Sustainable Marketing Application in IKEA

Abstract

This paper explores the marketing tools and techniques used by IKEA, a global retail company that has an excellent reputation and is favoured by many customers. The analysis is based on a wide range of marketing concepts, which allow painting a comprehensive picture of all IKEA’s activities related to marketing. Based on the results, IKEA uses marketing tools and techniques effectively to attract customers and maintain a positive brand image.

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Introduction

IKEA is a private multinational company that designs, produces, and sells furniture and homeware. The company was founded in 1943 by Swedish carpenter Ingvar Kamprad, who wanted to produce furniture that is simple and modern in design and can be assembled easily by customers (History 2019). Since then, the company has grown in terms of its size, scope, and geographical reach. As of today, there are over 300 IKEA stores in 38 countries around the world (IKEA group stores 2019). Most of the stores are owned by the IKEA Group, but 37 stores are owned by external franchisees (IKEA group stores 2019).

IKEA’s headquarters are currently situated in Delft, Netherlands, and the company is owned by Inter IKEA Systems BV, which is controlled by the sons of IKEA’s founder. IKEA faces competition from local and international furniture producers and sellers. Its biggest competitors are diverse retailers selling furniture and homeware along with other products, such as Walmart, Amazon, Wayfair, and TESCO (Bhasin 2018a).

The present paper will focus on analysing IKEA and its products according to the principles of sustainable marketing. To fulfil this goal, the author will analyse various aspects of the company’s marketing, including the marketing mix, segmentation, competitive advantage, pricing, and branding. The results of the analysis will be used to provide objective critique and offer suggestions for improvement, if relevant.

The Marketing Mix

The marketing mix is often used to identify the company’s features that could be translated into marketing efforts. According to the definition by Londhe (2014), the marketing mix is a framework that identifies the company’s offerings in terms of a set of core factors. In the original marketing mix created by McCarthy, the core aspects were 4Ps: product, price, place, and promotion (Liao 2015). Later, other models of the marketing mix were created in response to changes in the business environment. In one of such models, Robert F. Lauterborn introduced the four Cs: consumer wants and needs, cost, convenience, and communication (Baker 2014).

In the 4Cs model, the company’s offer is presented from the customer’s viewpoint, whereas the 4Ps relate more to the managers’ perceptions. This allows combining both marketing mix models to achieve an increased depth of analysis (Liao 2015). Hence, both models were applied to IKEA as part of the analysis.

Product and Consumer Wants and Needs

IKEA’s products are furniture and homeware, including kitchen appliances, lights, home textile, and decorations. By offering a large range of products, IKEA enables customers to find everything they need in one store. This correlates with the wants and needs of IKEA consumers since people usually want to make furniture and homeware shopping as efficient as possible. The design of IKEA’s products is also appealing to customers since it is rather simple, and thus items can be combined easily. This contributes to the value of IKEA’s offer from the consumers’ perspective by enhancing its visual appeal and meeting the need for efficiency.

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For example, a person who is moving into a new home can buy everything they need in a single visit to IKEA, and the products will match one another in terms of style and colour. In addition, IKEA’s products can be assembled easily by customers and have a warranty period. The company also offers services, including assembly and delivery, which make purchases even more stress-free and appealing. Hence, the company’s products and services match consumers’ wants and needs.

Price and Cost

In terms of price, IKEA’s products are rather versatile, with various price options for every type of products. The prices for most types of furniture and homeware products start low, meaning that almost any customer can afford them. For customers with above-average income, the company offers more expensive products, which differ from cheaper alternatives in terms of design and materials used. The cost of products comes very close to their actual price because of product quality and features.

Most types of furniture in IKEA are of good quality and come with a warranty that will enable customers to replace a broken product if necessary. They are also easy to use and clean, thus reducing maintenance costs. For instance, textile covers on IKEAS’ armchairs and sofas can be washed in the washing machine, whereas many other products are made from materials that can easily be cleaned with a warm cloth. The company’s low-priced services, including delivery and assembly, also reduce the cost of shopping in IKEA. This means that the cost of satisfying the customers’ needs or wants in IKEA is rather low, allowing customers to shop and use products stress-free.

Place and Convenience

There are two paths by which IKEA sells its goods. First of all, the global chain of large IKEA stores allows customers from multiple locations to buy products offline. Secondly, the company also has online shops in several countries, which features the same products as offline stores and offers delivery home delivery. Both options add to the convenience of IKEA’s offer for customers. On the one hand, customers who prefer offline shopping can come to their nearest store and find everything they need. On the other hand, customers who do not have an IKEA store nearby or who like online shopping better benefit from the use of IKEA’s online shop.

Promotion and Communication

When it comes to promotion, IKEA uses a range of techniques to attract customers. Advertising tools applied by the company include mostly TV ads and posters, whereas the use of digital advertising in most countries is limited to YouTube video ads (Nudd 2017). There are also regular sales both offline and online, during which customers can buy IKEA products at a lower price. Communication is an important part of the 4C marketing mix theory since it poses that enterprises should strive for one-on-one communication with customers (Liao 2015). At IKEA, communication relies on various means, including online, phone, and e-mail.

For example, the company has profiles on major social networking sites, such as Facebook, Twitter, and Instagram, where it posts information about various online and in-store offers and introduces new product lines (Duncan 2019). This promotes two-way communication since customers can leave comments and questions while finding the information they need. Customers can also contact IKEA by phone or e-mail to leave feedback or request more information. All in all, IKEA’s choice of promotion and communication strategies suits various customer groups.

Differentiation and Competitive Advantage

Competitive advantage is crucial for a company to attract and retain customers, particularly in business sectors where the competition is rigorous. According to Baker (2014), competitive advantage refers to a particular aspect of a company’s offer that makes it stand out from other market players. The author also explains that a competitive advantage can be achieved through either cost leadership or differentiation. Cost leadership means that the product prices set by the company are lower than the ones offered by competitors (Yuan, Wang & Yuan 2016). Differentiation reflects the distinguishing features of the company’s offer that appeal to customers (Baker 2014).

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In the case of IKEA, competitive advantage relies on both strategies. Over the years, the company has become famous for its low prices, which attract customers from various market segments (Yuan, Wang & Yuan 2016). Taking into account the quality of items, the range of products offered, and the company’s warranty policies, it is hard for people to find an alternative seller offering the same conditions.

Additionally, IKEA’s products are different from the ones offered by its competitors in that they can easily be assembled by customers at home. Self-assembly has been the key distinguishing feature of IKEA’s offer from the company’s founding, and it continues to drive customers into IKEA stores today (Yuan, Wang & Yuan 2016). The primary benefit of self-assembly for customers is that they do not need to pay for additional services and can thus acquire furniture and other items at a lower cost. Hence, the combination of cost leadership and differentiation strategies enables IKEA to stay in a favourable position compared to its competitors by maintaining a competitive advantage.

Commoditisation and Total Product & Solution Offering

Commoditisation is a concerning trend for many companies today, which can threaten business performance and sales. It is defined as a process by which products of different brands become equal in the eyes of consumers, and the only remaining difference is their price (Holmes 2016). In these circumstances, it is hard for businesses to attract customers, and they might face losses while attempting to establish cost leadership.

Commoditisation is also associated with changes in customer behaviour. According to Holmes (2016), when buying commoditised products, customers have less desire to research new options, features, and alternatives and are reluctant to pay for anything beyond the necessary. Home and office furniture are among the goods that are considered commoditised (Basu 2019). For IKEA, this means that the company has to find strategies to attract customers that rely not on product features but on other conditions or circumstances.

One of the key strategies to escape the drawbacks of commoditisation is to think about solving customers’ problems (Yu 2011). IKEA found a way to do this through total product and solution offering. This means that, while the products sold by the company do not differ from other brands in terms of function and design, the store format enables customers to find everything they need in one place.

Total product and solution offering enables customers to spend less time searching for products they need, thus improving the overall shopping experience and reducing the desire to shop elsewhere. Indeed, the range of products offered in IKEA stores is immense, and each product has a different colour, material, or texture options. As a result, one visit to an IKEA store allows customers to furnish an empty apartment or house and equip it with all the necessary appliances and tools. This enables the company to fight competition despite product commoditisation, thus sustaining high performance and a great position in the market.

Segmentation

Market segmentation is crucial for businesses because it helps to develop a successful marketing strategy. According to Venter, Wright and Dibb (2015), market segmentation involves dividing a particular market into different groups of customers depending on their product preferences, buying behaviours, and characteristics. There are different types of market segmentation, depending on the features used for grouping. For example, geographic market segmentation is based on customers’ location, whereas demographic segmentation distinguished between groups based on age, gender, occupation, and life cycle stage (Dudovskiy 2017).

IKEA relies on three different types of segmentation, namely, demographic, psychographic, and geographic segmentation (Bhasin 2018b). Psychographic segmentation is different from the two types explained above since it uses social class and lifestyle to divide customers into groups (Dudovskiy 2017).

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In terms of geographic segmentation, IKEA caters to groups of customers located in Europe, North America, South America, Asia, and Australia. Demographic segmentation is mostly focused on life cycle stages since the variety of products does not allow effective segmentation based on age and gender. The key life cycle stage groups targeted by IKEA are students, newly married couples, families with young children, empty nesters, and retired older adults.

Psychographic segmentation allows identifying both class-based social groups and lifestyle-based groups. Due to their price and the overall brand offering, the IKEA market segment consists mostly of the middle class, lower class, and working-class people (Dudovskiy 2017). The same characteristics of IKEA’s offers draw lifestyle segments of resigned, strugglers, mainstreamers and explorers to the company (Dudovskiy 2017).

Segmentation is used by IKEA to tailor products and services to customers’ needs. For example, families with young children can visit IKEA stores freely because there are kids’ rooms and restaurants with food for children and infants. Mainstreamers, on the contrary, are attracted to IKEA products because of popular minimalistic designs. Hence, IKEA’s approach to segmentation is fruitful and helps the company to preserve the diversity of offers.

Managing Services and Customer Relations

In order to maintain a positive reputation among customers, it is crucial for IKEA to manage in-store and online services correctly. According to research, service quality has a significant influence on customer engagement and brand loyalty by increasing customer satisfaction (Ivanauskienė & Volungėnaitė 2014; So et al. 2016). In the retail sector, service quality relies on ten factors: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding of the customer and tangible evidence (Yarimoglu 2014). The management in IKEA stores maintains high scores in each of these factors, thus achieving excellent service quality.

IKEA’s approach to service quality management relies primarily on two processes: meeting customers’ needs and investing in human resources. According to Pontefract (2016), IKEA leverages customer service by creating and maintaining teams of employees who are well-trained, experienced, and committed to the company’s values and goals. Training, promotion, and rewards enable IKEA to benefit from employees with a high level of expertise and engagement on all organisational levels, including in customer relations (Pontefract 2016). The second dimension of service management involves proactively responding to customers’ needs.

One example of this is selling umbrellas at discounted prices on rainy days (Kaufman 2015). This demonstrates the customer-oriented culture in place at IKEA. Supporting this culture through training, education and guidance for employees allow achieving buy-in throughout the organisation, which, in turn, ensures the stable quality of service and great customer relations.

Experiential Marketing and Experience Management

As evident from the analysis of IKEA’s offering, the experience is a significant part of what draws customers to its stores. To capitalise on this, IKEA uses experiential marketing and experience management. Experiential marketing is the strategy of tailoring the company’s offering to create memorable positive experiences for customers (Lainer & Hampton 2016). Experience management, in turn, refers to the company’s activities related to measuring and improving customer experiences (De Farias, Aguiar & Melo 2014; Wu& Tseng 2015). In IKEA, both of these processes are executed continuously, which assists in attracting customers and building loyalty.

Experience management and experiential marketing in IKEA mostly concern its offline stores. Making the shopping process comfortable for customers is the primary goal of IKEA, which is why the stores are equipped with restaurants, kids’ rooms, bathrooms, various trolleys, and maps. These features help customers to shop with comfort, thus contributing to their positive experiences. Additionally, IKEA stores are usually well-staffed, meaning that customers can get assistance whenever they need it.

A significant part of the company’s experiential marketing is the store layout. To showcase products, IKEA designs and installed rooms that are furnished and equipped with its products. This contributes to the customers’ experiences in two ways: by creating a pleasant, homey atmosphere in stores and by assisting customers in visualising how IKEA products would fit into their homes. Therefore, the use of experiential marketing and experience management help IKEA to leverage customer experience, thus attracting customers into stores.

Internet Marketing

The development of Internet technologies allowed companies to promote products and services online. The use of the Internet in advertising and promotion is called Internet marketing or digital marketing (Chaston 2015). There are multiple options for companies to engage in Internet marketing, including social media ads, search engine-based targeting, and affiliation with online influencers (Chaston 2015; Shaltoni 2017).

IKEA’s Internet marketing strategy differs from other retailers in terms of quality and content. While many other companies use targeted ads in mobile applications and social media to increase sales, IKEA focuses on using the latest technology and delivering content to interested customers. First, the company uses social media networks to post offerings and interact with customers (Erkilic 2019).

Secondly, the company applies augmented reality and virtual reality tools to help customers experience IKEA products before buying them (Erkilic 2019). Both features of IKEA’s approach to Internet marketing are important because they help in maintaining brand awareness and reputation. Social media use assists in maintaining excellent customer relations while delivering information to existing customers. The use of new technologies, in turn, attracts attention and distinguishes the company from its competitors.

Branding

IKEA’s branding strategy enables the company to grow year-on-year sales and remain among the most valuable brands in the world (Yohn 2015). The term ‘branding’ reflects the activities of a particular company that aim at building an image of its brand in the customers’ minds (Yohn 2015). In IKEA’s case, branding relies mostly on its positioning, corporate culture, and innovation. Firstly, IKEA’s positioning is unique because the company focuses on experiences rather than on the price-quality balance (Merkelijkheid 2016). Most customers have positive associations with IKEA that stem from their experiences, thus distinguishing the company from its competitors.

Secondly, IKEA’s corporate culture also contributes to how the brand is perceived by the public. According to Yohn (2015), IKEA has a famous democratic corporate culture that is consistent with its brand philosophy. Hence, customers associate the brand with the concepts of trust, responsibility, and responsiveness. Finally, the consistent use of innovation improves both the quality of products and the customers’ experiences with the brand as a whole (Merkelijkheid 2016; Yohn 2015).

For instance, the use of AR and VR in Internet marketing distinguishes the company from its competitors, placing IKEA in a favourable position. Technologies that the company applies in production fulfil the same goal since they help to make products more comfortable and durable. Thus, IKEA’s branding strategy has enabled it to secure a unique position in the market by creating an excellent brand image.

Price and Cost Structure

The cost structure reflects all the costs that are part of a particular company’s business model (Novák & Popesko 2014). The nature of different types of costs can be fixed or variable, depending on the company’s business line (Novák & Popesko 2014). IKEA’s business model involves product design, manufacturing and sales, meaning that its cost structure is complex. However, many of the costs incurred by the company are fixed, including rent, insurance, wages and benefits, amortisation and taxes. The variable costs for IKEA include transportation, materials and utilities because these costs depend on the volume of sales.

In order to maintain low product prices, it is imperative for IKEA to reduce both types of costs where possible. One way in which the company reduces expenses is by designing products. According to Tyler (2018), this gives manufacturers control over the costs of materials and parts. In addition, the company uses flat packing to reduce transportation expenses substantially (Tyler 2018). Cost-saving strategies used by IKEA help the company to ensure that product prices are low enough to attract customers from the target market segments without sacrificing product quality.

Sustainability, TBL and Stakeholders

Maintaining positive relationships with stakeholders, including customers and communities, is critical for businesses to succeed in the modern business environment. The triple bottom line (TBL) concept was introduced in 1997 to identify an approach to measuring business performance based on three lines: economic, social and environmental (Alhaddi 2015). In other words, this approach encourages companies to focus on the social and environmental impact of their business activity as much as they do on economic profits.

Based on IKEA’s sustainability report, the company strives to follow the principles of TBL by contributing to communities and the environment (IKEA Group 2018). For instance, the company strives to use circular production design and use renewable or recycled materials in production. IKEA also contributes to society by eliminating workplace discrimination and providing fair compensation to all workers and suppliers. In addition, the company promotes environmentally friendly activities among customers. For example, many IKEA stores accept products for recycling, and in some stores, customers can sell or give back the IKEA items that they no longer need (IKEA Group 2018).

Besides these activities, the company engages in advocacy through partnering with foundations and organisations that have a significant social impact, including the UN and the LEGO Foundation (IKEA Group 2018). Therefore, the company’s strategy creates value for various stakeholder groups while also promoting sustainability and following the TBL principle.

Conclusion

The analysis of IKEA based on the principles of sustainable marketing showed that the company utilises most marketing techniques effectively, which allows it to maintain market leadership and grow year-on-year sales. The primary component of the company’s strategy is its offering, which satisfies the needs of customers by providing quality products at low prices. Nevertheless, the commoditisation of furniture requires IKEA to utilise other marketing strategies to secure an advantageous position.

The approach chosen by IKEA relies heavily on customer experience, which is supported by experiential marketing and experience management. The atmosphere and structure of IKEA stores make shopping comfortable for all groups of customers targeted by the customers. The use of market segmentation is crucial for leveraging customer experiences since customers’ needs vary depending on their demographic characteristics and life cycle stages.

Another way in which IKEA sustains market leadership is through a carefully designed and maintained brand image. IKEA has an excellent reputation among consumers, which is due to its approach to human resources management, sustainability, and marketing. The company has successfully applied the triple bottom line principle to generate value for different stakeholder groups while also remaining responsible for advertising and social media use. Based on the analysis, it is likely that IKEA will maintain its current market position in the future since its marketing approach suits the contemporary business environment.

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