allow them to sleep. I think it’s so that people not only try the product but also feel like they own it. When we start using something, it’s as if we become its owner and it hurts to part with it afterwards.
In fact, all kinds of trials and test drives are needed to make people feel like they own the item, not for trivial testing.
And then there’s the reciprocity effect, which is that after receiving something for free (a trial, a service, a favor, …) we feel a sense of obligation, and for us it’s uncomfortable until we’ve paid back and thus zeroed out the conditional reciprocal service calculator.
Loyal return terms.
It depends on the product, but in general IKEA has very loyal return policies – within a year you can return if you don’t like something or it doesn’t fit, even if it has already been collected. Again it seems to be about the quality of service. But also in this way IKEA reduces the risks for us: if we know that we can return the purchase, the risks (the barriers mentioned above) are reduced, and we can choose something that we do not really need or are not sure that it will fit (“I will return, if anything”). Clearly, in reality, we more often than not return nothing – and again the effects of ownership and reciprocity.
The children’s room
Not an Ikea invention, and here everything is clear – the children’s room is needed not because the store cares about the parents, but because this way parents spend more at a quieter pace.
Well, you’ve all heard. Without windows, we lose our sense of time – invented in casinos. Whether or not IKEA did this for a similar purpose, I don’t know, but it sounds logical.
At the entrance, IKEA obligingly offers free pencils and a piece of paper for a list. If we put something on the list, we already want to do it – that’s a commitment.
We really don’t like not making a commitment, even if (and maybe especially if) it’s a commitment to ourselves.
Inexpensive little things at the entrance and the exit
That’s where we started, and that’s where we’ll end. It’s not just about us as buyers picking up stuff we don’t need or building a picture in our heads of low prices on everything based on the little things. It’s also about putting us into “shopping mode,” and in that mode it’s much easier to buy something else.
It’s much easier to put a person into buying mode with a $2 change than with a $1,000 couch (which IKEA actually wants to sell us).