A case study on branding IKEA

Last Glimpse at IKEA: baranding a Cash Cow

Branding: Product Life Cycle/BCG

The product Life Cycle is normally used for products, but in this case we will use it to analyze IKEA’s branding strategy. IKEA is in the stage between growth and maturity. We know that they are already an established company because there is a demand in the market for their products. People like shopping at IKEA and they want more access. IKEA is also still in the growth stage because they are still in the process of fully penetrating the US market, their sales have been increasing, and so is their competition. Right now there are 37 stores, but they want to have 50 by 2013, so they need to continue to grow.

There are certain branding strategies tied to each stage of the PLC. In the growth stage, a company’s most effective branding strategy is to establish a customer loyalty program or some way to encourage repeat business. In the maturity stage, “brand differentiation and feature diversification is emphasized to maintain or increase market share” (Wikipedia.com) This means that if IKEA wants to at least maintain its current market share, they need to ensure repeat customers by introducing new products and offering new designs and options.

The same conclusion could be derived by placing IKEA into a BCG matrix. Normally, I would place IKEA in between the cash cow and rising star because, according to the case, they are still growing at a rate above 6%, but beginning to plateau like a cash cow. The income is still consistent, but, given their future marketing plans, they could continue to grow as they have been. Given the facts, it is hard to place IKEA in any of the BCG Matrix.

In this case, IKEA seems to have a very unique business model which has little to do with their growth stage and more to do with their potential as a company. Although this is a risky statement, I would consider them in their own category of the BCG matrix and I would call them a “Lone Wolf.” A lone wolf company is a company that is so unique in their business model that they essentially create their own market and monopolize it. Although they have competition, IKEA says in the case:

“Many competitors could try to copy one or two of these things. The difficulty is when you try and create the totality of what we have. You might be able to copy out low prices, but you need our volumes and global sourcing presence. You have to be able to copy our Scandinavian design, which is not easy without Scandinavian heritage. You have to be able to copy our distribution concept with the flat pack. And you have to be able to copy our interior competence- the way we set out stores and catalogues.”

The barriers to gain entry into the market are too high for any real competitors to emerge. If, let’s say, Wal-mart wanted to directly compete with IKEA, they would have to invest so many resources in mimicking IKEA’s entire business model and relations. Since the barriers are so high, it is nearly impossible for IKEA to be threatened by competition. This means that as long as the demand for cheap designer furniture is prevalent in the US, there will always be a demand for IKEA. IKEA will continue to grow as its brand gains more exposure and their sales will fluctuate based off of their promotions and the fluctuation of the market.

Branding Recommendation

Given the facts of the branding case, I think that the best branding strategy should be focusing on making IKEA one of the most loved companies in the world. This means that there should be a strong customer service presence. I’m sure that IKEA’s stores have wonderful employees and help, but I think that they should have a team much like “Geek squad” at best buy. Maybe people don’t really enjoy putting together their furniture and they would appreciate a crew of guys that they can call, within their area, to help them put together their furniture; I would call this group “IKEA’s Handymen.”

IKEA’s Handymen will not only help you pack up your car, but they will drive their Dodge Ram pick-up trucks to your house, build your TV stand and thank you for your purchase. Although this can be a costly venture for IKEA, I feel that the customer satisfaction will help ensure repeat business and encourage positive word of mouth. As long as IKEA keeps the market happy and offers satisfactory products, I believe that IKEA will be able to maintain its current growth and they can continue to profit. “90% of North American firms view customer experience as important or critical to 2010 plans. 80% of the firms would like to use customer experience as a form of differentiation.” (Source: Forrester’s The State Of Customer Experience, 2010).

It is very possible that Bob the consumer will have questions for IKEA about return policies and warranties. IKEA needs to keep Bob in mind because he is the customer that they are trying to satisfy. IKEA’s website currently has an “Ask Anna” button. When you ask Anna a question in regards to knives, she directs you to the knives section. IKEA needs to have real customer service agents ready and waiting on the other side. Bob wants to talk to a human, not a robot. He wants answers and he wants to be able to talk reason with the customer service agent. If customers can make a connection with IKEA on the internet, then IKEA will expand its reach from 316 stores in 38 countries to anywhere with internet access.

Finally, I think that IKEA should continue to introduce new products and new design, in order to stimulate the intrigue of its current customer base. If their research suggests that the customers that enjoy their products also enjoy watches, maybe they could introduce a watch selection to their store. If IKEA maintains its current strategies and focuses on customer service, IKEA’s growth potential is limitless.

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