Founded in 1943 by Ingvar Kamprad, IKEA sells ready-to-assemble furniture, appliances, and home accessories. What started as a vision to bring interior design to the masses grew to 433 IKEA stores operating in 52 countries. It’s been the world’s largest furniture retailer since 2008. But did you know that IKEA uses psychology to help drive that success?
Principles like Scarcity, the Endowment Effect, and the Priming Effect laid the foundation for the company’s success.
How IKEA uses psychology to create addictive products
1. The IKEA Effect
This effect states that people attribute more value to products they’ve helped create. In other words, labor leads to love.
Researchers described the experiment that gave the IKEA Effect its name this way:
“Two groups were given IKEA boxes, with one group given fully-assembled versions, and the other given unassembled boxes, which they were told to put together.
This second group were willing to pay much more for their box during the subsequent bidding process than those with pre-assembled boxes.”
Inspired to keep co-creating, customers created a mini-industry of “IKEA hacks”. These projects transform the basic furniture into unique reformulations.
How the IKEA Effect helped grow the brand
To understand how the IKEA Effect impacts business performance, consulting firm Iris created a Participation Brand Index.
According to their research, businesses that encourage co-creation with customers outperform their competition. For example:
- Investing in the top 20 brands in the Participation Brand Index over three years would have seen 4x higher ROI than investing in the brands at the bottom of the ranking.
- Investing in the top 10 brands in the Participation Brand Index over three years would yield a return 2x higher than the S&P 500.
2. The Choice Overload Effect
This principle states that while some choice can be good, too much choice will overwhelm customers and become a barrier to sales.
According to research from Episerver, 46% of customers have failed to complete a purchase online due to overwhelming choices. Compare that to companies like Procter & Gamble, who found that a decrease in the variety of Head & Shoulders shampoos resulted in a 10% increase in revenue.
The negative effects of choice can be much worse than a missed sale. Research shows that when there are too many options, customers feel anxious, will disengage, and can even become depressed.
How avoiding Choice Overload helped grow the brand
Most IKEA furniture comes in a limited variety of colors and sizes. For the business, standardizing choice allows for production efficiencies that lower costs.
For customers, limiting choice makes them more likely to buy rather than browse. Constraining options to black, white, and oak finishes simplifies the buying process.
How IKEA uses psychology to create an unforgettable store experience
If you’ve visited an IKEA store, you’ve probably experienced going in for one or two things, then walking out with a full cart. That impulse buying is due to two features of the store layout: its one-way system and a circular design.
1. Scarcity Effect
“When our freedom to have something is limited, the item becomes less available, and we experience an increased desire for it.
However, we rarely recognize that psychological reactance has caused us to want the item more; all we know is that we want it.”
How Scarcity helped grow the brand
Because IKEA’s store design uses a one-way traffic system, it creates a feeling of scarcity. The design forces customers to put any item that catches their eye in their cart right away.
Why? Let’s say you stop to consider a lamp but then decide not to put it in your cart. If you change your mind, the store design makes it inconvenient to go back and get the lamp. You’ll have to walk through the entire store to get back to that section. No small feat when an average IKEA store is around 300,000 square feet or five American football fields.
2. The Endowment Effect
The Endowment Effect states that people place a higher value on items that they own or intend to buy. Ownership, or intent to own, create emotional bonds that people don’t want to break.
“Ownership” creates emotional bonds that people don’t want to break
How the Endowment Effect helped grow the IKEA brand
When a customer puts something in their cart they begin to dream about their future with that item. Fantasizing about how it will look in their living room, and how much guests will admire it. Once customers create “pre-memories” they become emotionally bonded to the item.
This Endowment Effect is incredibly effective at driving sales. Because once you bond to an item, you don’t want to have to walk back through that 300,000 square foot, one-way store to get it. Instead, customers are more likely to put it in their cart “just in case”, then never take it out again.
As Alan Penn, professor at University College London, put it:
“[IKEA] get you to buy stuff you really hadn’t intended on. And that, I think, is quite a trick.”
3. Priming Effect: The secret psychology of meatballs
First demonstrated in the 1970s, priming is when our brains call on unconscious connections in response to a stimulus — also called primes. In other words, what we’re exposed to now changes our behavior later.
What we’re exposed to now changes our behavior later.
Priming is passive, subtle, and people aren’t aware it’s happening. And it can be activated with almost any kind of stimulus. Images, words, smells, light, sound, tasks, touch, or temperature can all unconsciously affect our choices.
How the Priming Effect grew the brand
At first glance, it might not seem like IKEA’s food has an effect on their furniture sales. But according to the company’s research, 30% of its shoppers come to the stores just to eat. In 2017, the company made $2.24 billion from food sales. That makes them the tenth-largest food retailer in the world.
The food at IKEA food doesn’t only have an impact on the bottom line. It also has a priming effect on how customers think, feel, and act in the store. Eating primes a state of happiness, and that mood can affect how much customers spend and what they buy.
As Gerd Diewald, former head of IKEA food operations told Fast Company:
“We’ve always called the meatballs ‘the best sofa-seller…
When you feed them, they stay longer, they can talk about their [potential] purchases, and they make a decision without leaving the store.”
The bottom line
There are many behavioral science and psychology principles at work in IKEA’s experience. Whether the company knows it or not, IKEA uses psychology to help make their brand more engaging.
If you’re looking to apply some of these principles to your experience, ask yourself:
- IKEA Effect: If there’s a problem area in your product experience, ask yourself if customers can be more involved in the process. Do they feel left out, like there’s no transparency, control, or participation?
- Choice Overload Effect: How can we limit our options to maximize sales?
- Scarcity: Is there a way to design our experience so that items seem to be available, but only for a limited time?
- Endowment Effect: How can we get customers to imagine their futures with our products? Is there a way they can make a small, low stakes emotional commitment to our brand or product?
- Priming: Are there moments where we can prepare our customers to buy by influencing their sensory environment or mood?