Reserve Positioning Strategy3
Withheld Product/Service Attributes4
Founded in 1943 by a poor Swedish farmer named Ingvar Kamprad, IKEA is now one of the largest furniture retailers in the world. From its inception, Kamprad wanted to create cheap, quality furniture that everyone could afford. That formula led to IKEA’s early success in Sweden and has carried over until today. To its customers, IKEA is not just a store but a way of life, which may be evident through the cult-like following the company has achieved.
When talking about the four P’s of marketing (product, price, place, promotion), there are few companies in the world that have mastered this concept better than IKEA. IKEA has been able to recognize the demands of its shoppers and create compelling products that meet those demands at a reasonable price. Its products are sold at unique stores that serve strategically important, geographic markets. This paper examines the factors that have made IKEA such a big success and offers some recommendations for future growth in the United States.
Today, IKEA has over 240 stores in 35 countries and has revenues of over $26 billion. Its revenues double every 5-6 years and the company is now expanding to growing markets like China, Japan, and Brazil. The future of IKEA looks brighter than ever. For a brief snapshot of IKEA’s current sales around the world see Appendix 1.
In 1985, IKEA decided to invade America. Faced with this early failure, IKEA retooled its furniture to fit American tastes. IKEA soon became the fastest growing furniture retailer and the 14th largest furniture retailer overall in the United States. IKEA executives needed to find a balance of how to create new furniture offerings without losing its unique design and corporate soul. By examining IKEA’s marketing strategy and answering a series of four questions, we have developed recommendations (see Appendix 2) that we think will lead to IKEA’s continued growth and success.
1) What are some of the ways that furniture retailers have sought to overcome these purchase obstacles?: a) identifying a product that consumers like, b) visualizing the product in the consumer’s home, and c) getting the product in the consumer’s home?
In furniture sales, there are two general strategies: the low-end and the high-end. The low-end offers cheap, utilitarian furniture that is dreary looking. Cheap furniture is marketed to people such as college students who have a small budget. The cheap furniture is also displayed in poorly lit showrooms that offer little to no customer service. High-end furniture stores compete on quality and service. The high-end offers a large selection in each style and sub-style of furniture, which results in the showroom having a large inventory. The broad, variety strategy virtually guarantees that a customer’s preferred style will be available. The high-end stores also have high touch sales associates to help customers with product selection and furniture measurement. Sales associates are trained to educate their customers; such as explaining the life spans of different materials. They also reassure customers that their furniture will last a life time.
Visualizing a piece of furniture in a person’s home can be very difficult. The high-end furniture stores have beautiful showrooms that are elaborately decorated to help the customer visualize where they can place new furniture or how they can redecorate their home. High-end stores also offer interior design services. Most retailers offer credit to make high-end furniture more affordable.
All retailers offer home delivery, sometimes free, to make the transition as painless as possible for the customer. As an added bonus, retailers offer to assemble the furniture in the customer’s home. Sometimes, delivering the furniture also...