IKEA - 7 P's of Marketing Mix

  1) Product

As seen in the goods-service continuum, IKEA as a product have both tangible and intangible aspects, and it is the thing you offer to satisfy your customers’ wants and needs. Within this element, one need to consider such things as product range; its quality and design; its features and the benefits it offers; sizing and packaging; and any add-on guarantees and customer service offerings.

Following are the range of products in which IKEA has diversified itself:

• Eating
• Desks
• Mirrors
• Cooking
• Bathroom Storage 
•  Children’s IKEA
• Beds and Mattresses
• Chairs
• Clothes Storage
• Decoration
• Flooring
• IKEA Family products
• Kitchen cabinets and appliances
• Lighting
• Small storage
• Sofas and Armchairs
• Storage Furniture
• Tables
• Textiles and rugs
• Tools and hardware
• TV and media furniture

 

  2) Price

Sound pricing decisions are crucial to a successful business and should be considered at both long-term strategic and short-term tactical levels. Within this element of the mix IKEA considers list price and discount price; terms and conditions of payment; and the price sensitivity of the market. Worth remembering is the connection of price to it’s position in the marketing – specifically that only one operator in any market can be the cheapest. Jostling between competitors for this position is rarely wise.

Keys to IKEA's Low Prices Just how does IKEA manage to offer such consistently low prices?  Many people think that it's because the furniture is made cheaply, which isn't exactly true.  Read on to find out about some of IKEA's less obvious cost-saving strategies.  Recycling The Recovery Department (of which, the AS-IS room is part) is responsible for sorting and recycling all recyclable materials, including packaging broken down in-store as well as materials collected from customers at recycling donation bins where available. Automatic selling Despite the showrooms showcasing IKEA furniture in real living arrangements (typically located upstairs), IKEA is a warehouse store designed to maximize customer self-sufficiency with minimal reliance on staff assistance. Cost savings stem from reduced wages, training costs and lower design, maintenance and outfitting costs associated with the marketplace and warehouse areas of the stores. Economies of Scale IKEA utilizes it's massive economies of scale to secure long-term contracts with manufacturers and to reduce costs of raw materials through bulk-buying. Because of their sheer size, they can demand lower prices for materials which suppliers can afford to give if they have a steady income. Transportation All transportation of IKEA products is by cargo container - either via cargo carrier for overseas transportation or via tractor-trailer for ground transport rather than by more expensive air transport. Transportation costs are also minimized by carefully locating distribution centers and stores for optimum travel efficiency (see below). Minimal packaging The ubiquitous plain brown corrugated cardboard is the packaging material of choice for a reason - it's cheap, easy to recycle and can be made to fit around almost any product.  Small labels on the boxes identify the products within.  Printing wordless instruction materials also saves money by eliminating the need to translate the written word to the native languages of the many nations in which IKEA retails.

  

3) Promotion

This is the element of the marketing mix that most people mean when they talk about ‘marketing’. IKEA is one of the world's largest furniture retail brands. The brand itself is based upon the concept of offering home furnishing products at value prices. The promotions mix includes TV advertising, sponsorship, newspaper and magazine advertising, and many other elements. 

Some of its TV advertising is considered controversial whilst others see it as pretty plain. Recent campaigns include the IKEA kitchen party advert ‘Be Happy Inside’ campaign and the kitchen party advert. Obviously their iconic yellow IKEA logo serves to support the brand.

4) Place

Marketers love models that explain the way they work; they love it even more when elements of each model begin with the same letter – hence the use of the word ‘Place’ to describe distribution channels. The IKEA group is an international business, which sells furniture and accessories in Europe, North America, Asia and Australia.

IKEA's main business relates to its retail stores. Many of these stores are in out-of-town locations and do not benefit from the footfall of primary and secondary locations. The stores themselves are very large. Many of the stores even have restaurants, food shops and a Swedish market. Some stores even have a bespoke play area.

 

5) People

The impact that your people can have on your marketing cannot be underestimated. The IKEA brand is based upon strong relationships with customers and customer satisfaction. So, serving and working with people is central to IKEA's business philosophy. In 2011 its then president Mikael Ohlsson made a statement in their annual report outlining his view on the business and its future. In his view the business would be launching many energy-saving alternatives to conventional light bulbs. He commented that their kitchen range would offer many smart, eco-friendly solutions which would include water-saving taps, appliances and a special system that would sort household waste ready for recycling.

Ohlsson made a commitment to reduce the impact of his business on people, as well as the environment. The business would act responsibly, resources would be used efficiently and costs would be reduced. He also wanted sustainability to become more visible to customers and employees.

6) Process

The process part of the mix is about being ‘easy to do business with’. If you’ve ever become frustrated at call centers that can’t answer your questions, or annoyed when you can’t buy something in a shop because the computerized till doesn’t recognize that it exists, even when you can see it on the shelves, you’ll know how important this element can be. The furniture is made by IKEA itself whereby IKEA makes its own wood-based furniture and wooden components. So for example the business owns forestry sawmills.

The customer drives to the store, selects a product, orders, it, and then collect it, only then to have to drive the product home themselves. This is all part of the low pricing commitment.

 7) Physical Evidence

When you sell tangible goods, you can offer your customer the chance to ‘try before they buy’, or at least see, touch or smell. Interestingly IKEA was a business that encompassed sustainability quite early in its strategy. Many of its products are recyclable IKEA has invested in very green energy solutions such as solar power. Physical evidence for IKEA is its very large stores. They are out of town and offer a huge selection of furniture products. Stores tend to be well-equipped with restaurants, very large car parking, the space to move around and modern display technologies.

IKEA Case

What are the factors for the success of IKEA?

The factors for success of IKEA can be attributed to many different philosophies woven within IKEA. One thing IKEA always focuses on is seeking to balance cost-effective labor with the company’s product quality standards. To save money on labor and production, IKEA constantly is on the lookout for opportunities to build supplier relationships in developing countries. IKEA also made it so all furniture was designed to ship disassembled, and all of the products were transported flat. The flat packaging not only makes it easier for customers to transport furniture home, it also saves the company on shipping. IKEA also focuses on design or the products it sells.
The company’s corporate slogan, “Low price with meaning,” captures their commitment to offering tasteful, cleverly designed products that do not always make the customers feel cheap. The IKEA shopping process has also been referred to as immensely appealing by customers. Upon entry shoppers are gently guided into a predetermined path through model bedrooms, kitchens, living rooms, and bathrooms. The atmosphere is always bright and inviting. IKEA stores include childcare centers and restaurants. All of theses amenities allow the customer to feel more comfortable and contribute to the success of IKEA.

What do you think of the company’s product strategy and product range?

I agree with the current product strategy being used by IKEA to evaluate its product lineup. I believe this strategy is the cause of IKEA’S wide product range, thus leading to its success. To evaluate the extent of IKEA’s product range in relation to price categories, IKEA uses the Product/Price Matrix. Using the Matrix enables IKEA to explore every possible niche within their market, by not only product type, or price, but both simultaneously. This is a very smart move on IKEA’s part because they offer a product in every category, at every different price range (high, medium, or low). The best feature of the matrix is that IKEA is able to identify any gaps in the company’s lineup. If a gap is noticed in the matrix, the market opportunities available are clearly identified. Overall, I feel this is the best possible strategy for IKEA’s products and evaluating the ranges of these products.

What are the downsides of shopping at IKEA?
For most furniture shoppers, IKEA comes to mind. After all, IKEA is ideal in many ways. IKEA boasts of locations all over the world, and is known for their large selection and ridiculously reasonable prices. But is IKEA necessarily the best option? For most, it is because of their cheap costs. In other ways, IKEA might not be the best alternative.
At IKEA there are thousands of options. Their showroom is enormous; it's a never ending maze with each section specialized in each room of the house. In each department there is a wide selection of options. For example, if you're looking for a bed, IKEA has many different styles and sizes, with varying prices. However, most of what you will find is very reasonably priced. IKEA's more dependable items are usually a little more pricier. Take, for instance, their MALM collection. A queen sized bed frame in the MALM collection is only $199.00. Not bad. But the bed frame is made of fiberboard and particleboard. Particleboard is a low-density fiber board; in other words, the bed is made of pressed wood chips, sawmill shavings and saw dust! None of which are very sturdy or dependable. Aside from that, IKEA is known for having to assemble most of the furniture yourself. If you're a handyman, or someone experienced with tools, this is not an obstacle. But for the rest of us, assembling some pieces might be slightly difficult and will generally result in us doing something wrong, striping a hole or not securing a piece as tightly or properly as possible. Weighing all these factors, along with the general wear and tear furniture takes over time, it is wise to say that within a couple years, the furniture will fall apart or disintegrate in some way or another.
Unfortunately, the reason why IKEA can afford to be so cheap is merely because the bulk of their furniture is made of such low quality materials. On the flip side, however, IKEA is ideal for other household essentials such as storage units, kitchen utensils, textiles, decorative objects, and other furnishings that require little or no assembly and are not major furniture items, such as sofas, beds, dressers, or tables and chairs.
Shopping at IKEA can be a fun experience, and if cost is you're main concern then you will love IKEA for their low prices and huge selection. But if you're a wary shopper and take into consideration time for assembling your own furniture, and if you plan on making a big investment and don't plan on buying furniture again in a couple years time, then you might want to consider shopping elsewhere.

How would IKEA make Value Proposition for its Customers? How could they make it even more attractive?

Consumer preferences are different in America, than in Scandinavia, Europe, and Asia. IKEA must take this into consideration when trying to appeal to the American furniture market. Americans love quality products that are durable, and those are two things that IKEA does not necessarily focus on. IKEA currently gives up quality for low prices. To accommodate the American market, IKEA should focus more on providing products that will last, and not be disposable after a few years of use. Not to say that IKEA shouldn’t still provide its lower prices items, they should just expand their products in terms of quality.
Another aspect that current American retailers offer, that IKEA lacks, is customer service. During a consumers shopping experience at IKEA, there is little interaction between the consumer and IKEA employees. Instead of a do-it-yourself shopping trip, IKEA should focus on having more employees on the floor to assist customers when help is needed.

 

What would be the model of IKEA in India?

IKEA will invest 1.5 billion euros ( Rs. 10,500 crore) to set up 25 mega stores in India in a move certain to cheer the government, which is battling charges of a policy standstill and dipping investments. I know that this idea is being toyed with for quite some time now. The reports also mentioned that the Indian Government’s move to allow foreign firms to own 100% of the retail ventures from a previous 51% comes from a serious lobbying from IKEA who would like to have a complete ownership of its business in India. It was initially stated that IKEA would have to procure 60% local material, but a little birdie has it that this figure has been reduced to 30% now. The government is trying to relax a lot of its red tapism for IKEA. One of the reasons could be a recent blow which came by way of a lot of foreign investments being withdrawn from India. If the Indian Government manages to get IKEA in ,then it will surely be a booster to the lagging FDI.

IKEA has a more or less same business model around the world. It would be for us to wait and watch if IKEA’s quick-fit furniture model would impress the Indian consumers. Not to forget our customer base is still a majority of people who want to have their furniture made by the local carpenters. It will be hard to penetrate into the minds of this customer who has an affinity towards the rich Rajasthani wood work or antique designs, as compared to the flat, geometrical, do-it-yourself kit. Most importantly, I hope they pay attention to the fact that no Indian homes have the same kind of furniture, call it social status or I-have-the-better-one attitude, variety is what the consumer here targets at. The Do-it-Yourself could be a fun activity at school but Indians prefer paying some rupees and getting their work done. So, in such a situation, I am a little sceptical if these consumers would want an ‘assemble yourself’ type of home.

On the other hand, it would be a very pessimistic attitude to completely disregard the Indian mindset of trying out new things. We do have a portion of the urban young class which has travelled well and would not mind trying out a new idea. Though I was not able to find anything on their Indian business model, I really hope that IKEA understands that the Indian Government and the Indian Consumer, both, are different entities all together and even if it manages to impress the Indian Government and get an entry, it will be an entirely different ball game to get into the homes of Indian consumers.

Hope that, once in, IKEA would be able to give the Indian Consumers a better outlook in designing their homes than just another mall to visit with their families during the weekend!!