Book: Consumer Behavior (edition 14th)

IKEA CASE:

#5) Consider the 10 factors that affect the spread of innovations discussed in Chapter 7 (see Table 7-3 for quick reference). A) Which of these factors would play a positive role in how quickly acceptance of shopping for furniture using the IKEA model would spread? Explain your answer. B) Which of these factors would play a negative role in how quickly acceptance of shopping for furniture using the IKEA model would spread? Explain your answer.

#7) Chapter 5 discusses marketing to the Hispanic subculture in America. IKEA made an effort to better understand American Hispanics in California through ethnography.

A) What adaptations did IKEA make to better target the American Hispanic segment?

B) Based on your knowledge of this subculture from reading the text and personal experience, what suggestions would you give a marketing manager at IKEA to best target this segment?

The rate at which an innovation is Factors Affecting the Spread of Innovations diffused is a function of the following 10 factors. 1. Type of group. Some groups are more accepting of change than others. In general, young, affluent, and highly educated groups accept change, including new products, readily. Thus, the target market for the innovation is an important determinant of the rate of diffusion.62 2. Type of decision. The type of decision refers to an individual versus a group decision. The fewer the individuals involved in the purchase decision, the more rapidly an innovation will spread. 3. Marketing effort. The rate of diffusion is heavily influenced by the extent of marketing effort involved. Thus, the rate of diffusion is not completely beyond the control Ol the firm.63 4. Fulfillment of felt need. The more manifest or obvious the need that the innovation satisfies, the faster the diffusion. Rogaine, a cure for some types of hair loss, gain rapid trial among those uncomfortable with thin hair or baldness. 5. Compatibility. The more the purchase and use of the innovation are consistent wu the individual's and group's values or beliefs, the more rapid the diffusion. ined 6. Relative advantage. The better the innovation is perceived to meet the relevant need compared with existing methods, the more rapid the diffusion. Both the perfor- mance and the cost of the product are included in relative advantage. The digital audio tape (DAT) had neither advantage compared with CDs and DVDs and thus never took off. Complexity. The more difficult the innovation is to understand and use, the slower the diffusion. The key to this dimension is ease of use, not complexity of product. Specialized blogging software is making an otherwise complex task easy and fun. 8. Observability. The more easily consumers can observe the positive effects of adopting an innovation, the more rapid its diffusion will be. Smartphones are relatively visible. Laser eye surgery, while less visible, may be a frequent topic of conversation. On the other hand, new headache remedies are less obvious and generally less likely to be discussed. 9. Trialability. The easier it is to have a low-cost or low-risk trial of the innovation, the more rapid is its diffusion. The diffusion of products like laser eye surgery has been hampered by the difficulty of trying out the product in a realistic manner. This is much less of a problem with low-cost items such as headache remedies, or such items as smartphones, which can be borrowed or tried at a retail outlet. 0. Perceived risk. The more risk associated with trying an innovation, the slower the diffusion. Risk can be financial, physical, or social. Perceived risk is a function of three dimensions: (1) the probability that the innovation will not perform as desired; (2) the consequences of its not performing as desired; and (3) the ability (and cost) to reverse any negative consequences. Thus, many consumers may feel a need for the benefits offered by laser eye surgery and view the probability of its working success- Tully as being quite high. However, they perceive the consequences of failure as being extreme and irreversible and therefore do not adopt this innovation. IKEA USES MARKET RESEARCH TO ADAPT FOR GLOB IKEA is a well-known Swedish retail company that sells CATALOG ADAPTATIONS low-cost, stylish furniture that is purchased in a flat- marked form and usually assembled at home. It is known Each year, IKEA distributes a cat for a simplistic, clean-lined Scandinavian style. IKEA countries in which it is located. This is a massive under- has large warehouse-style stores throughout the world. taking, especially considering the vast array of lifestyles and values across the various markets. For example, Although there are differences in various regions, the in 2017, IKEA distributed 203 million copies of its stores are typically set up into "rooms that show the furniture arranged as it would be in homes so 324-page catalog. There were 72 different versions specific to various regional cultures. IKEA's extensive visitors can experience it. They also host kid-friendly research allows for tailoring the communication and play areas and cafeterias with Scandinavian foods. imagery to best target consumers in a given region. as well as some local dishes. IKEA stores are often destination shopping centers There are many different types of kitchens throughout where consumers frequently travel many miles to visit the world and the images attempt to fit the norms of and spend the day enjoying the experience. IKEA execu- the locations where consumers are viewing the catalogs. For example, in China kitchens are smaller than in the tives believe one reason for IKEA's success is it listens to its customers' needs and wants to co-create value. United States. IKEA modifies its catalog photos and in-store kitchen models to reflect the smaller kitchen size, However, the exact Swedish model does not trans- as well as other important aspects appealing to Chinese late well directly into all cultures. So, the company takes plenty of time before entering a market to make consumers. Other changes are more dramatic, such as the edition for Orthodox Jews in Israel. In the Israeli sure it is done right. Even so, IKEA has encountered version, no female models are included in the photos. some missteps. Years often are spent conducting exten- 1 . 1 some missteps. Years often are spent conducting exten- sive market research and ethnography (the study of local customers and cultures), both before and after entry into a new market. IKEA researchers visit sur- rounding homes and talk with numerous consumers to discover local tastes, preferences, and ways of liv- ing. They also pour over market reports and perform company and consumer surveys. These practices allow IKEA to attain success in a variety of different cultures with disparate tastes and values through local adapta- tions. Adaptations can be found in many areas, includ- ing catalogs, products, pricing, and shopping styles. According to IKEA Chief Executive Mikael Ohlsson: version, no female models are included in the photos. Instead, all models are male and some are studying reli- gious texts. The 2011 and 2012 versions for Saudi Arabia similarly omitted female models, or in some cases the images for the Saudi editions contain no models at all. This omission of women in these versions was meant to appeal to those male-dominated cultures. However, after consumer protests, IKEA had to issue apologies in both instances and recognize such practices are not consis- tent with IKEA values. This is the 2017 statement: We realize that people are upset about this and that the publication does not live up to what IKEA stands for and we apologize for this. We will make sure that future publications will reflect what IKEA stands for and at the same time show respect for the Haredi community. Most people don't really know and can hardly imagine that we visit thousands of homes around every store in the world every year. We sit down in the kitchen and talk to them. That's the way we try to learn and under- stand. "What are you annoyed with? What are your Irustrations? What would you like to have? How much can you afford? What are your alternatives?" PRODUCT ADAPTATIONS Marketing research and talking with consumers reveal several adaptions to product offerings in the United States. IKEA quickly learned that homes are larger Part Two 260 nally, there are many low- urnishings in China. reduce prices by about is evidenced by IKEA and Americans prefer their household furnishings form of consumption. Additionally, there are to be larger as well. Curtains are made longer, sofas cost competitors of household furnishings in are made deeper, spaces in kitchen cabinetry are wid- Therefore, IKEA had to reduce prices ened to accommodate U.S. appliances, and tableware 50 percent before Chinese sales really took off I is enlarged. Upon first entry, IKEA executives pon- a successful strategy though, as evidenced by dered why they were selling unusually high numbers becoming the largest foreign commercial lando of vases. It did not take long to realize that Americans An average Saturday in the Bejing IKEA sees! were buying them as drinking glasses because the 28,000 visitors, which approximates the weekly ave actual initial drinking glasses offered were too small in European stores. for American tastes. Also, IKEA stores initially lacked large tables and serving platters to accommodate large SHOPPING STYLE ADAPTATIONS groups of people because Thanksgiving was an unfa- miliar concept. IKEA performs this type of research Many Chinese visitors enjoy the shopping experience even within regions of the same country. Recently, but do not make a purchase. In fact, in contrast to IKEA but do not make a purch IKEA felt it may have been out of touch with the stores in other countries, China's IKEA stores are often large Hispanic population in California. After visiting filled with people sleeping in the model beds and on the many homes, IKEA made product adaptations such as sofas. It is not uncommon for whole families to pile into adding more bold colors and elaborate picture frames the bedroom displays alongside strangers to nap and to its offerings. then go eat in the IKEA cafeteria after awaking. Chinese Likewise, IKEA found several differences in regional IKEA management welcomes them because they will W ILL LUI 15. CITUS Likewise, IKEA found several differences in regional IKEA management welcomes them because they will tastes, values, and preferences in India that shaped likely become customers later and by allowing visitors product offerings there. The market research revealed to spend the day in the store resting and enjoying the that Indian consumers prefer home furnishings with air-conditioning, IKEA is accommodating local culture vivid colors; the family life centers around the sofa in and building brand relationships. the living room where they eat their meals, do home- IKEA is committed to understanding its customers work, and even sleep; and Indians do not enjoy the by continuously engaging in ethnography and other do-it-yourself culture. In response, products offered forms of marketing research to keep in touch with their in the Indian market are adapted to have more vivid needs, preferences, and values in regions and countries colors, in contrast to the Scandinavian versions where where IKEA is located and those in which it may poten- white and beige color schemes are preferred. Sofas also tially enter. are redesigned so that they are expandable for sleeping and entertaining and collapsible for maximizing space. Discussion Questions Finally, delivery, assembly, and installation are high- lighted ancillary products to overcome the antipathy to 1. IKEA spends a considerable amount of time do-it-yourself culture. researching new * Discussion Questions LUI LUI y allu Collapsible for maximizing space. Finally, delivery, assembly, and installation are high- 1. IKEA spends a considerable amount of time lighted ancillary products to overcome the antipathy to researching new markets before entering them. do-it-yourself culture. What are some issues that IKEA should be considering? PRICING ADAPTATIONS 2. Chapter 2 discusses individual versus collective In China, research shows key differences from other other-oriented values. regions: Chinese consumers are highly price sensitive a. China is one of the countries discussed in to products for domestic consumption, like household this case. On face value, would you expect furnishings, and they view shopping as an experience China to have a more individual or collective more so than many other cultures. Chinese people orientation? are willing to pay a price premium for more visible b. The text discusses how cultural values evolve Western brands, such as automobiles and Starbucks and individualism is on the rise in some Asian coffee. However, furniture is a much less conspicuous countries, especially among younger consumers