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Executive Summery

Background Information Research

IKEA

It is vital to understand IKEA’s business model and core strategy in order to establish a successful execution of a promotional campaign. IKEA is a market-driven business that places the customer concern in the center of the business activity throughout the scope of business activities (Jobber 2010). This can be perceived in IKEA’s vision ‘A better everyday life for the many people’ (IKEA 2011).

Ikea’s long-term successful retail strategy is based on the company’s unique resources and capabilities that have established “Ikea as the world’s largest furniture retailer” (Mintel 2011, BBC 2012). The Ikea Company currently operates in 26 countries with 280 stores and employing 127,000 people, Ikea also launched 28 different language catalogues (Mintel 2011, Ikea 2011). Appendix 1 highlights important IKEA’s resources and capabilities, which give IKEA a competitive advantage in the market over the other competitor’s. The resources and capabilities build core competencies that allow IKEA to establish the business’s unique selling point that can deliver customer value (see Appendix 2). Ikea unique selling point is "To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them" (Ikea 2011). IKEA core idea to satisfy customer needs with below the market price furniture (IKEA 2011 and Johnson, Wittington and Scholes 2011).

Ikea provide over 9500 products in the Ikea warehouse and catalogue (Ikea 2011). The products are well arranged and illustrated in context of a home, in order to demonstrate the simplicity and perfect design that can fit every home by providing item specifications. This enables the customer to make a better-informed purchase decision with reduced perceived risk during the high involvement decision. Ikea had 42.3 million visits in UK, and more then 400 million people in 38 countries have read the catalogue (Ikea 2011, Ikea 2012).

The catalogue is one of the fundamental marketing tools for Ikea. It is one of the ‘most widely distributed commercial publications in the world’ (Ikea 2012). Nevertheless, Ikea marketing mix also consists of print media, TV, radio, and Internet based communication. However, the company focuses mainly on print media since it has proven to be successful in communicating Ikea’s values and products.

Target Audience

IKEA`s core concept is focusing on high quality products that can appeal to different demographic markets in terms of modern designs and costs (The Economist 2011). The target market is middle class primarily Bs and Cs with lower disposable income, this is why Ikea appeals to their emotional needs of well designed and highly functional furniture at low price (Johnson, Wittington and Scholes 2011). Ikea attracts a lot of students, families, first-time house buyers, tenants and landlords that want to

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furnish their homes with stylish furniture even if there is limited space (PR Week 2005). The core customer profile is customers aged between 25-50 years old, and 80% of them are women, majorities have children (Thinkbox 2012 and Johnson, Whittington, and Scholes 2011). This is why, Ikea provides children area and restaurant on premises to ensure a better shopping experience. Mintel (2011) identifies that single pre-families adults (37%) and pre-family couples (28%) market is growing and more of them can be found shopping in IKEA. In order, for Ikea to better understand consumers better Ikea launched Ikea Family Loyalty Card to ensure that Ikea’s consumers are retained through further targeted discounts schemes that appeal to the consumer’s needs (Campaign 2010, 2012 ). Ikea positions the business as "Your partner in better living. We do our part, you do yours. Together we save money." This indicates that Ikea focuses on all generated value to be passed on to the consumers (Ikea 2011). Appendix 2 displays Porter’s Value Chain that is tailored to Ikea.

Competitors Analysis

Mintel (2011) identifies that the furniture market is in a decline, which is driven by the 2.5% increase in VAT. Consequently, this has a heavy influence on the consumer activity since replacement purchasing had declined as well. This has put and enormous strain on the promotional activities of competing companies to capture the potential consumer’s attention.

Ikea faces high competition form specialized and non-specialized companies that use furniture as part of their range (see Appendix 4). Most specialized competitors have adopted the interest free credit and delay payments offers on top of their half price guarantee in order to overcome the affordability issues in the market. This creates an opportunity for the consumer to acquire desired products by affordable driven offers. For example:

DFS Furniture• Targeting pre-family couples• Brand is position is targeting the higher end market • Most recent advert (see appendix…) presents a highly sophisticated environment that uses a dog as a mood elevator that tries to communicate the brand personality• Focusing on interest free credit and 50% off offers• Available in-store and on-line

Magnet Kitchen• Targeting single pre-family adults• Brand is position is targeting the higher end market• Most recent advert (see appendix …) presents a sophisticated kitchen layout with dimed lightning that can communicate romantic setting for dinner. Displays men cooking can support target audience. •Focuses on interest free credit, 50% off offer, and displays price of £2,980 that suggest high end market• Available in-store, on-line, and in a brochure

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Dreams• Targeting customer that want to purchase bedroom furniture at affordable price• According to the price on the advert (see appendix…) the furniture is target at middle class market• The advert focuses on 3 for 2 deal on bedroom furniture, 0% interest free credit is available•Available on-line, in-store, or over the phone

Mintel (2011) identifies that the non-specialist retail outlets are expanding their ranges into furniture and homeware products in search for better returns. For example:

Argos• Targeting the same market as IKEA• The most recent advert for Argos (see appendix…) the advert displays a contemporary well designed living room that identifies the price of three low involvement product that the consumer could use to bring color into their home.• Available on-line, in-store, and in catalogue that is mentioned on the advert but it is not very visible

M & S• Target market is unclear due to the latest advert not using any furniture to demonstrate quality or class (see appendix …)• Focuses on 50% off on all furniture range• Identifies only available in-store

B & Q• Identifies several different prices in the most recent advert (see appendix …) which can be translated that the target market and middle class• Advert focuses on unbelievable prices that will stimulate consumer’s interest• Further the advert identifies hundreds of items in store which illustrates a wide rage for the choice of buy• Available in-store

Creative Development

Print Advert Concept 1

The original concept of the first advert incorporates an imaginary setting using Rapunzel from “Tangled” as the selling point for Ikea’s products that are launched in the new Ikea catalogue (see Appendix ).

The advert displays the Ikea catalogue as the trunk on the tree, with branches leading out of the trunk to different products that are available in the Ikea catalogue. The branches symbolize different opportunities for the consumer to revitalize their home this spring. The spring factor is developed through bright colors that are aiming to attract attention and communicate refreshing (Lee and Barnes 1990). Color can be seen as an important tool for influencing the customer’s emotions and responses (Lee

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and Barnes 1990). The use of symbolism and spring colors wants to inspire the consumer to acquire an Ikea catalogue this spring. By using Rapunzel, the advert establishes a humor appeal and positive tone of voice. It is important to understand the tone of voice that the advert communicates due to the fact it tries to portray Ikea’s values and personality. In this case, the advert is trying to establish a cheeky and rebellious tone of voice through the fantasy character Rapunzel. The tone of voice and humor, help to ease the transition of the message between the advert and the audience.

The purpose of this advert is to create awareness of the IKEA catalogue. The branches in the tree provide compelling information to stimulate interest for the potential customer to acquire a catalogue. The advert title “Turn your home into a fairytale this spring with the new IKEA catalogue” establishes the customer’s need or want to acquire the catalogue to browse through ideas how to brighten up their home (Yeshin 2006). This interest can be turned into motivation and satisfying the need of esteem and status. Maslow (1943) he proposed a Hierarchy of Needs that can be related to what needs might be satisfied during a purchase (Jobber 2010). In this case, the visual element satisfies the need of esteem and status, since buying products for the consumer’s home is more of status appeal to satisfy the ego. The advert present more low involvement products trying to appeal the consumer through impulse buying. This is where the IKEA catalogue presents an opportunity for the consumer to window shop throughout the catalogue.

Print Advert Concept 2

The second advert (see appendix …), focuses on premium household theme where the potential customer’s want to improve their home’s through high involvement products.

The advert displays a house that the consumer could potentially have if they have choose to do their home improvements with IKEA catalogue this spring. The advert uses the IKEA catalogue as the door to the better living. Further, the advert uses several Ikea designs and puts them into the context of home. According to the Elaboration Likelihood Model this advert requires for the consumer to get more involved in and will require higher motivation to be persuaded to acquire the IKEA catalogue (Arens, Weigold, and Arens 2009). The advert uses the central route to persuasion to demonstrate what the consumer home might look like this spring if successfully acquiring the IKEA catalogue. This route is trying to communicate the benefits of displaying rooms in a home to appeal to the psychological needs of improving your home. Since this advert is a higher involvement one it needs the consumer to go through deeper thinking in order to stimulate interest and to do the first step to get a catalogue.

Since this is a high involvement process, the perceive risk is high as well, therefore the need of improving your home this spring will drive the consumer to a higher information search. This could include family and friends, which means that this can be driven by a social influence of reference groups and opinion leaders (Arens, Weigold, and Arens 2009).

The advert’s title ‘Refresh your home this spring, pick up a catalogue today’ eases the transition of the message, rather then saying improve your home this spring

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which could portray it like a undesirable chore. The word ‘Refresh’ is searching for the target audience that are willing to make a high involvement change in their home.

List of References

1. BCC (2012) ‘The Ikea edge’ [online] available form <http://news.bbc.co.uk/today/hi/today/newsid_9679000/9679720.stm> [7th March, 2012]

2. Campaign (2010) Ikea revamps strategy in loyalty focus [online] available from < http://www.campaignlive.co.uk/news/1017082/Ikea-revamps-strategy-loyalty-focus/?DCMP=ILC-SEARCH > [20 March, 2012]

3. Campaign (2012) Marketers need to work on loyalty activation, research claims [online] available from <http://www.campaignlive.co.uk/news/1115622/Marketers-need-work-loyalty-activation-research-claims/?DCMP=ILC-SEARCH > [20 March, 2012]

4. Daily Mail (2010) Ikea’s flat-pack Fuher: Future chain founder is branded a tight-fisted former neo-Nazi in new book [online] available from <http://www.dailymail.co.uk/news/article-1319156/Ikeas-flat-pack-Fuhrer-Furniture-chain-founder-branded-tight-fisted-neo-Nazi-new-book.html> [8th January 2012]

5. Ikea (2011) Facts and Figures [online] available from <http://www.ikea.com/ms/en_US/about_ikea/facts_and_figures/index.html> [8th January 2012]

6. Ikea (2012) IKEA and the IKEA Foundation honoured at Save the Children’s first ever Corporate Business Awards [online] available from <http://www.ikea.com/gb/en/about_ikea/newsitem/IKEA_Foundation_award_28.19.11> [March 12th, 2012]

7. Ikea (2011) Ikea marketing strategy [online] available from <http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html > [8th March, 2012]

8. Ikea (2011) Welcome inside 2011 [online] available from <http://www.ikea.com/ms/en_US/pdf/yearly_summary/Welcome_inside_2011.pdf> [16th January 2012]

9. Independent (2012) DFS hit as consumers cut spending [online] available form < http://www.independent.co.uk/news/business/news/dfs-hit-as-consumers-cut-spending-7582515.html> [8th March, 2012]

10. Marketing Week (2012) Guardian outperforms market with festive circulation bump [online] available from < http://www.marketingweek.co.uk/guardian-outperforms-market-with-festive-circulation-bump/3033269.article > [26th March, 2012]

11. Mintel (2011) Furniture Retailing [online] available from <http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545203/display/id=587790?select_section=587792> [8th January 2012]

12. PR Week (2005) News Analysis: No rest for Ikea in the furniture wars [online] available form < http://www.prweek.com/uk/news/477569/ > [16th March 2012]

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13. Heiser S.R., Sierra J.J., and Torres M.I (2008) ‘Creativity via Cartoon Spokepeople in Print Ads’. Journal of Advertising 37, (4) 75-84

14. Seonsu L. and Barnes H. J. (1990) ‘Using Color Preferences in Magazine Advertising’. Journal of Advertising Research 25-30

15. The Economist (2011) The secret of Ikea’s success [online] available from <http://www.economist.com/node/18229400> [10th January 2012]

16. The Times 100 (2012) SWOT analysis and sustainable business planning [online] available from <http://businesscasestudies.co.uk/ikea/swot-analysis-and-sustainable-business-planning/introduction.html> [8th January 2012]

17. Thinkbox (2012) Ikea: Moving House [online] available from <http://www.thinkbox.tv/server/show/ConCaseStudy.65 > [16th March 2012]

Bibliography

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Appendix 1

VRIO Framework

Professor Jay Barney presented VRIO framework that can provide and evaluation of organizations’ resources that could lead to promising returns. Below is an example, of VRIO Framework being applied to some Ikea’s key resources and capabilities to identify how they can contribute to competitive advantage.

Resource Valuable? Rare? Costly to Imitate?

Organized Properly?

Competitive Implication

Flat-pack packaging

Yes No No Yes Competitive Parity

Brand Reputation

Yes Yes Yes Yes Sustained Advantage

Catalogue Yes Yes No Yes Sustained Advantage

Suppliers Yes No Yes Yes Sustained Advantage

Stores Yes Yes No Yes Sustained Advantage

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Appendix 2

Porter’s Value Chain

IKEA focuses on cutting cost in every possible way, they still generate high value in terms of suppliers’ loyalty and long-term partnership and this value continues to be distributed throughout the value chain until it reaches the customer. The customer achieves the most value due to ending with modern, well-designed, and cheap furniture.

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Appendix 3

SWOT Analysis

Strengths Weaknesses

• Ikea is a global brand with strong brand equity• Cost leadership concept and hybrid strategy enable Ikea to keep ahead of its competitors• Providing a wide rage of modern designed products at low prices • Outsources enables to keep costs low •Self-assembly furniture • Strong long-term alliances with the suppliers enables Ikea to retain the suppliers loyalty•Large inventory with parking, restaurant, and care facilities•Impulsive shopping experience due to unique store layout

• Not customer focused• Lack of customer support on store floors

Opportunities Threats

• Growing demand for purchasing greener products• Due to the financial climate there is a growing demand for lower priced products • The reduction of waste and to reduce carbon footprints•Expand to high end products• Household numbers rising in the UK• More people are spending time at home rather then out due to shortage of disposable income, this can increase in furniture spending•Desire for quality

• Accelerated market competition of non-specialized companies that add furniture as part of the product range• More companies using flat-pack packaging to reduce costs e.g. Argos• Consumers don’t enough disposable income• Competitors using heavy promotional activity

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Appendix 4

Leading UK Furniture Retailers, 2010-2011

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Appendix 5

Factors that drive consumers when choosing to buy furniture, June 2011

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