Wella

TARGET MARKET: PRICE CONCIOUS PEOPLE

Unique selling points and what differentiates IKEA from all other furniture retailers:

IKEA meets the shopping ideals of a broad base of consumers. By successfully managing a brand image with an ultra-competitive, underpricing model, IKEA has the potential to usurp market share from fellow national big box retailers such as target, to regional discount furniture giants such as Jordan’s, to smaller independent local retailers, alike.

Factors that distinguished IKEA from other furniture retailers were that its stores were strictly self service, they featured amenities such as playrooms and child care facilities and the stores also had Swedish cafes and restaurants which served good quality food. When at IKEA a customer really didn’t have to bother any other things and could attend to what he or she was here to do i.e. purchase and select furniture with a peace of mind because neither did one have to worry about parking space (all IKEA outlets had parking space for 1000 cars) nor did one have to worry about any sort of cash problems because IKEA outlets are even equipped with ATMS and some even feature banks. They took pride in offering furniture which had a touch of the Scandinavian heritage in them. The shops were so cleverly designed that upon entry shoppers were coerced into a predetermined path through model bathrooms, kitchens, rooms etc. What IKEA aimed to achieve through this method was that once a customer walks through all of these model rooms, he or she may end up purchasing something which they had not come here with an intention to purchase originally a swell or they may remember to purchase something they like when passing through all these rooms next time they visit. Having wandered through the showroom's temptations and filled up your shopping cart with closet organizers, kitchen place mats and bathroom toilet roll holders-- none of which you had any intention to buy before you walked through the store's doors, you decide to go for broke and buy a computer desk, which packs down to a five by seven foot cardboard flat box weighing about 50 pounds. You tell yourself it will fit into your car without a problem.

It does not.

The reason why IKEA is able to keep its cost low varies from:

IKEA is basically able to keep its costs low because first of all it does not depend on any marketing intermediaries. The furniture retailer design all their furniture for flat packaging which in turn reduces storage cost (because it then does not require warehouses specifically meant for storing the furniture because already the flat packaging reduces capacity problem). Secondly, by letting people serve themselves, IKEA does not need to hire many sale representatives either. Because of this IKEA has less people to pay salaries to and so it can offer products and a lower cost to the customers.

IKEA believes in outsourcing. The Company does what its best at that is designing the furniture using the material decided in such a way that it performs the function it is meant to and then after the design has been finalised, the company circulates the description of the proposed design amongst different manufacturers and the one who offers the least cost of production may get the business.

IKEA is also able to keep its costs low by using high quality wood in areas of high stress and which are visible and using low quality wood in areas which are not visible and are of low stress.

The Product Development Process:

This is overseen by the product strategy council which consists of senior managers who establish the priorities for IKEA’S product line up by looking at the market trends and also surveying the competitors in the market.

BUT: the matrix method which is used to establish the price has a lot of loopholes in it. Though it was used to identify the gaps in the company’s product line up and one could easily introduce a new product in a category