Getting It Right: IKEA and the

Power of Consumer Behavior

By The Collective on 2016/07/19
None can deny the critical importance of China’s market to global corporations and their
leadership. With a population of over 1 billion consumers, China has become a proving
ground for CEOs, an integral influencer in the international stock market, and the
country where corporations learn to prototype innovate products for a massive, diverse
base of customers and clients.
Above all, China’s high-stakes market dynamics fundamentally rest in the hands of its
outspoken consumers. IKEA learned this the hard way.
The furniture franchise currently struggles against a storm of attacks from its recent
scandal surrounding the recall of 36 million chests and drawers, escalated on the basis
that the recall did not initially extend to consumers in China. While some have
questioned whether IKEA is truly at fault for the disparity in recall procedures between
the U.S./Canadian and the Chinese branches of the franchise, many online consumers
hold the furniture giant responsible – and the online arena is precisely where the unique
power of consumer behavior gathers influence and momentum.
Now, more than ever before, is a time where firms like IKEA that seek to strengthen and
extend their reach in the Asian markets need to get things right with consumer relations
the first time. There are three main takeaways from IKEA’s example of dealing with
21st-century stakeholders: firms need to be proactive in their understanding of their
markets and operations, maintain responsible consumer engagement practices, and
listen to the voices of the people who will not be silenced.

What lessons can we learn from IKEA’s crisis management in the 2016 recall scandal?

BE PROACTIVE WITH INFORMATION

GATHERING
With any sector, department, or region handled by a firm, it is imperative to know and
understand your market, and nowhere is this more critical than in China. A firm should
always be well-positioned and well-prepared with complete comprehension of its
stakeholders, consumer expectations and needs, and up-to-date knowledge of
the firm’s own operations.
Ideally, this should be standard practice before a crisis strikes.
“A sound crisis management strategy starts with preparation long before the onset of an
actual crisis,” says the Public Relations Council in their social media crisis
management white paper. “While it’s impossible to plan for every future scenario…
identify the potential threats that are both most likely to happen and most likely to cause
harm,” the PR Council advises. Such threats can be internal, resonating with risk factors
within your company, and external, amplifying the state and climate of the consumer
base your company serves.
This is where IKEA fell short. The true root of their error rested not in the flaw or
their product or the need to make the recall, but in the gap in their understanding of
those consumers’ behavior and typical reactions to shortcomings in product and
process. Their failure to recall the products for their Chinese consumers when they did
recall the products sold in Western countries incited a notable public outcry that the
Chinese market was not receiving the same policy standards of their North American
counterparts.
Armed with a profound degree of interconnectivity through social media, consumers of
2016 are empowered and know their rights. Moreover, Chinese consumers benefit from
strength in numbers, swelling with emboldened leverage born of collective action in the
world’s most populous nation. They rightfully expect the same treatment as the
consumers of the global west, and when faced with inequity, or in the case of IKEA, a
“double standard”, they are quick to condemn corporations en masse.
“It is a discrimination against Chinese if IKEA refused to recall its problematic products
in China. They shouldn’t hold double standards. They must recall the items,” said one
Weibo user. Some Chinese social media users even called to mobilize a boycott against
IKEA, an action that would heavily damage the company’s performance in one of its
most critical markets worldwide.
One week ago today, IKEA finally relented with a voluntary extension of the recall to
Chinese consumers, a full two weeks after the recall notice to the U.S. and Canada.
The backlash should not have taken IKEA by surprise, given the number of brands that
have been involved in media- and social media-led scandals in recent years (see the
cases of Yum! and Apple), and the impact that those scandals have had to their bottom
lines (Yum!). They should have proactively understood the consumers they served and
been prepared to deal with the crisis accordingly.
The corporate world saw a similar example of the problems firms face when they lack
to-date information of the markets in which they operate and their operations
themselves in the Yum! Brands food safety scandal, where the company lost 40% of
their customer traffic in a single quarter following the crisis. Time will tell what financial
setbacks will hit IKEA in the wake of the dresser recall.
The key lesson, then, is to prevent ignorance of your own supply chain operations and
safety standards to avoid blindsides against your firm. Photo Credit: EVAN-AMOS /
WIKIMEDIA COMMONS

BE INTENTIONAL WITH CONSUMER

ENGAGEMENT
When crisis strikes, you don’t want to be caught without information – but more
importantly, you want to maintain consistent, genuine communication with your
most critical stakeholders: your consumers.
In the Digital Age, firms and corporate leaders can no longer afford to stall on issuing
public statements and answering the media’s pertinent questions. Communication
through social media, online forums, and news sources is instantaneous, continuous,
and almost universally accessible all day, every day.
With this in mind, firms should be prompt and authentic in their responses to
accusations. Be upfront with what you know in your initial responses, be transparent
about what steps are being taken to get to the bottom of the incident or accusations,
and foster and maintain the conversation with your consumers. “Your very first public
statement of the crisis will set the tone for how your brand is perceived throughout it –
so show sensitivity, and humility if appropriate, and ensure that people know they are
your first priority,” says Nick Sharples, CEO of Twitter-monitoring firm CrisisVu.
We can take the example of Starbucks as a case of a company practicing powerful
consumer engagement during crisis management. In response to a 2013 CCTV
exposé on what could be perceived as unfair market pricing in the worldwide café
franchise, Starbucks was prepared with information and fostered open engagement on
social media. They did not speak to the public through an “outsourced” middleman, but
rather upheld an upfront, timely, personalized response.
As a result, Chinese social media users questioned CCTV’s legitimacy in
directing attention away from real issues. Starbucks came out strong.

Chinese consumers are heavily engaged and interconnected on social media,

especially for issues they care about, like fair and safe market practices. Photo Credit:
Imagechina

LESSONS FROM IKEA: LISTENING

& LOOKING FORWARD
Regardless of the ultimate size of this recall, and the impact to the brand, this storm will
pass. When IKEA regains traction and seeks to initiate recovery, they will need
to develop and refine new crisis management procedures that are better suited to the
instantaneous nature of the information age.
Should IKEA encounter another fiasco like the 2016 recall in the future, the corporate
world will likely see a notable, and fortunate difference in their response. But
nevertheless, the Chinese consumers’ loss of faith in the firm’s products will hurt IKEA’s
market performance in China and potentially other countries around the world. Much of
their ability to recover from the firestorm will rely on a third, ongoing crisis management
practice: listening.
“[K]eep your finger on the pulse and monitor your online PR… Listening to your
audience is essential because your next move will depend on their sentiment towards
you,” says social media manager Charli Day. Keeping abreast of public
conversations on social media, online mentions, and tracking general opinion of the
IKEA brand will be integral to the firm’s efforts in rebuilding that lost credibility and trust.
It remains to be seen how successful their recovery in the Chinese market will be in the
near future. Nevertheless, IKEA simply should have gotten it right the first time.
One of Collective Responsibility’s ongoing services as a strategic advisory firm is to
conduct research and assess business cases, which help us advise best practices for
corporate leadership. To stay in the loop with Collective’s upcoming IKEA Business
Case Study in the coming weeks, follow us on social media to receive regular updates
and resources.

to improve the opportunities for children

and youth in developing countries by funding
long-term programmes
Agunnaryd
Elmtaryd

$200
Ingvar
2004 to 2015

Pioneered
"Flat-Packed! packages at its buyer's behest
$79.99
BED
IKEA

Kampard Vision Statment

"People have really thin Wallets, we should take care of their interest"
Kamprad

Ingvar Kamprad

Different showrooms
Showroom entrance
IKEA logo
The long natural
way of IKEA
Euro32.7 b
IKEA Group
Stores Worldwide
Transportation
Modes of transport (% goods volume)
The IKEA catalogue was printed in 30 languages and 59 editions.
- a "green" company
70% of the marketing budget
is spent on Catalogue

"You Do your part, we do ours

THE Products: Targeting Millennials… before there were Millennials.

Renewable energy
IKEA Foundation
When IKEA expands in new country, it studies that country’s market and do consumer’s need analysis
and then designs products to cater that country’s needs. When it expanded in China, IKEA gave
importance to the local taste in China. They placed plastic placements with “Year of the Rooster” themes
which sold to thousands of people quickly. When IKEA realized US shoppers were vases as drinking
glasses because they considered IKEA’s regular glasses were too small. So, they customized the size to
fit the needs of the US markets. Some of the great things IKEA does to reach consumers are given
below:
• IKEA’s products are stylist and customized.
• Wide range of products according to the need of customers.
• Low priced furniture store provides reassemble furniture and casual furniture.
• Products available for different sections of the society.
• Product adaptation according to the need of different market.
• Diversify product line product depth.
• Concept of flat packaging which makes it easier to consumers to transport the furniture

Pros: :)
• IKEA’s low cost concept keeps it ahead of its
competitors.
• IKEA has successfully combined low cost with good
quality.
• IKEA’s ability to find ways to alter designs to save on
manufacturing costs.
• A key feature of IKEA’s furniture is self-assembly.
• IKEA’s ability to adapt its product design strategies
according to the market
• Family Oriented
• Affordable to everyone
• Because of the wide variety of items displayed and the
layout of the shop designed in a one-way format results in
customers seeing everything available. They might
therefore end up buying even something that they hadn’t
thought about.
• Convenience for the customer because everything is
boxed and they do their own assembling. It makes it easy
to transport (on buying and when people move)
• Also saving shelf space for other IKEA products and
reducing transport costs for the consumer hence resulting
in the lower prices
• Using unconventional names for their products that
people can easily remember (belief is that people
remember names better than they do codes)
Forestry

What Makes IKEA Unique?!

The IKEA Group had a total
of 350 stores in 43 countries.

IKEA Catalogue
IS NOT DEAD!!
The IKEA range consists
of approximately 12,000 products.

Pricing: Inexpensive but Not Cheap!!

Smart Sourcing Strategy at IKEA

 Supplier Base 1,350 suppliers in 53 countires

 Control the supply chain process
 Sources its wood from

Sleepover at
PRESENTED BY
RYAN BEDEKAR - M00550350
AYESHA S RAZA - M00550356

MKT4810 Marketing Management

Weekly Case-study
Presentation
Week No. 4
Understanding Consumer Behaviour
• Cost leading Strategy
• Lack of product innovation
• Changing social trend can hinder the growth of sales of IKEA
• The size and scale of IKEA sometimes affects the quality standards of their products and therefore
negatively affect the view that customers have of them. As such customers will have to pay more
attention to the products they are buying
• The format of the shop (everything is on floor) can be too overwhelming for the customers such that they
may not even know where to start from
• Not maximizing on the growing technology available for marketing and advertising, so consumers might
end up going elsewhere
• The fact that that people have to assemble their own items can be problematic for people who are not
good at fixing or assembling items

Ikea's Unique Value Propositioning

IKEA
IKEA Promises to reduce its cost by 1% to 3% annually!!

Merchandising :

Live for Today, Forget about Tomorrow!

Q1 (a). What are some of the things IKEA is doing right to reach consumers in different markets?

IKEA
unicef
1. The Background of the Case

2. Questions from the Case Study

Recap
Q2 (a). IKEA essentially changed the
way people shop for furniture.
Discuss pros and cons of this strategy

Our story will consist of 2 parts:

CONS :(
What else it could be doing?
• IKEA should expand its product line by producing high end products
• IKEA can expand its business into interior designing and crockery products
• IKEA can go for environment friendly technology
• Product customization can boost up IKEA’s sales
• Consider online sales/retail
• Make use of social media to increase awareness
• Offer further discounts (e.g. seasonal discounts)
• Expand to new markets e.g. Asia and Africa
• Make use of catalogues for convenience

 Online Youtube Tutorials to DIY

Thank you
for your attention!

www.ikea.com
Top 5 purchasing countries:

 China 22%
 Poland 18%
  Italy 8%
 Sweden 5%
 Germany 4%

IKEA Revenue
LACK table
BILLY bookshelf

Thanks to the FB fanpage ”I wanna have a sleepover in IKEA.”, we enabled 100 clients to
spend one night inside our warehouses.
1943
12%
Did you know that the E in IKEA stands for the name of a farm, Elmtaryd, the
name of the farm where Ingvar Kamprad (IK) grew up in Agunnaryd (A) his
home-town? These facts may be insignificant but what is noteworthy is how
IKEA has managed to stay ahead in the furniture business since 1943. For
starters, IKEA doesn’t start with a competitive white Space or consumer
trends. IKEA starts with the Price-Point. IKEA thus operates on a cost
leadership strategy for sustained competitive advantage
The Consumer Research for IKEA goes beyond consumption patterns and
Ikea believes in uncovering the lifestyle patterns of consumers as this will
ultimately decide the design and development of furniture at Ikea
Ikea uses a unique form of Ethnographic studies to understand Consumer
buying behaviour. IKEA publishes a quarterly "Life at Home" report which is
collected after spending considerable time with people and understanding
their daily lifestyle. One of the statistics in such a report is that 51 percent of
New-Yorkers wake up before 7 A.M. Now one may wonder how this is
relevant to a furniture retailer, but the sleep-patterns of the consumer will help
design the furniture, one such thought flow could be “If I sleep lesser than
most people do I want to buy a bed which would double up as a couch?”.
IKEA believes in a Marketing Strategy which is efficient and effective. Other
competitive furniture retailers rely on designs from Top designers, IKEA, on
the other hand, relies on the product rather than the person. Designers
several times act as Influencers in retail as consumers want to associate
with products that are
Any product can be viewed as three-layered onion, the innermost layer being
the core product, In case of an airline, travel is the core product, and the
second layer is the facilitating service which is nothing but the service which
aids in the delivery of the core-product and which is essential, the third and
the layer which Ikea has mastered is the augmenting layer which creates
differentiation.
In IKEA’s case the core product is the benefit that the furniture offers, note
that it is the benefit and not the furniture itself, for instance, furniture for
someone could offer comfort, while for someone else it may be a matter of
pride, the core product is the want which satisfies the need of the customer.
The facilitating service is essential without which the core-product cannot be
met. In the case of IKEA, the instructions for the DIY furniture and the billing
counters are an example of the facilitating service.
The Augmented service is the Key Differentiator in IKEA which is providing
of facilities like Pram, restaurant services etc. Now what do these services
have anything to do with furniture, the answer is they have something to do
with the people who buy this furniture, it takes away a few of their worries, but
how can a low-cost retailer afford to provide such services, the secret is IKEA
withholds some aspects of the core service, for example IKEA doesn’t
assemble the furniture, there is no intervention by salespersons unless
required.
IKEA is a leader in understanding the elements that matter to a consumer and
de-constructing them, it has thus stood the test of time and is attractive in
today’s dynamic market environment.
Competitive White Space
Competitive White Space is similar to Points of Differentiation in a Perceptual
Map. Basically, it is a space for a company to manoeuvre in a crowded
playing field.