Ikea

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Background Information

• Ikea was founded in 14 by Ingvar Kamprad

• Originally sold pens, wallets, picture frames, table runners, watches, jewelry and nylon stockings

• Philadelphia, 185 First IKEA store reaches the US

Ikea's Holdings

• On August 1, 001, IKEA Group had 14 different stores in countries with 0 more stores owned by franchisees outside of IKEA Group

• Turnover for the financial year from September 000 to August 001 was about .6 billion dollars

• 17% turnover and 4 % purchasing in the US, both in nd place

• US is number after Germany in the top 5 sales countries

• The IKEA 00 catalog is distributed; around 110 million copies in 4 different languages

• IKEA is the 7th largest home furnishings company in the world

What happened?

• From 185 to 1, IKEA opened 11 stores in the US, with 4 of those 11 in 1. The next store IKEA opened in the US wouldn't be until 18. From 1 to 18, IKEA had to reorganize their stores and redevelop their ideas and marketing strategy.

Cultural Metaphors

• Americans are individualistic. Americans are taught to be leaders at a young age. Ikea likes to lead people by using arrows on the floor to direct traffic.

• Americans like specialization. At first, when IKEA hit the US, they were carrying lots of different items, and it took time for them to specialize into home furnishing alone.

• The US uses inches, feet and miles to measure, while the rest of the world uses the metric system (centimeters, meters, and kilometers). When Ikea first came to the US, everything was metrics, which made things difficult.

• Americans like to have things stand out, but at the same time be in harmony with one another. For example, take the football, one player stands out, but together the team is in harmony. Same goes with home furnishings in a room.

• Americans and the word independence are almost synonymous. Didn't know who to target when they first arrived, and then started to hit it big with college students seeking independence.

• Americans like to feel important and rich. Ikea came to the US using odd fabrics and colors which did not appeal to those of status, which then in turn did not appeal to the middle class.

Consumer Behavior Topics

• Psychological A need for belonging and acceptance; Self-expression is important; Want a modern look.

• Sociocultural Target age range 18-5 years; Both men and women shop at Ikea; Usually will have a bachelor's degree; Active and fast paced lifestyles.

• Efficiency Admire anything that saves time and effort; "Time waits for no one"

• Practicality Does it make life easier; Is time saved by using this product.

• Status Does the product give off a relative sense of value or prestige; At first, IKEA used materials that were very uncommon in the US, and Americans didn't like them at all.

• Relative Advantage IKEA came off looking cheap because of the materials that they used. They didn't have a niche in the market when they came. They carried too many items and it appeared cluttered.

• Targeting IKEA didn't have a target market when they first entered into the US market. They thought that they could just enter and do their best. It didn't work. They had to reorganize their products to appeal to specific groups of people.

• Intrinsic qualities Physical characteristics that serve to influence the customer's perception of the product. The material that the products were made from were not of the best quality, and therefore gave the customer the perception that it was cheap and of bad quality.

• Sociocultural Segmentation IKEA needed to redevelop a plan that would get different groups of people to all like IKEA. They could do so based on cultural variables, such as social class, stage in the family life cycle, religion, race, nationality, values, beliefs or customs.

• Single Parent Family America is known for single parent families. IKEA needed to appeal to those one parent families so that their children's line would be bought. Today, 0-5% of IKEA's female shoppers are single moms.

• Repositioning IKEA had to change the way their products were viewed. To Americans in the beginning, IKEA's products appeared to be cheap, therefore not generating sales.

• Reach IKEA had a few ads when they first came about, and then stopped. Their ads needed to be seen in order to get people to go to their stores.

• Relationship Marketing IKEA didn't have many sales people on their floors when they first open, nor do they now. Americans like people who can give them information on products that they plan on purchasing. Americans need reassurance that things are of good quality.

• Interpersonal Communication IKEA needed more people to interact with their buyers. Granted that customers would have to build their furniture themselves, but it people wanted to make sure that it would be feasible to do so, and therefore needed people to talk to.

• Message In one of IKEA's ads, they had two men holding hands walking through the store. That sent a negative message to most men because Americans have a problem with their identities. They didn't want to be affiliated with anything that appeared to be homosexual.

• Global Marketing Just because an ad works in one country, doesn't mean that it will work in another. (The two men holding hands)

• Family life cycle Where is the customer at in their life? Who is actually going to buy the product and be able to use it in a proper manner? It would depend on what stage the customer is in on their life. Married with kids, going to college, a bachelor? It all matters.

• Consumer Socialization Americans learn to shop by just walking around stores at random and looking. Window shopping you could say. IKEA struck out when they put arrows on the floor to guide people through the store.

Strategy to Target the Consumer Market

• Ikea's strategy to target the consumer market is more standardized than localized. Although there is some localization involved, IKEA has what they call their "wide range" of products. Their products are all the same in every country they are in. Although they may display the products differently on their showroom floors or in their catalogs, these products are all the same whether they are in the US, Sweden, Australia, Russia or even China.

• Ikea has experts in each country determine what is the best way to advertise and sell their products accordingly.

• They use rooms on their showroom that have about the same size as rooms you would find in a home of that country. Everything relates more to the buyer.

Recommendations

• IKEA needs to work on more localized marketing. The ad with the two men holding hands just didn't work with Americans.

• IKEA needs to work on their interpersonal communication. They should staff more people to help the customers while they roam the store. Lots of questions can be raised about their products at any given time.

• IKEA could use cross cultural psychographic segmentation. Because America is made up of many different cultures, they could take pieces of that, along with where these people are in their lives and create products to fit each category.

• IKEA is now starting to take out the arrows and let shoppers roam the stores on their own

• IKEA is planning to build more stores in the central area of the US

• IKEA is opening two more stores in Southern California, one of which is a relocation (New store in West Covina and a relocation of the Tustin store to Costa Mesa)

• IKEA plans to enter the Japanese market in the next 5 years

• The first IKEA store in Philadelphia is now the headquarters for the US market and about miles away a new store is being built. 00,000 square feet with five full size "model homes" inside

• If people can imagine what rooms will look like, they are more likely to buy a product that is being used, rather than one that is just sitting on a shelf

• The idea to show off full homes with profiles is a good idea and that may help IKEA expand even further

Resources

Mr. Clive Cashman

IKEA US Public Affairs

610.84.0180 ext 51

IKEA website

www.ikea.com

Consumer Behavior, 7th Edition

Leon G. Schiffman and Leslie Lazar Kanuk

Page 4 and Glossary

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