Ikea Statistics

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- Do not focus on competition in mature industries

This is where most companies make the mistake. Instead of concentrating too much on competition, IKEA needs to focus on where the job is to be done.

The last two assumptions refer to volume.

- Focus on total solution sought by the bulk

Instead of increasing functionality of your product, think outside the box and try to find complementary services or products that may make a good combination with yours. This tactic allows you to target more people and decrease the price, and eventually raise the quantity sold.

- Focus on commonalities in what customers value

Instead of separating the market, it is important to recombine it by focusing across segments and industry. This almost resembles a mass market approach with one key difference.

- Creating a Value Curve

- Select markets to combine

This step needs to be highly customer-oriented. The mass market can be defined by looking for the two largest segments that make up the market based on a combination of USD volume and segment size. A big part of the bottom of the industry life cycle are the laggards, namely those that are most sensitive to price and highly dogmatic when it come to venturing out and trying new products. It is crucial for IKEA to spend quite some time and effort to convince this segment first and then move on to the more risk-friendly segments like early adopters. Generally speaking, when combining markets, companies could go across

- Tiers within industries

- Functional or emotional appeals to buyers

- Substitute industries

- Complements

The first two refer to reversing the industry while the last two imply combining industries. It becomes evident that the last two strategies entail more risk as you are looking to merge two perhaps completely different industries.

Specifically to the client IKEA, let’s look at the buyers of furniture in the US across strategic groups within the furniture industry in 2012. IKEA is currently targeting the rather thrifty shopper who seeks affordable furniture for his/her student accommodation or first own apartment. During the recession though, even these shoppers saved money wherever possible and one of the first segments to cut spending on was furniture. In order to stay in business, IKEA needs to think about new target customers within the market. Essentially the objective is to offer the same products but try to target families as well.

- Identify factors of competition

Based on thorough analysis of the furniture industry through 30 hours of in-depth qualitative research through the use of five segment specific focus groups, and elaborate consultation with the client, the map factors of competition that cater to both of the aforementioned market segments were defined as follows: price, style, selection, ease of use, customer service, durability, inventory, delivery service, location, ambiance and amenities. These factors were pinned down after asking the question of what IKEA’s mass market receives from existing providers currently. Together, they eventually make up the x axis by laying the foundation of the value curve which in essence provides a visual separation of the features.[2]

- Map the performance of existing solution providers

This step involves creative wordsmithing when trying to create and map features of competition for IKEA’s mass market. Basically, besides the x axis we are now adding the y axis to generate a 2-dimensional graph which highlights relative performance of two of IKEA’s primary competitors. After careful investigation of the industry, the competitors chosen were Crate & Barrel on the high end and Target on the low end. It is utterly important to keep in mind that the x axis maps all the crucial factors whereas the y axis gives the relative performance of the market players.[3]

After grouping the types, the buckets need to be arranged on an x axis, one after the other.

[pic 2]

Figure 1: Map of Competition within furniture industry, client specific map for IKEA, October 2012

As illustrated in the graph, Crate & Barrel ranks high on every feature except for amenities. Target, on the other hand ranks low on price, medium on most of the factors and quite high on location and amenities.

- Create the curve

Before diving into the actual creation of the curve, some clarifications need to be made up-front. The factors that were identified for IKEA can be grouped together in different buckets depending on the type of feature they belong to. In order to maximize the significance of this assignment, it is necessary to ask consumers for their opinion. A sample of 1,000 people in the US between the ages of 24-55 was hereby asked to find points of commonalities across competitors and throw the descriptions of 11 features into four different buckets.

- Must haves

Also known as points of parity, these must haves are hygiene factors that affect dissatisfaction by absence. While they don’t really have an impact on satisfaction, they must be present in every furniture store in order for the store to even be considered part of the industry. The must haves in the furniture market are customer service, durability, enough inventory, delivery service and location. It makes sense that furniture needs to be somewhat stable, that the stores shouldn’t run out of stock fast, and that they should offer an option on delivery service, etc.

- Linear satisfiers

The linear satisfiers are positively correlated with satisfaction, meaning the more you increase that feature, the happier the consumer becomes. They affect satisfaction and dissatisfaction with presence and absence and in the example of furniture, linear satisfiers would be price, style, selection and ease of use. It is logical that by raising the style, by enlarging the selection, and by alleviating the furniture assembly you make consumers happier and more inclined to buy from IKEA.

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