How IKEA Changed Customer Retention For The Flat Pack Furniture Industry?


IKEA has changed customer retention forever, for the flat pack furniture industry. The global furniture retailer is known for its modern designs for home appliances and furniture. It offers simple, eco-friendly designs for interiors. When it was founded in 1943, IKEA was essentially a mostly mail-order sales business. It only started selling furniture around five years later. In August 2015 alone, IKEA had over 373 stores in 47 nations and is the largest furniture retailer in the world, worth over 44 billion pounds.

The IKEA Effect

In 2011, researchers Michael Norton, Dan Ariely and Daniel Mochon studied why IKEA customers valued the brand. They found the real reason for customer loyalty towards IKEA is because of the self assembly involved. A group of participants in their study assembled IKEA furniture and origami cranes as well as Lego sculptures. Researchers found that the subjects were more likely to pay higher prices for taking self-made objects home. The tendency to place higher value on those things we participate in creating is referred to as the IKEA effect.

Building consumer retention is more important than offering value.

A Unique Product Development Process

Unlike many companies, where product development processes start with customer trends or competitive white-space, IKEA starts with the target price point. The basis of IKEA pricing is value creation with a focus on low prices or no-frills rates. This retail brand is not into premium pricing and skimming and is universally preferred for it. Holding prices lower helps the furniture brand to be true to their commitment to providing better quality and value for money. True innovation comes with quality furniture is designed and is affordable for each individual.

Reinventing Customer Retention

IKEA’s annual catalogue is the chief marketing tool of retail giants, consuming over 70 per cent of the yearly marketing budget of the company. The catalogues feature stylishly outfitted showrooms with company products. It inspires clients to develop furnishing ideas they seek to emulate. Further, IKEA reinvents the wheel and uses tried-and-testing marketing tools to ensure innovation for customers.

For example, the catalogue for 2013 is smartphone-compatible, containing photo and video galleries that can be accessed through the app by scanning the pages of the catalogue. The 2015 version improved further on it, incorporating the augmented reality app that actually uses technology to project items into real-time images of the user rooms.

Involving Users

Such innovation is the focal point of energising consumer retention and ensures IKEA builds a buzz for itself among customers. IKEA's online catalogue also has the choice of sharing the product on Facebook. While IKEA showcases its expertise, a real reason behind its unique client retention approach is that the brand encourages consumers to channel their own creativity and design skills.

IKEA created Share Space in the year 2011 and that is a community image-sharing site which has become a hub for user-generated content. The furniture retailers microsite also invites users to share ideas that offer inspiration. This helps in saving layouts, too. IKEA also has a corporate social responsibility initiative called the IKEA Foundation. So, through competitive pricing on excellent quality products fosters customer retention. IKEA is clearly the largest furniture retailer in the world and shares product catalogues that are dynamic and inspirational. Customers can also get creative and share brand experiences. Feel-good initiatives and campaigns like the mobile or SMS survey it deploys to foster a connection with customers, IKEA clearly leads the retention industry.

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