Ikea Marketing Mix

Marketing Mix Components

Price

IKEA has opted cost leadership pricing strategy in the market for better penetration. It prices quoted are generally too low that as many people are able to afford and purchase them. As a result they are able to achieve economies of scale in their manufacturing operations. The three primary factors which worked very well are following.

1. Prices ending in 99: In Sweden, they started with an experiment of pricing their products with price ending in 99 only. This later on became a worldwide low price ideology. The experiment was driven by a human behavior psychology, which states that we all start reading from left to right. Hence a product priced with $3.99, we will all read 3 first and then the later figures of price. Consequently, 99 worked out nothing less than a magic number for IKEA sales.
2. Reference pricing: IKEA always believed in changing price based on the demand and revenue maximization. For which they always did mathematical churning in background of calculating the elasticity of particular product. And if the product is highly elastic, means it has a very high demand in the consumer segment, then they try to reduce the prices of those product, so that the quality can be sold in greater proportion, so that the revenue can be maximized. Moreover, when IKEA sets the new prices, they always keep the previous prices on label as well (although those are strikethrough). When consumers estimate a price of product to decide whether they consider the price as a good deal or not, they usually check the price with some references. As a result, people feel satisfied as they are gaining something better at less than the usual price.

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1. The last but not the least, IKEA sales programs are always undisputed in the market. As those are very rare and most awaited events by consumers. Moreover, the IKEA has a model of selling the disassembled furniture directly to its customers, which they have to assemble. Consequently IKEA always has the price advantage, as they are saving drastically on the warehouses, transportation and assembly costs, which would otherwise be incurred if furniture is assembled before shipping to customers.

These three psychological pricing strategies are highly effective as it makes IKEA much price competitive and also encourage consumers to purchase their products more frequently.  

Place

IKEA is always renowned across the world for their competitiveness approach and their innovative DIY furniture concept. It produces a limited amount of products and mostly relies on its network of suppliers. All of the IKEA stores are located in the suburban area, where generally there is no space crunch. Products are displayed in a clear and scientific classification. Further, there are floor pained arrows to lead consumers quickly find the items they need in a logical orders. Besides entity stores, orders from E-shopping and via telephone channels are rising continuously, which requires the efficiency and flexible distribution solutions towards each individual customer’s expectations.