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IKEA Consumer Analysis

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 Case Analysis

Submitted by: Umair

Registration # 1511-107-010
Dated: 3rd May, 2010
 Contents

1. Introduction ------------------------------------------------------------------ 1
2. History -------------------------------------------------------------------- 2-3
3. SWOT Analysis ------------------------------------------------------------ 4-5
4. Marketing/Consumer Behavior Objectives --------------------------------- 6
5. Consumer Behavior Strategy -------------------------------------------- 7-13
a. Market Segmentation ----------------------------------------------- 7
b. Culture ------------------------------------------------------------- 7-8
c. Subculture ------------------------------------------------------------ 8
d. Social Class --------------------------------------------------------- 8-9
e. Information Processing ------------------------------------------- 9-10
f. Learning and Memory ------------------------------------------ 10-11
g. Attitudes ------------------------------------------------------------ 11
h. Changing Attitudes --------------------------------------------- 11-12
i. Post-purchase Behavior ----------------------------------------- 12-13
6. Recommendation to the Management -------------------------------- 14-15
7. Annexure ------------------------------------------------------------------- 16
 Acknowledgment

First of all I thanks to Almighty ALLAH, who is most Merciful and Beneficial and
Benevolent. He helps me to complete this report. Than, I am very thank full to my
parents, who help and motivate me at every stage of my life to become a successful
person on every stage of my life, and their prayers always help me to fulfill my work be a
competitive.
 Introduction

IKEA U.S. management hire me as a consultant to provide them solution of those

problems which they have faced in 2006 and those which are expected that they will face
in 2007. IKEA is facing numbers of problems in their marketing strategies and the study
of consumer behavior in their home furnishing products markets.
I have analysis the problems and give recommendations to the management at the page
number 11. I also make strategy for the year of 2007. All these recommendation and
strategies are made for U.S.A. market of IKEA. This study covers their internal and
external environment and conducted various interviews with their management and got
information regarding different issues and problems that they are facing in the host
countries.

1
 History

IKEA was founded on 1943 by a 17-year-old Swedish boy named Ingvar Kamprad.
Initially he was selling Christmas greeting cards, seeds, and pens from Kamprad’s family
farm. From his childhood he was have the ability of entrepreneur, as his identification of
people’s need, he attempted to satisfy them by selling low price products which
ultimately gave growth to Kamprad retail store from farm place to a global home
furnishings cultural, to what BusinessWeek called a “one stop sanctuary for coolness”
and “quintessential cult brand.”
IKEA was providing their service to about 1.1 million customers per day. Its fame can be
judge from its debut in London in 2005, before opening door 6,000 people arrived. It has
achieved this success by offering unique value proposition to consumers which is
leading-edge Scandinavian design at bargain prices. Because IKEA inherited unique
design from Sweden and lower bargain price advantage they get by making compact
product which are come in boxed and require complete assembly at home which, of
course, reduce shelf space, easier to transport, and seldom to delivery.
IKEA followed its founder’s mission statement that “People have very thin wallets. We
should take care of their interests.” And they made their policy to achieve this statement,
IKEA annually reduce 2% to 3% on every product and half statement describe the focus
of consumers’ desires means their interest for what they come to IKEA.
IKEA learning capability also helps it to flourish in furnishing market. They appreciate
local taste and make their product according to consumers’ needs. As they have change
their small glasses into big glasses for U.S. market. Same as they have done in Hispanic
market, IKEA find out the Hispanics behavior towards shopping and understand their
attitudes, then make their store according to Hispanics’ requirement such as add seating
and dining space, brighten the color palettes, and hang more picture frame on the walls.
IKEA have 264 stores around the world the still many growth opportunities are remain
untouched which they are planning to avail them.

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 SWOT Analysis

Opportunities
• U.S.A. economy is moderately reasonable.
• IKEA is doing reasonably good in implementing the concerning laws and
legislation.
• IKEA is equipped to internalize new technology.
• IKEA international environments are reasonably contusive.
Threats
• U.S.A. is experiencing social shift in the area of doing cultural and social at large
is becoming moral savvy.
• Legislations are in variably passed including related to business.
• Technological innovations happing frequently.
Strengths
• IKEA is maintaining formidable positions against their competitors.
• The suppliers are friendly and they are lasting after IKEA interest.
• The company is maintaining good company relationship with labor.
• The company is financially sound.
• IKEA is operationally design on sound standards.
Weakness
• IKEA is needs significant improvement to help understand the consumer behavior
of diversified group/subgroup.
• Consumers are pretests in their pursued of seeking value in the transaction.
• Competition is fiercer among the retailing business.
• Vision and mission and long term objectives needs rethinking and improvement.
• IKEA needs improvement in marketing management particularly in U.S.A.
• HRM policies procedures demand rethinking and designing the HRM on
contemporary line.

3
 Marketing/Consumer Behavior Objectives

IKEA marketing/consumer behavior objectives from 2006 to 2007 in U.S.A market are;
• To increase in revenue from 22.2 billion to 28.6 billion.
• To increase market share from 18% to 28%.
• To increase ranking from 96 to 90.
• To increase sales from 2.78 billion to 4.2 billion.
• To enhance IKEA brand name in consumers mind.
• To expand IKEA retail stores from 19 to 38.
• To maintain local customers’ taste about home furnishing.

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 Consumer Behavior Strategy

Market Segmentation
IKEA has segmented their market on the income, geographic, product-usage, and brand-
user bases. As it’s target market are place at middle-lower and lower class, where income
level is quite low and this segment of the market are usually lives in suburban areas of the
country. The U.S. economy is moderately reasonable, so IKEA need to capture this
economical advantage by using extensive marketing strategy in their distribution channel
and it’s financial position also very good which permit IKEA to expand its operations to
others urban and suburban areas. On the other hand, segmentation based on usage of the
product, IKEA products are furnishing related which are based on low price so they offer
much verity in it and also take new innovation by effectively utilizing their technical
skills. Through making them known in the furnishing market, IKEA develop their
customer brand loyal. Hence, they can segment their market on loyalty bases as its
competitors namely Target and Pier 1 Import are also making their profit. So, IKEA need
to focus on how to make non-loyal customer loyal and this require buyer-seller
relationship. As the competition in retail business is increasingly fiercer which IKEA can
respond to it by best margin to retailers who will try to sale IKEA’s products.

Culture
Culture is varying from on society to society. And IKEA need to acknowledge it. As
IKEA has done mistakes in past because they have not understanding consumers’
behavior, taste, and their willingness to buy the product what they want according to their
culture and social needs and requirements. This may cost to lose their brand name. IKEA
inherit Scandinavian design from it home land but they should give local host country
taste in their products. As they have good technological advantage so they must make
their product according to the local standards. One other factor is that IKEA need to
understand value system of host country before enter there, which ultimately benefited
for IKEA. The U.S. cultural values base on individualism, equality, activity, progress and
achievement, efficiency and practicality, religious, humanitarianism, youthfulness, and
materialism. Hence, its product should be show its furniture made for every individual,

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and give feelings of young with perfect efficiency. IKEA can adapt young value with the
connection activity value of Americans in which they can utilize their leisure-oriented
product. And it must be look like nature mean show some humanitarianism.
Its organizational culture is very sound and suppliers are very friendly with firm which
gives competitive advantage over its competitors. IKEA’s labors which is also healthy
sign for company to increase productivity at a good value.

Subculture
The U.S. market is much more diverse in the sense of subculture. There are many race,
nationality, and religious factors make this subculture exist. It provide many
opportunities to marketers, as they segment their market quiet easily by understanding
similar characteristics which help them to make more efficient marketing-mix.
Subculture is heterogeneous culture exist in homogeneous culture. If we talk about U.S.
market, there are five largely heterogeneous subcultures are exist, Hispanic, Asian, black
American, young, and older subculture. The bases of segmentation could be demographic
and psychographic. IKEA’s target markets are lower home furnishing class, so, black
American and Hispanic are the major target market for IKEA if we analysis their
demographic characteristics. Black Americans’ are consist on younger age group and
their psychographic characteristics are that they are more fashion-oriented and their
women – potential target market for IKEA – are more value conscious and heavier
advertising readers. They are dependent on home appliances, and here IKEA
technological ability give more profit to it. They are also very much price conscious,
which is better for IKEA to make them primary target group.
Hispanics are lower level income group with low education. But this segment is growing.
Family sizes are moderately large and consist on much younger market. They are more
favorable market for IKEA as all the factors are in the bucket of it. IKEA need to
aggressively focus on Hispanic market because there are much more chances for IKEAs’
flourishing.

Social Class

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Lower class segment is the actual target market for which the Kamprad – founder of the
IKEA – build his firm’s vision that people has very thin wallet. And we should take care
of their interest. The upper-lower care the people who are working at level poor and have
low-paying and less education. They are also unskilled labor position. IKEA need to
analysis upper-lower class need and usage of furniture and build its product according to
them. But at the same time consumer are pretest in their pursued of seeking value in the
transaction. So, IKEA have to cope with this value transaction in lower level class which
is the primary market for its products.

Information Processing
The weaker sides of IKEA management, where they need much emphasize in order to
make their product more valuable, demanding, and unique. The marketing management
of IKEA has to take in-focus to the product evaluation process, where consumers use
product physical cues to identify their size, shape, and grade of ingredients and this is
known as intrinsic cues. Through using these techniques IKEA can distinguish its product
form competitors. There are also extrinsic cues in which IKEA can enhance its
advertising campaign and packaging to influence consumers’ mind. IKEA is very well
using its psychological pricing techniques to capture maximum market. The IKEA image
in the consumer mind is much more favorable by its functional quality and aura
psychological attributes. IKEA sustainable competitive advantages are also help it to
build top store image such as its pricing, convenience, and unique Scandinavian design.
In addition, IKEA specially concentrate on every local taste to maintain its store such as
in Hispanics region, they use different colors and wall frames plus dinning and seating
arrangements for customers. But on the promotional side, they need improvement.

Learning and Memory

One of the elements that marketers use to make their identity in their product market as
well as in the world is the symbols. Symbols are the signs which comprise the whole
vision or statement into few words/signs. IKEA have to create some slogans and logo to
give positive image of the company and make them familiar to the consumer. They are
effectively utilizing affective learning types through finding out the habits of consumers.

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IKEA need to start series ads to make them known in the wider market. They have to
repeat ads on continuous bases with little cosmetic changes but the basic content must be
remain same to increase viewers’ rate of learning about the brand which make them
awake in the market. In order to remain into the long-term memory of the consumer,
IKEA should follow some advertising guidelines which are;
• Advertising messages with unique aspects which a greater potential to
remembered.
• The most important content must be place at the beginning and end of the ad
which have much tendency remember.
• Message in chunk form will retain for longer time period.

Attitudes
As the home furnishing products required high involvement of all the family members
which is prior purchase, attitude form before the product is purchased. Here IKEA need
to improve consumers’ attitude towards its products by understanding consumer
behavior. They need to develop good attitude which is form on the numbers of beliefs the
person hold about the product. The opportunity for IKEA is that all laws and legislations
are in the favor of it. So they need to use this era to build positive attitude of its products
by offering adjustment function of attitude, in which people directed towards pleasurable
and away from unpleasant. Attitude made through personal experience of the object, so
IKEA can give on trial bases its furniture to consumers so that their positive attitude
towards IKEA will be developed. It is also develop through influence of others such as
opinion leaders to whom people follow. IKEA can use them in its promotion to capture
consumers’ positive intentions.

Changing Attitudes
To change the though of those consumers who have made some unfavorable attitude
towards IKEA’s brand, IKEA will need to apply attitude changing strategy, as IKEA’s
products are low in price so they require low-involvement as far as price is concerned,
but the product class is home furnishing which is consistent in its level and it influence all
the household, so, it here it come most appealing high-involvement products. But we will

8
take a look from low involvement prospective because furniture for high-involvement is
different in all aspects. For low-involvement product IKEA have to consider some
important aspects such as
• It must link the product with the current issue in which customer is presently
involved.
• Link the product with the present situation so that customer can easily drive
his/her current motive for the purchase of the product.
• IKEA can develop advertising in which customer can involve himself deeply.
• Change the importance of product benefits.
• Reveal important characteristics of product.
Attitude could be change through numbers of sources such as sales representative,
magazines, retailers, and spokespersons.

Post-purchase Behavior
To complete the loop of customer service, post-purchase behavior must be identified.
IKEA is maintaining its sound standards in its operations to provide satisfactory service
to customers. And it is equipped with the ability to internationalizing technology, as its
products are somewhat complex in the sense of portable and compact in design. So,
IKEA’s products are set-up in order for them to be properly used. When it come to user,
IKEA need to understand how its product are going to use and who the user of it is. This
study will help IKEA to not only save from failure but also achieve success. Final task of
all the activity is to achieve customer satisfaction. Satisfaction is the expectation of the
consumer from the product for which he/she made all the sacrifices. IKEA have to
develop a complete process to get to know what customer are expecting from them and
how much they are satisfied with the product. It is feedback process. This process help
IKEA to improve its services as well as it will become closer to the customers and
understand their behavior.

9
 Recommendation to the Management

• I recommend IKEA in the period of moderate U.S. economy with good financial
position of IKEA support it to use extensive distribution channel.
• IKEA need to take in-depth study of cultural values of the host country before
entering in it. For U.S. market they have to give feelings of young and active look
in their product.
• There are two major subcultures in U.S. market for IKEA those are Black
American and Hispanic. Black Americans are much more concerted on home
appliances and ads, whereas Hispanics are lower income level with larger family
and most of them are consist on younger age.
• In social class, IKEA’s need to cope with value transaction phenomena, which is
taking place at the core market of the company.
• The marketing management has to improve its product’s intrinsic and extrinsic
cues for better make to work information processing.
• IKEA must have to create its symbols such as logo and slogans to make brand
familiar to people and give positive image in the mind of the customers.
• Because home furnishing is high-involvement product in which people make
attitude before purchase, so IKEA need to develop favorable attitude towards their
product through test/trail bases or ads with opinion leaders.
• To make its brand name reputable, IKEA should change attitude from declining
sides by utilizing reveal important characteristics of product and link the product
with the current issue in which customer is presently involved.
• IKEA have to develop a complete process to get to know what customer are
expecting from them and how much they are satisfied with the product. It is
feedback process. This process help IKEA to improve its services as well as it will
become closer to the customers and understand their behavior.

10
 Annexure

Worksheet for Analyzing The Progress

Consumer Behavior
Market Segmentation: a) Income level __________ b) Geographic _________ c) Brand
Usage ________
Environmental Influences
Culture: a) Cultural Values ________ b) Activity _______
Subculture: a) No. of Ads for Blacks _______ b) Ranking in Hispanic Market ________
Social Class: a) New Products for Value Transaction __________ b) Classes Cover
________
Individual Determinants
Information Processing: a) Symbols Used _______ b) Company Image ____________
Learning & Memory: a) Rate of Learning ________ b) Degree of Learning __________
Attitudes: a) Change in Affective Function __________ b) Influential Activity _______
Changing Attitudes: a) Sources Used for Changing Attitudes ________ b) How Much
Change Occur ____________
Decision Process
Post-purchase Behavior: a) Ways for Feedback ___________ b) Company Response to
Complaints ______________

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