IKEA x India — IKEA Effect on Indian Consumerism.

A brief article on understanding the behavioral psychology and IKEA Effect on Indian Consumerism.

Overview

This is a little research case study I did out of curiosity to understand if the IKEA Effect exists in India. and if it does, then what are the factors that make this happen? The purpose was to understand their behavior, and usage patterns and gather findings that can be distilled into insights. For the project, I performed a survey, and user interview, and gather as many insights and proven data as I could on Indian consumerism and behavior favoring IKEA Effect. I applied data visualization techniques to showcase the data gathered during the research meaningfully.

Background Context

The IKEA effect, named after the Swedish furniture manufacturer, depicts how individuals value an object more if they make (or assemble) it themselves. More broadly, the IKEA effect describes how we like things more if we put effort into making them.

Objective

• Understanding Psychology behind IKEA Effect.
• Understanding consumer behavior in India.
• Identify the target customers IKEA serves.
• How IKEA matches customers’ spoken and unspoken needs?
• How Ikea tweaked its products to woo India’s consumers.

What is IKEA Effect in Psychology?

If you value and love something, you will probably assign more value to it. That is an inherent cognitive bias in us. We don’t need a behavioral psychologist to tell us about it — it is intuitive.

A cognitive bias is when people place a higher value on products that they partially made themselves. It was named after the Swedish self-assembly furniture firm IKEA by a group of American researchers that included behavioral psychologists Dan Ariely, Michael Norton, and Daniel Mochon. One of the reasons for this preference for handcrafted items is that individuals love a product more when they put their labor into making it. Another explanation could be that individuals like a product better because of the work they put into it.

Where this bias occurs?

Luv decides he wants new furniture to freshen up his apartment, so he goes to IKEA and purchases a nice coffee table with a lot of umlauts in the name. He brings it home in a box, as he does with all IKEA furniture, and assembles it himself. Luv later chooses to sell his furniture because he is moving. He discovers that very similar tables are being sold online for $120 after some Googling, but he decides to charge $145 for his.

Why does it happen?

The IKEA effect is similar to the endowment effect, in which individuals regard things more highly if they belong to them — or even if they merely feel ownership over them. One study revealed, for example, that when potential purchasers take the car for a test drive, the endowment effect begins to impact. They act as if they are the true owners of the car, and as a result, they are willing to spend more money on it because of their emotional attachment. The IKEA effect, on the other hand, differs from the endowment effect in that it requires the individual to produce or make something. The IKEA effect can even be avoided if the individual is instructed to disassemble their work after it has been assembled.

So, why does this happen?

We have a psychological urge to be competent.

We prefer to feel like we know what we’re doing; that we can handle the tasks that are assigned to us and cope with any impediments that arise. Nobody enjoys feeling foolish or inept. It enhances our sense of self-efficacy when we accomplish activities like assembling furniture or baking a cake. This not only feels nice in the moment, but it also satisfies a deep psychological need. This is one of the reasons why we regard goods we make ourselves as far more precious than they are.

Now that we’ve seen how the IKEA Effect works from a behavioral psychology standpoint and given how Indian customers’ psychology differs from that of most Western consumers, we’ll look at how IKEA managed to create a similar effect on Indian consumers if they accomplished it at all or it’s all just a fuss? And how limited or extensive this effect is in India.

Understanding consumer behavior in India

I. Big Savers

India is considered a saver’s paradise, despite rising spending. In India, value for money is a key aspect in deciding customer behavior. Indian customers are well-informed and eager to obtain a decent deal, even on high-end items.

II. Family-Oriented

The Indian family is changing. Traditional multigenerational households are declining. Just 37.1% of Indians live with extended families nowadays. Nuclear families are the new norm, but single-person households (4.1%) are still uncommon. Traditional priorities, such as income and home ownership, are still important to Indian millennials.

In many other markets, such as Sweden or Portugal, a bedroom is often a place where you sleep and keep items. In India, though, the bedroom is always buzzing with activity. There’s nothing you can do. In that room, people may watch television, do their cosmetics, store items, sleep, entertain guests, eat supper together, or even do their hair.

Identify the target customers IKEA serves.

IKEA’s target clientele in 2022 will be middle-class people aged 20 to 34.

This age and income group is especially interested in purchasing stylish, modern, high-quality furniture at the lowest possible price, which IKEA sells. Furthermore, men and women visit IKEA in almost equal numbers. The middle-class consumer is IKEA’s core target income bracket (averaging 10lakh and above salary). People in this pay bracket want to get the most bang for their buck since they work hard and spend their money on high-quality items. Customers in the middle class want high-quality furniture at the lowest possible price. Furthermore, this demographic is willing to pay a little more for durable furniture. The primary draw of IKEA is its low prices on appealing goods.

The age bracket that IKEA targets are consumers between the ages of 20 and 34. After people reach the age of 34, the numbers that shop at IKEA drop off dramatically.

IKEA draws younger customers due to the modern designs of its furniture and the affordable costs they give. This age group is at the start of their adult life and is looking to save money when they move into their first apartment or home. When it comes to focusing on the ideal customer, IKEA takes a mono-segment approach. This marketing strategy explains why younger generations with middle-class incomes are the most likely to visit the store.

How IKEA matches customers’ spoken and unspoken needs?

Customers' spoken needs such as design, price, and lightweight are inherent to the product, and reliability, and durability are fulfilled by IKEA.

Meanwhile, how is it successful in fulfilling the unspoken need of customers?

1. Creates an expectation.

2. Delivers a meaningful experience that matches the expectation.

3. Builds an emotional connection that compels customers to want to repeat the experience.

Why and how has IKEA kept its prices low?

To prevent itself from seeming or feeling like an outsider more than 1000 products at IKEA India are local in terms of material used, sourcing, etc. Flat packaging, strong service offer, transparent pricing, sourcing quality materials in a sustainable way, and Local sourcing remains key driver of affordability and over a third of the products under new lower prices are made in India. These are some of the ways that help IKEA keep a competitive price point.

Out of the 7,500 products that IKEA sells in India, about 1,000 are priced at less than Rs 200, and 500 cost under Rs 100. This pricing strategy was formulated keeping in mind the price-conscious Indian audience it was catering to.

How Ikea tweaked its products to woo India’s shoppers.

While gathering perspectives from various people from various places, I discovered some interesting information about IKEA that not only our culture differs from state to state or city to city, but so do IKEA stores.
The average home in Hyderabad, for example, cost twice as much as a home in Mumbai. As a result, Ikea expanded its vertical storage options in Mumbai, a city with a high concentration of “small-space living.” In this region, customers were also more likely to acquire a couch-cum-bed — a sofa that can be converted into a bed.

Customers in Hyderabad were more likely to buy larger sofas and beds. The bedrooms on display in Hyderabad and Mumbai reflected these differences in space and size. Each city in India has its unique set of tastes and solutions. Due to dust concerns, Ikea decreased its huge assortment of open storage products and instead provided glass cabinets and cupboards.

In India, families typically consume four to five meals per day and use substantially more water when washing up in the kitchen. Water was spilling off the worktops in the company’s modular kitchens, ruining the cabinet fronts. As a result, they constructed a “countertop block,” or a narrow ledge, to keep the water out.

Similarly to how Ikea produced a big number of paella pans in Spain, it sold a variety of pans, woks, and stainless steel idli (steamed rice cake) steamers and cookers appropriate for Indian cooking. Because Indians enjoy extravagant lunches at work, the business offered lunch boxes with three compartments as well as a combination pack that included a water bottle.
Untreated pine furniture, which may work in cooler climates, is not suitable for the hot, humid climate of southern India. According to the New York Times, this meant that the company had to change some of its furniture designs to use different materials. Because most people use water to clean their floors, the designers built risers to keep the furniture from becoming wet.

“We respect the faiths in India and our meatballs have pork and beef, so we won’t bring that to India,” a top IKEA executive John Achillea told The Economic Times newspaper. If you were hoping to grab a bite of the famous meatballs, then you won’t be finding them in India. Ikea has been catering to local taste buds — biryanis, samosas, vegetarian meatballs — in its popular cafeterias from the start.
The consumption of beef in India is steeped in controversy even though a large population of the country’s citizens eats meat in the form of chicken and fish. That’s because Hindus, India’s majority religious sect, worship the cow and consider it a sacred animal. As a result, the open slaughter of cow meat for consumption is considered taboo by several political and religious leaders, even though beef is consumed widely across southern and northeastern states.

Does IKEA Effect real in India?

After extensive research from collecting various user data to gathering and analyzing stats and researching information from a behavioral point of view, I do believe that the IKEA effect does exist in India on a far greater level than was expected and we’ve seen why. Ikea is not just another fast, convenient furniture store instead it has been made into an emotion. Especially during the pandemic era, when people were sitting at home, trying new things on their own, assembling pieces of furniture, and decorating their space, such small things gave the just what they needed — confidence in knowing what they were doing. Ikea was launched right before the pandemic in India. If the pandemic had never happened, did Ikea in India would have been the same today? Guess, that’s another story to unveil.

Conclusion

This is the first time; I have tried to research a topic extensively and deeply. It sure isn’t perfect and not complete but I tried to add as much as I could get on this particular topic. This can be better and improved as there is no boundary when it comes to research.

I’m open to suggestions and feedback. Please do let me know your thoughts. See you next time! Adios