This History Of The IKEA Effect In Marketing
1. What is the IKEA Effect?
The IKEA Effect is a cognitive bias which refers to the tendency of people to place a higher value on products that they have actively engaged in assembling themselves, compared to similar but already-made products.
The phrase originates from the Swedish furniture retailer IKEA, which is known for its flat-pack furniture that customers have to assemble themselves.
The IKEA effect in marketing is the deliberate intention to involve consumers in the value creation process by providing them with customization options, DIY assembly, and other forms of active participation.
Retail companies utlise the IKEA effect in marketing to create stronger emotional connections between consumers and their products, and place them at the heart of marketing innovation.
Read more blogs about Consumer Behaviors
2. The IKEA Effect: When labor leads to love
There has been a traditional assumption that people find the quickest solutions to their problems, so they will devalue and never go for an incomplete product that requires them to figure out how to use it on their own.
Yet, the paper by psychology professors who first mentioned the IKEA Effect in 2012 challenges this norm by proving that there is always an increased value perception when individuals invest their own effort into creating a product. Even if the labor involved is not particularly enjoyable or does not allow for customization, people still tend to overvalue their creations.
The IKEA Effect is the standard of value co-creation in marketing. Letting customers use their creativity to craft and assemble the products themselves means that the brand value and product innovation process are no longer controlled by brands, but are co-developed by customers.
When people are highly satisfied with self-creation, they enjoy a sense of achievement which motivates them to promote the brand or share the fruits with others.
The primary question remains “Why don’t other brands deploy the IKEA effect in marketing by letting their customers discover how to use the products on their own like IKEA?”
The Psychology Behind The IKEA Effect
1. Effort Justification
Effort Justification is an idea first proposed by an American social psychologist Leon Festinger who suggested that people tend to value things more highly when they have put significant effort into obtaining or creating them.
Leon found that people who often find their tasks or even jobs to be unpleasant or challenging still perceive them as rewarding. This is because of the cognitive dissonance in which people feel uncomfortable when their behaviors do not align with their thoughts or attitudes.
So far, the principle still stays correct across different sectors, including human psychology and animal behaviors. For example, research on the effort justification of rats conducted in 2010 shows that rats, with their simple mechanisms, still surprisingly placed more value on the taste of food that requires high effort to achieve than less demanding ones.
Yet, the IKEA effect in marketing is confined to some specific categories such as furniture and toys where people can see a possibility of reaching the desired results. Overall, the willingness of individuals to engage in a task largely depends on their perception of their ability to perform it. In the case of IKEA, customers assemble pieces of furniture with which they have been very familiar in life.
2. Self-determination Theory – A sense of competence
We, as human beings, have a fundamental need for effectance and competence, which involves the ability to successfully achieve desired outcomes. According to Self-determination Theory, we are intrinsically driven to act and behave in certain ways to satisfy 3 primary psychological needs, and one of them is the need for competence.
When individuals engage in tasks and achieve successful outcomes, it satisfies their need for competence, contributing to their sense of autonomy and psychological well-being. People feel more comfortable and self-assured to do something that is subjectively achievable.
However, the IKEA effect in marketing will be hard to execute if there is a perceived failure to complete tasks or a low level of confidence in one’s abilities. Researchers confirm that these perceptions may result in negative emotions such as regret and dissatisfaction of products.
This is why customers never buy separate car components to build a complete car themselves but are willing to spend hours crafting a piece of furniture and building a Lego toy model.
3. Endowment Effect – A sense of ownership
Like the result of effort justification, the Endowment Effect takes place when people value objects more highly just because they own them. In other words, people attribute a higher value to items they possess compared to the same items they don’t own.
The effect is even stronger when people directly engage in building their possessions. The psychology behind this is a sense of ownership we develop when we touch or interact with something. This sensory experience has built up the IKEA effect in marketing.
Many companies take advantage of this effect to build a multisensory brand experience in which brands persuade their customers to touch the products or even try them before making purchases.
To find the answer to how much people overspend on their own products, psychology professors conducted an experiment in which consumers were given standardized and boring IKEA boxes to assemble and value the results themselves.
Expectedly, those who crafted their own furniture were willing to pay a 63% premium compared to those who were given the chance to buy an identical but already-built one.
Read more: The Psychology Behind Sustainable Consumption
The IKEA Effect & Value Co-creation in Marketing
As I mentioned above, the IKEA effect is closely related to the Self-determination Theory in which people are internally motivated to act to satisfy their needs for autonomy (control), competence (achievement), and relatedness (social well-being). People engage in assembling IKEA furniture to enjoy a sense of competence, gain control over their purchases, and gather with their family members.
Value co-creation in marketing is the collaborative and voluntary efforts between companies and customers in building brand values and creating product innovation.
A study on self-determination in value co-creation in 2021 discovered that people who satisfy the above psychological needs will likely become brand advocates and engage in the value co-creation process by sharing brand messages, contributing to product innovations, and forming brand personalities.
Let’s take DIY (do-it-yourself) culture as an example. The DIY culture allows customers to improve their homes without professional or brand services. People are empowered to control their household projects and make independent decisions, which satisfy their need for autonomy.
Besides, DIY activities require customers to develop their craftsmanship and technical knowledge, which bolsters their confidence and triggers a sense of competence.
Research shows that under the given context, people become more proactive in value co-creation by signalling their competence to other people, spreading the brand message and boosting the effectiveness of word-of-mouth marketing.
The IKEA Effect In Real-life Marketing Practices
IKEA
IKEA is a Swedish multinational retailer known for its ready-to-assemble furniture, home accessories, and kitchen appliances. The company is also the owner of the phrase ‘IKEA effect’ in marketing by providing customers with flat-pack furniture that requires assembly.
For example, IKEA’s iconic Billy bookcase comes with simple assembly instructions, encouraging customers to engage in the assembly process themselves.
IKEA’s DIY approach fosters a sense of competence and autonomy among customers. The company wants customers to completely control their living spaces and customize them to achieve the best outcomes.
Currently, the company has run the ‘Life at Home’ Project in which its designers visit customers’ homes to admire their unique DIY projects and let them contribute to the process of creating innovative ideas for new products.
LEGO
LEGO is a Danish toy company known for its interlocking plastic bricks and accompanying kits for building various structures and vehicles.
The company often sells building kits that allows children or end customers to construct their own creations following the company’s instructions. For example, LEGO sets come with step-by-step instructions for building specific models, but customers can also use their creativity to build unique creations using the same bricks.
Lego has promoted a sense of creativity and commitment among its customers. By employing the IKEA effect in marketing, Lego engages with its fan community through user-generated content platforms like LEGO Ideas, where fans can submit their own designs for potential production, further enhancing the sense of co-creation and community.
BUILD-A-BEAR
Build-A-Bear Workshop is a teddy bear retail company where customers can create their own stuffed animals, choosing from a variety of plush skins, stuffing, and accessories.
Customers assemble their own stuffed animals by going through a step-by-step process of selecting a plush skin, stuffing it, and adding accessories like clothing and sound chips.
The company aims to create an emotional attachment between the kids and the stuffed animals. By building up the relationship with the IKEA effect, Build-A-Bear now offers in-store workshops and events where customers can further customize their creations, enhancing the sense of co-creation and community engagement.
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Academic Sources for this blog:
Lydall, E.S., Gilmour, G., and Dwyer, D.M. (2010) Rats place greater value on rewards produced by high effort: An animal analogue of the “effort justification” effect. Journal of Experimental Social Psychology. 46(6), pp.1134-1137.
Norton, M.I., Mochon, D., and Ariely, D. (2012) The IKEA effect: When labor leads to love. Journal of Consumer Psychology. 22(3), pp.453-460.
Shulga, L.V. (2021) Customer self-determination in value co-creation. Journal of Service Theory and Practice. 31(1), pp.83-111.
Sy Chu
As an analytical and creative marketing enthusiast skilled in customer analysis, content research and brand management, my passion is help businesses gain insights into their brand and marketing strategies to drive impactful outcome to their success.