Founded in 1943 by Ingvar Kamprad, IKEA sells ready-to-assemble furniture and home accessories. What started as a vision to bring interior design to the masses has grown to 433 IKEA stores operating in 52 countries. It’s been the world’s largest furniture retailer since 2008. To put those numbers into perspective, the brand sells a set of its Billy bookcases every ten seconds. It’s said that one in ten Europeans were conceived on an IKEA bed.
You might be familiar with the numbers, but did you know that IKEA uses psychology to help drive its success?
1. Scarcity Effect and the Thrill of Novelty in Bulla Bulla
IKEA uses a merchandising technique called “bulla bulla” to create the impression that an item is cheap. In bulla bulla, a bunch of items are jumbled and stacked in large bins to create the impression that there are lots of items available. And because there are so many items available, they must be cheap. Often these items are intended to be impulse buys and are priced cheaply in comparison to the items surrounding them.
Why do our brains equate volume and disorder with cheapness? It’s down to a combination of the Scarcity Effect and the thrill of novelty.
What is the Scarcity Effect?
As you’ll recall from an earlier section, the Scarcity Effect states that humans place a higher value on items that are scarce. Bulla Bulla merchandising is an example of scarcity at work, but not in the way you’d think.
If scarcity means that seeing fewer items means we value them more, then the opposite can be true as well. An abundance of items signals to customers that this item is more available and therefore should be cheaper.
On its own, this roundabout use of scarcity is probably not enough to drive sales. But, the bulla bulla technique has another trick up its sleeve. The brand is always changing out these items for something new, cheap, and exciting. Why does this work? It’s down to the thrill of novelty.
What is the thrill of novelty?
When people discover something unexpected or new, our brain releases dopamine — the same chemical associated with falling in love. That means when you see a bulla bulla stack of new, cute, cheap plush toys your brain makes you happy. This one-two punch of abundance and novelty, contrasted with a streamlined selection of higher priced furniture, is what creates the bulla bulla appeal.
2. Sunk Cost Fallacy in Store Locations
IKEA store locations tend to be giant warehouses located just outside of urban centers. For its mostly younger, city-dwelling customer base, that represents a significant challenge — getting to IKEA. For those who don’t own a car, there’s a cost in getting the furniture home as well. They’ll have to either rent a van from IKEA, rent a car themselves, or get it delivered. However, IKEA does not offer free shipping, and the cost for shipping a flat-packed desk is between $40 and $60 in the United States.
But interestingly, inconvenient store locations can work in IKEA’s favor. Because people have to spend time planning their trip, researching public transport routes, or even renting a car to get to IKEA, they become more committed to spending money once they make it to the store. Why? It’s down to a cognitive bias known as the Sunk Cost Fallacy.
What is the Sunk Cost Fallacy?
The Sunk Cost Fallacy states that people are more likely to commit to an activity if they’ve made a significant financial or time investment. For example, a business might spend millions on developing a product that customers don’t want. But because a middle manager has committed money to the project, they go ahead with the product launch.
New Coke, perhaps the most famous marketing mistake in history, could be seen as an example of the Sunk Cost Fallacy. The brand dedicated $4 million to develop the product, then doubled down on marketing once the product launched. Eventually, they decided to pull New Coke from the shelves and destroy more than $30 million in unwanted products. Had they admitted the product wasn’t viable early in the process, they could have saved millions that were spent due to the Sunk Cost Fallacy.
How does the Sunk Cost Bias help grow the IKEA brand?
Research about the IKEA customer experience found that most people plan their trip — some customers even have to spend a night away to visit the store. That makes IKEA seem like a get-away from ordinary life, like a mini-vacation. And once customers get to IKEA, they spend a long time at the store, where they can discover products. Because of the sunk costs of so much time, money, and effort, customers feel they have to make the most out of their trip. In other words, if they see something that strikes their fancy, they are more inclined to buy it.
3. Anchoring in the “Open the Wallet” section
Every IKEA store has an area internally dubbed the “Open the Wallet” section. A former IKEA employee named Rob described it this way:
“[This area is] a lot of very cheap items, things that look practical, useful, something you didn’t realize you wanted.”
“Open the Wallet” is stocked with plastic trash cans, hampers, ice trays, and other cheap household items, priced under $5.00. This section’s location varies from store to store but is usually toward the middle of the customer journey.
On the surface, “Open the Wallet” doesn’t seem different than any other store’s accessories section. So why is this area so good at driving sales? It’s not just because the items are cheap. It’s also down to a behavioral science principle known as the Anchoring Effect.
What is Anchoring?
The Anchoring Effect states that the first information we see influences our later decisions. We anchor to this information without being consciously aware of its effects. This effect has been rigorously researched in situations like home prices, legal judgement, and purchasing decisions.
How does Anchoring help IKEA sell more items?
Customers anchor to the price of the sofa they came in to buy, and in comparison, $5 trashcans in the “Open the Wallet” section look like a fantastic deal. As author Lauren Collins described it:
“[In ‘Open the Wallet’ there are] an abundance of cheap goods — flowerpots, slippers, lint rollers — [that] encourages the customer to make a purchase, any purchase.”
IKEA’s perspective is that customers either buy nothing or a lot. If the brand can get you to put a few cheap items in your basket, you’re much more likely to purchase a bigger product, like a sofa.
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. Interestingly, despite the presence of friction points and some IKEA-specific annoyances, even people who hate the store experience tend to come back at some point. As Professor Alan Penn put it:
“There are a lot of people who go [to IKEA] and don’t enjoy it, but still seem to keep going back.”
So although the store experience isn’t always the most enjoyable, it’s clearly effective — and the numbers bear this out. As we’ve established, IKEA is the world’s largest furniture retailer and the world’s tenth-largest food retailer.
Clearly, its use of psychology and behavioral science is working.