Marketing Insights

The Ikea effect: An audience centric Marketing tactic

We are all familiar with assembling furniture from Ikea. They are famous for their modern designs, eco-friendly products, low prices, and flat furniture packaging. But there is also a psychological reason behind Ikea’s iconic success, it’s the feeling of a sense of accomplishment after the 1000 pieces of furniture are put together by you to … Continued

We are all familiar with assembling furniture from Ikea. They are famous for their modern designs, eco-friendly products, low prices, and flat furniture packaging. But there is also a psychological reason behind Ikea’s iconic success, it’s the feeling of a sense of accomplishment after the 1000 pieces of furniture are put together by you to see a complete finished product, just like solving a puzzle.

The term “Ikea effect” was first coined in a 2011 study by Harvard professor Michael I. Norton. According to this study, the perceived valuation of self-made products is more than ready-made products. It gives a sense of productivity and accomplishment. Similar to using instant cake mixes to bake a cake or making your own combinations of pizza topping.

What is the Ikea Effect?

It’s the tendency for people to place a disproportionately high value on objects they have partially assembled themselves regardless of the quality of the result.

This also aligns with the fact of our cognitive bias towards objects that we can rationalize. All this aligns to giving every customer that experience that helps them rationalize and inturn places a higher value on the products that you are selling.

Role of Ikea effect into the Experience era

Our economy has moved from an agrarian economy to a manufacturing economy, to selling services and now selling experiences. This means we need to sell products to customers that provide delightful experiences.

The Ikea effect sometimes is contradictory to delightful experiences. Ikea gives pieces of wood with instructions for you to assemble. The service provided by Ikea is poor as they are not giving assembled products and you spend more time building them. Still, you plan to buy from Ikea, the next time you want to purchase a piece of furniture.

Apple does a really good job of selling experiences. The Apple store revolutionized the shopping experience by creating a space to be fully immersed in the brand. If you ever tried to buy an Apple Watch, they let the customer play around and customize your own apple watch band.

Other real good examples of the Ikea effect are:

  • Creation of fully customizable playlists/watchlists that can be shared with friends (e.g. Spotify, Netflix).
  • Fast-food joints that let you design your own food (e.g. McDonald’s, Chipotle, Dominoes).
  • Home meal kit companies, where consumers can personalize the type of food box, meals, etc (e.g. Marley Spoon).

Ikea effect to build Customer Engagement in a B2B world

Today customers need to be engaged throughout the journey. Every product even in B2B space has evolved to incorporate the DIY component, to get the customers involved in the product creation. There is an increasing need for B2B companies to provide experiences like B2C. According to a Salesforce 2018 report, 72% of B2B customers expect personalized experiences.

Great products and innovative marketing are key areas to drive customer engagement. Let’s explore how B2B companies using the principles of the Ikea effect to transform product development and marketing tactics.

B2B Product evolution

  • Saas Subscription bundles: B2B Saas companies have created business models like that of iTunes and Spotify. They let you customize your user packages and then select the price that works best for you. The most common example of this is Microsoft Office. Initially, the only business model that Microsoft Office had was to buy expensive MS office CDROMs for users to install in their PCs or if you are like me, get it pre-installed on your new Windows PC. However, with Microsoft 365, you can bundle and buy different software components of MS office, which is only a click away and customizable even for the duration you need it. It’s cheaper, affordable, and no lock-in period.
  • B2B Ecommerce portals: Many B2B brands have seen tremendous eCommerce success and have become industry leaders. In 2019 the global B2B e-commerce market surpassed $12 trillion, making it more than six times the size of B2C. Red-Hat Marketplace is one such example where Red Hat has launched a marketplace to buy and sell software solutions. This marketplace is similar to B2C eCommerce platforms. The buyers in this case developers can look to buy or sell solutions that they make or need. Again because this platform is populated by developers, it gives them a sense of ownership and higher perceived value of the marketplace.
Screenshot from RedHat Marketplace
  • No-code products: Minimal or no-code solutions like Notion, Adobe photoshop, etc lets you create databases or design beautiful graphics without actually being a DB admin or a designer. Yet you feel like one after creating the finished product and put a high value on this software that helped you achieve that sense of accomplishment.
Screenshot from Notion
  • Crowdsourcing platforms: There are platforms where information is populated by the crowd like Wikipedia, Ways, or social networking platforms like Facebook, Twitter. Users value these sites, apps, or platforms because they come there to contribute their own content and see content from other users. The popularity of these platforms is not just because of how user friendly they are but because people go there.

B2B Marketing Evolution

Marketing is the key to creating an engaging customer journey even before they decide to buy products from us. B2B Marketing involves a lot of tactics to drive personalization.

Content: As established earlier, people like the content they create. User-generated content is an easy way to customer reach as well as increase brand loyalty. Involving customers by getting their inputs, co-creating content, feature them, get them to vote on the content created. Client references, customer testimonials, interview them for panels. Promoting these kinds of content is easier not because of the value of the voice of the customer but your customer, your audience is invested and they get to hear a story, they relate to and they feel like promoting.

Screenshot of Hubspot Certification

Hubspot is leading the content marketing tactic. They have blogs, they have customer stories, but what drives maximum engagement is Hubspot Academy certifications. Users/Customers complete it, they feel a sense of accomplishment and also get a certificate to share. The content gets viral as more and more users/customers see it and share their own achievements.

Digital ads: Advertisers today through social media platforms like Facebook, Google, and Instagram have billions of data points like

  • Location,
  • Device used,
  • Apps used,
  • Searches,
  • YouTube videos
  • Interests based on Facebook likes and comments

These data points have allowed advertisers to move away from generic ads that broadly-target audiences to very personalized ads that micro-target audiences. This not only improves the click-through-rate but also increases conversions. LinkedIn has evolved to be the platform for advertising for B2B marketers.

Screenshot from LinkedIn Ads

This ad in LinkedIn is a SurveyMonkey ad essentially targetting B2B customers like me, who are in marketing and need to design user-centric campaigns.

Through this ad, they can get qualified users to view product demo and inturn get increased intent from users who want to buy the product.

Account-based marketing: In B2B, personas are developed based on business-related attributes. Account-based marketing really helps in the targetted messaging.

Below is an example of a welcome screen that targets by company name.

Screenshot Qualified.com

B2B Customer Services: With the increase in AI solutions for customer services, chatbots are a great way to use the Ikea effect. Typical virtual chatbots initially ask your preference and then answer questions around those selected preferences. It gives the customer a sense of satisfaction only because based on those preferences, these AI chatbots can deliver better experiences.

Screenshot from Drift.com

Drift specializes in conversational marketing has virtual chat bots on its welcome page. The chatbot asks certain questions to the customer and in-turn learns more to give a more personalized experience.

The Ikea effect is an interesting concept about the love of labor and how working on things that you own, makes you love them more.

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