Do you aim to make your products as easy as possible to use for your customers? It turns out that’s not always the best idea. IKEA owes a significant part of its success to the fact that customers have to get stuck in and build their new wardrobe, shelf or table themselves.
What does this IKEA effect mean in terms of customer loyalty? And how can companies in other sectors benefit from it? Before we get started, let’s make one thing clear: for the IKEA effect to work, it has to be done correctly. Clumsy attempts to integrate it will backfire and only lead to disgruntled customers.
The IKEA effect means that people value products they have made themselves more highly than comparable ready-made products.
The term “IKEA effect” was coined by US researchers Michael I. Norton, Daniel Mochon, and Dan Ariely. In 2011, they carried out an experiment in which they asked people to assemble IKEA storage boxes. At the end, they asked the participants how much they would pay for the boxes and compared this to what a control group said they would pay for the finished boxes. Those who had assembled the boxes themselves named a higher price than those in the control group. The work they had invested in assembling the boxes had a positive effect on their appreciation of the product.
The researchers then repeated the experiment with other objects, such as origami figures and simple construction kits. Each experiment gave the same results. In the origami study, the people who had made the figures priced their creations five times higher than the comparison group.
What’s more, based on an experiment where participants built a simple, standard model according to a set of instructions, the researchers also concluded that the IKEA effect manifests itself even when no customisation is involved. They also reported that the effect was the same whether or not the participants usually enjoyed DIY tasks.
Norton, Mochon, and Ariely proved that the IKEA effect goes far beyond the Endowment Effect. In other words, the perceived value does not increase simply because the person owns the product. Rather, it is the assembly process itself that leads to a higher appreciation of a product.
Why do people prefer things they have made themselves to perfect – but ready-made – products?
Norton and his colleagues pointed out that the DIY aspect of these products speaks to the deeply rooted human need for self-efficacy. According to them, people derive satisfaction from the feeling that they are able to influence their surroundings, for example, by creating objects. This was proven in other studies, for example, those by Russel Belk (1988), Lita Furby (1991), and Helga Dittmar (1992).
The IKEA effect only occurs if the object is assembled successfully. According to Norton et al., if people fail to build a product using the instructions provided, the value they attribute to it does not increase.
Other researchers focus on feelings of competence, claiming that when people successfully master a challenge and can see the results with their own eyes, they perceive more value in the finished product. Still others say that the effect can be explained by the influence that the creation processhas on an individual’sself-concept.
Companies wanting to apply the IKEA effect for themselves are faced with a challenge: how can they convince customers to go for a DIY version of a product? You see, what many companies overlook, is that the effect only applies after purchase.
Beforehand, people tend to base their decision on the time factor. For example, in another study by Norton et al., 92% of participants said they would pay more for ready-built products than for DIY products. They were only willing to pay premium prices for the DIY versions after assembling them.
So what strategies can companies adopt to attract customers to DIY products? To date, two methods have proven to be successful: focusing on faster delivery, and offering customisation options.
An innovative idea for stationary traders – give your potential customers a free coffee! Gibbs and Drolet found that when consumers have a higher energy level, they are more likely to choose experiences that require more effort, such as watching foreign movies with subtitles instead of movies in their own language.
However, companies must always make sure that the DIY aspect is not too challenging, so that it can be managed by all potential customers. If they fail to do this, their plan will backfire, and customers will be frustrated and angry.
Although the effect was first named in 2011, lots of marketers had been using it for many decades prior to that.
In the 1950s, a US manufacturer introduced the first baking mixes onto the market. Although the products drastically shortened the baking process, they were not successful at first. It was only when the company changed the recipe so that customers had to add an egg at home that the popularity of the mixes really took off. Of course, several different factors were likely at work here, but the feeling of having put some effort in undoubtedly contributed to the product’s success.
Since then, the relationship between companies and customers has changed. Instead of being passive consumers, customers are increasingly seen as co-developers of a product. Everywhere you look, whether online or in stores, you’ll find companies that have found creative ways of involving their customers in the product design process in order to take advantage of the IKEA effect.
Although these examples primarily involve customisation, rather than requiring the customer to assemble a product according to a set of instructions, it’s ultimately the IKEA effect that comes into play and positively influences the customer’s relationship with the brand and product.
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