Decoded: IKEA’s Clever Use of the Endowment Effect and Choice Architecture
Looking for divine inspiration on how to display your products to promote x-sell and increase the total value of the shopping basket? Look no further than some Scandinavian simplicity with a dash of behavioral science (OK, actually a whole bucket of it).
In this article, you´ll find out:
- How IKEA puts insights about human psychology into practice in their stores.
- Why you can find perfume and alcohol in the “rooms” and how it helps drive sales
- How those infamous “twists and turns” help IKEA speak to customers with different needs and wallet sizes
- What they know about salience that you don’t
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Let’s explore IKEA’s display techniques and product design secrets that allow them to speak to customers with different life situations and needs. One by one we will tease out what insights about human psychology this home-furnishing maverick relies on to make everyone buy more.
Different customers, one vision
The brand’s lofty shared vision is to create a better everyday life for the many people. And yet it has often (and quite unfairly) been associated with cheap, student furnishing – something you get for one season but that breaks the next. But the company would not have become the furnishing tycoon it is today if it had accepted that fate.
Instead of throwing their arms in the air and saying, “Alright, so they think we sell cheap stuff, let’s double down on it and sell more cheap stuff which breaks even sooner,” they decided to cater to eco-friendly, design-seeking customers as well. Creating pricey, long-lasting design pieces as well as affordable low-price items.
But how does IKEA reach design-conscious individuals as well as customers on a budget without falling between two stools? How can it speak to Jacob, a 19 year old student who’s looking for a cheap desk and a wardrobe for his dorm room, as well as Vincent and Arnie, a non-conventional, arty couple, looking for something swanky to show off in their newly furnished loft?
Is it not true that if you try to be everything to everyone you wind up being nothing to anyone?
IKEA’s main objectives
How do you make head or tail of what to display when you run a store with around 9,500 items? You should certainly think twice about what you make stand out.The answer to what to focus on in terms of product display, is based on IKEA’s three main objectives:
- Catering to different needs and wallet sizes: no matter whether it's the price or the style the customer is after, their needs will be met! That’s why IKEA collaborates with designers across the globe and launches limited collector's editions up to 5 times a year. This is further enhanced by different display techniques across the showroom and market hall.
The psychological ammunition they rely on: the endowment effect & salience.
- Increasing the total value of the shopping basket: To achieve this, IKEA relies on double, triple and sometimes even quadruple exposure of small and relatively cheap items, usually home accessories.
Hand on heart, how many times have you picked up something small and innocuous that was not on your shopping list? Perhaps it was a plant water-sprinkler in a limited color, which you’d seen a bunch of times around the store, until you finally gave in to its charm near the cash register.
The psychological ammunition they rely on: the mere exposure effect.
- Recurring visits: the goal is to make a customer feel like every time they visit a store there’s something new to discover. That’s why a team of two dozen in-house interior designers and visual merchandisers redress each of its 445 stores up to 5 times a year. They use dedicated areas such as vitality and activity areas to display seasonality and new collections.
The psychological ammunition they rely on: novelty & friction.
2 and 3 are quite straightforward and are often used by other retailers. Let’s focus on 1 and understanding the set of unique techniques IKEA uses to influence the subconscious minds of people from all walks of life.
