IKEA is an international home products privately held company that designs, makes and supplies assembly ready furniture. The company is one of the biggest retailing furniture suppliers which was southern Sweden based company founded in 1943 by Ingvar Kamprad. The company has more than 320 stores in over 35 countries having more than 1,500 suppliers of 12,000 products. The derivation of IKEA Company is gotten from the initial letters of the names Ingvar Kamprad and of Elmtaryd and Agunnaryd (Kling & Goteman, 2003). IKEA's growth has been dramatically influenced by its philosophy on "quality at a low price" which has been responsible over the years in its expansion in not only Stockholm, Sweden but also across other parts of Europe and the globe. The company outlets have children's caretakers and playrooms that allow the parents to shop comfortably, and a cafeteria that meets the hunger needs of the customer. IKEA applies a business marketing plan that incorporates the market segmentation, positioning, pricing strategy and promotion plan that contributes significantly to its continuous growth and expansion.
IKEA'S Segmentations & Target Market Segments
The company applies four segmentation in the potential market which includes the segmentation in demographics, geographic behavioral and psychographic.
Demographic segmentation-IKEA utilizes the demographic based on its target market. This segmentation comprises all groups in the world, i.e., age, gender, family cycles, income level and occupations of every customer. The company also considered the dominant economic factors. Research has shown that the company targets the young couples, which are averagely under the age of 38 years. This is because they are likely to be the ones who recently bought an apartment, therefore may require furniture to home. Moreover, the company targets the salaried workers as they have a more spending ability, therefore, have a higher probability of purchasing new products (Mariotti & Glackin, 2011).
Geographic segmentation- IKEA acknowledges that different areas have a different background, therefore, diversity in needs of the people. The company sells various products depending on the geographical unit to accommodate the different region's local conditions. IKEA differentiates the markets into three distinct areas. This includes the European, America and the Asian markets regions. The Scandinavian sector accounts for most sale rated at over 80% of all wide variety of products availed, America region accounts for about 15% of the total sales whereas Asian and Australian continents account for the remaining 5%.
Behavioral segmentation- IKEA produces products basing on the buying behavior of the customers, customer's demand, varying income of the groups, prices of commodities and the attitude of the consumers. This is because there are specific products that are influenced by the quantitative consumer's behavior patterns. IKEA focuses on the national economic development status, therefore ensure the product is affordable to all income group levels. The company further targets the booming sector in Asia.
Psychographic segmentation- the company emphasizes the behavior; know activities, culture, and wellbeing of the company's customers. The customers in Europe and America would opt to choose their products in a design that is simple and natural such that in case of the furniture wears out it can be the substitute to the customer's preference on the demands and lifestyle trends. In contrast, Asian customers prefer home decorations that suit the luxurious lifestyle, therefore very specific in the choice of buying bulky furniture.
IKEA'S Positioning Strategy
Positioning strategy is applied in the creation and sustenance of the company's product philosophy, activities, and decisions in the customer's minds. IKEA implements the differentiation position strategy in its success. It creates products that are of high quality, at the same time ensures that they are affordable (McCarty & Stires, 2011). Furthermore, the products are modernized which is essential in the space economy and increased durability of the products. The company involves all designers from a specific country's as well as the culture in the design of the products. With their designers, they achieve the delivery of all range of products that favor the taste of the customer. The utilization of every country's designers is useful in the meeting of the customer's requisition. IKEA has availed all the range of products in the catalogs as a form of customer utility. The products advertised in the catalogs include home improvements like knobs and handles, children's products such as tablewares, dinnerware's, bathroom accessories, desktops, bed and mattresses, chairs, clothes storage, home decorations, and kitchen cabinets and appliances. IKEA bases its design on each product on market research. The company engages examination of the cultural aspects, taste, and preference on different nations' customers.
IKEA'S pricing Strategy
IKEA applies a combination of furniture and flat packaging that provides a pre-requisite in ensuring that the furniture's prices are affordable. The DIY furniture adopted by IKEA facilitates the cost economization through the assembly and storage in the outlet's spaces. This affects the prices as it lowers down making it affordable to the customers (Schulaka, 2011). Flat packaging saves on space and ensures convenience as the product is purchased and assembled on the place where they are used. The pricing of IKEA's products is made as affordable as possible without compromising on the quality of the products. The company engages in the achievement of profits from their investment while their prices are made reasonable to minimize competition. Furthermore, the company participates in pricing destruction, which is a mechanism that reduces the prices with an aim of keeping off competitors in the industry. The company also applies the promotional pricing by providing special offers and vouchers to the customers on certain products. This attracts more potential customers making them buy more the products within their budget ranges.
IKEA's Promotional Strategies
The company applies several methods of product promotion which plays effectively in the marketing of their produce. It applies online advertisements through social media platforms like Facebook and websites (Buttell, 2009). The company also uses publicity as a means of product promotion. It achieves this through the sponsoring of events and functions. A good instance is when there are functions such as weddings or fashion shows, IKEA may chip in by providing the furniture such as tables and seats that may be used in the events. Additionally, the company engages surveys that are conducted periodically to get the feedback of the customers. IKEA uses the innovative approach, which is a technique of getting ideas from the customer. In this case, the opinions of the customer are considered by proposing the improvements on a product. The company also makes use of published catalogs as a means of advertisements. The catalogs are published in over 36 countries in more than 25 languages, which serve a reliable marketing tool in the furniture industry.
IKEA is the only store in retailing that takes major in the furniture products. It achieves this by availing high quality, durable and affordable household products. The company embarks on creating an enabling environment for not only the customers but also the employees of the company. The achievement of the company is contributed by the strategies in marketing, good customer relations. Good style of product pricing and availing of a wide variety of products.
Buttell, A. E. (2009). 4 steps to an effective marketing plan. Journal of Financial Planning, Practice Management Solutions, 6-8.
Kling, K., & Goteman, I. (2003). IKEA CEO Anders Dahlvig on international growth and IKEA's unique corporate culture and brand identity. Academy of Management Perspectives, 17(1), 31-37.
Mariotti, S., & Glackin, C. (12/2011). Entrepreneurship: Starting and Operating a Small Business, 3rd Edition. [Argosy University]. Retrieved from https://digitalbookshelf.argosy.edu/#/books/9781256690818/
McCarty, K., & Stires, K.T. (2011). Message in a bottle. Baylor Business Review, 30(1), 32-35.
Schulaka, C. (2011). Marketing's magic bullet? Keep it simple and consistent. Journal of Financial Planning, 24(3), 30-33.
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