With over 400 stores and an impressive $42 billion in revenue, IKEA is the world’s largest furniture brand. It did not get this far by ignoring customer needs. From click and collect sites in specific city centres, to home delivery and a new AR app for customers to visualise furniture in their living space, IKEA has always thought ahead of the curve, when it comes to winning customer retention and satisfaction. IKEA also allows customers to shop in new, exciting ways.
- The Convenience Factor
One of the cardinal ways IKEA changed customer retention for the flat pack furniture industry is the convenience factor. Now, customers are no longer willing to spend time on assembling low-priced furniture. Instead, online buyers demand quick sales, cheap shipping and plug and play technologies. In this world of fast-paced consumption, IKEA uses marketing strategies to ensure existing customers are more than satisfied.
- An Immersive Experience for Buyers
When it comes to creating immersive shopping experiences for buyers that shape customer retention, IKEA is the pioneer. In the 50s, IKEA set up stores which offered entertainment, shopping and recreation in one go. The level of customer loyalty IKEA has built over the years since its inception in 1943 is amazing. It operates in 43 countries and in 2014, the IKEA stores clocked more than 1.5 billion visits, up 15 percent from the previous year. With AR shaping the IKEA shopper’s experiences now, it’s small wonder that client retention was never a problem for the Swedish furniture retailer. IKEA also launches close to 2000 fresh products annually.
- Quality Products at Budget Prices
For growth and sustainable operations, IKEA used a steady reduction of product prices as a strategic tool. The approach made IKEA’s growth style one to follow for the furniture industry. The company seeks enough knowledge of production cost before setting up fresh projects. Pathwwway Ltd. maintains that high product quality and low product prices are easier to attain. IKEA has also restrategised on account of spike in prices post the recession in 2008, repositioning itself for long-term growth through reduction of product prices.
Additionally, customers got the same top-quality products at cheap prices. This is because IKEA’s designers work round-the-click to eliminate unnecessary expenses that add to the production costs. This was also coupled with 100 savings investment in developing core business areas, as against 25 per cent for most other companies. So, despite the economic downturn, IKEA stabilised its growth margins and maintained a growth rate of 10 per cent annually, to date.
Negative elements in relation to the production costs were eliminated by IKEA’s team. This led to the effective implementation of the price reduction strategy. The company has also gained a wider market share and tremendous goodwill. IKEA also also budgeted its operating activities, increasing the volume of production while keeping costs low. Developing an efficient supply-chain protocol is yet another way the furniture store stays ahead of competitors. Employees were also trained to resolve customer issues promptly besides adapting to IKEA’s profitable growth strategy.
- Value for Money
Most customers do not purchase products they do not require at low prices. Companies interact with customers to know their preferences, and these serve as important inputs during product design. IKEA holds that low prices work, even with high-end products. This combination and its value-for-money mindset makes for sustainable customer retention and business growth. This is at the core of the phenomenon referred to by marketing specialists as the IKEA effect. It signifies the ability of this furniture company to build customer loyalty worldwide.
- A Unique Experience
A reason why IKEA is so successful is undoubtedly the unique experience it offers to customers. After exploring the showroom, the IKEA team offers you new furniture in a flat pack and easy to follow assembly instructions. IKEA works well by bringing joy into the assembly process. Research found that consumers were more likely to value IKEA furniture assembled by them, over pre-built items for this very reason.
Feeling a sense of accomplishment and building your own furniture helps customers to engage with IKEA as a brand. The focus shifts from simply purchasing products to playing an important role in the assembly process. IKEA also builds connection with the customer through this method, according to research from Harvard Business School.
- Building Loyalty From the Start
The IKEA effect builds customer loyalty from day one. This is more so when the on-boarding process is concerned. Customers tend to feel emotionally invested in the furniture brand, prompting high levels of consumer retention, brand advocacy, repeat purchases and even referrals. Globally renowned for its innovation in designing products, selling concepts and packaging, IKEA has even made innovation a buzzword when it comes to retaining bills of purchase. Soft copies of bills are sent to customers, and even stored in the database to allow customers to retain bills for exchange, repair, warranty and more.
Further, based on purchase history, IKEA even recommends products that interest its customers. Customers can even sign up as IKEA family members for no charge. The IKEA Family program has now been available in other countries for several years and was recently launched in North America, too. Mobile serves as a centrepiece of the strategy, with IKEA employees using in-store tablets to sign up fresh customers and IKEA sending SMS alerts to keep customers updated on fresh products.
- Rewarding the Customer
While product prices remain low, special offers are another line of attack IKEA uses to retain customers. The goal of the loyalty program is to reward the best customers IKEA has with special offers and discounts throughout the store. The IKEA family loyalty program, for example, offers exclusive discounts and offers, when customers sign up for it in-store or in the in-store kiosk and receive membership cards.
IKEA also lets customers enrol for this loyalty program using a Galaxy Tab tablet which offers the way for users to sign up with the help of store associates. Cards are scanned with tablets for activation and handed over to the shopper for registration immediately. Customers can also be the recipient of SMS alerts through tablets. IKEA also has an SMS program that focuses on in-store campaigns, real-time feedback and sweepstakes in additional stores.
Response rates for these communications, according to research, are more than double those for conventional or traditional forms of retail communication.