The Australian Furniture Retailing Industry And The Strategic Marketing Approach Of IKEA

Table of Contents

An opening statement

Extent

Constraints

Segmentation

Determining the Target Audience

Segmentation theories and methods

Promotion combination

In conclusion, ___________________.

Introduction

Beginning

This is an introduction, outlining the purpose of this document.

This report is a continuation of the original report on Australian furniture retailing. It will focus on IKEA, an Australian furniture retailer. It will then analyze IKEA’s marketing mix to identify two distinct segments.

ScopeThis report examines the two markets IKEA operates in and its current promotions to these target segments. The report examines two market segments and the seven Ps from sellers’ point of view. It includes data from journal articles, IKEA’s website, and links to relevant websites. In addition, secondary data such as annual reports and text books on the furniture industry were used.

The constraints of the report included the inexperience of the researchers in gathering data, the limited amount of time available, and the difficulty in scheduling interviews with IKEA personnel. As well, we have addressed the problem of obtaining current marketing plans.

This report assumes that all information collected is accurate and that readers are familiar with basic marketing strategies.

SegmentationMarket IdentificationDespite the fact that Armstrong, Kotler, Brown and Adam (2001, p. 10) explain that market is an aggregate of all current and potential buyers of a product, Furniture and decorative products are the core product in the furniture retailing business. Furniture is purchased by customers to enhance their living or working environment. IKEA sells furniture to all customers. IKEA’s business model is to provide a wide selection of furniture for homes that are both functional and stylish at affordable prices. This is the main customer segment. They also make furniture suitable for children. IKEA is a global company that has a worldwide market.

IKEA’s new segmentation is “Enjoy Life, Work IKEA”. This segment is for Australian business people. Ikea’s marketers separated the market into those who work from home and those who work outside the office. These workers are white collared and usually belong to society’s middle class. The marketers believe that the key to making work a pleasure lies in creating a better workspace, the one designed with freedom, flexibility and fun in mind (http://www.ikea.com.cn/english/range/enjoy.htm). Accordingly, IKEA marketers divided this type of worker into a specific group. Armstrong (2001 p 294) states that they divided the consumer market based on demographic segmentation. This segmented the consumer market based upon income, gender, marital status and occupation. Ikea segments based on income and socioeconomic standing to target the wealthy.

IKEA’s marketers also created a segment of the consumer market for children called “Children’s Ikea”. This target customer group is completely different than the one before. IKEA believed children were the most important people in this world. Children expect their parents to decorate their rooms. Therefore, children have the ability of directing parents what kind of the room they like and what they want to buy for the decorations (http://www.ikea.com.au). IKEA marketers segmented children into another group. According to Kotler et al. According to Kotler et al. (2001, page 294), they divided the consumer market based on demographic segmentation. The consumer market was split based on sex and age.

Segmentation: Theories and Methods It helps to segment a market by identifying buyers who have different needs, characteristics, and behavior (Kotler 2001, p 293). IKEA is focused on children and the working class. These two categories are divided according four theories: geography, demographics, psychographics, and behavior.

Kotler and colleagues (2001, page 294) also define demographic segmentation to be “divide the market into groups based upon demographic variables”. It encompasses age, gender and family size. Income, occupations, religions, races, and nationalities are all factors. Both those two segments include age, family income cycle, occupation and income. The first segment is divided into income, occupation, education, and family lives cycle. The second concentrates on age and gender.

Psychographic segmentation is another method that divides a market according to social class and lifestyle (Kotler et. al., 2001 p 297). People from different geodemographic groups can have very diverse psychographic profiles.

Behavioural segmentation is another method. Kotler et.al. 2001, p 297, states that segmentation is based on the knowledge and attitudes of consumers about the product, how they use the product, and what their responses are to it. It typically includes purchase occasion, benefits requested, usage rate and loyalty status, as well as attitude towards the product (Kotler, 2001, p 295). Both segments are measured according to user status and benefits.

Marketing Mix According to Tideman and McDonald’s (1993, page 1), the term “marketing mix” refers to the various tools and techniques used for implementing the marketing concept. The marketing mix is the combination of all four Ps that a company uses to define its competitive marketing strategy. (Kotler and al. 2001, p. 69). McCarthy, Perreault, Quester (1998: p 42), provide a more detailed explanation of the marketing mix. It is “a collection of variables that an organization controls to satisfy a specific target group.” The typical marketing mix includes a product, price, promotion, and a location to meet these customers. (McCarthy Perreault, Quester, 1998, page 42). Marketing professionals must consider three additional elements when marketing service. The core benefit of all marketing efforts is people. All marketing activities are focused on people like customers, potential customers, employees and so forth. The service marketing mix also includes two more Ps, process and evidence. These two Ps give extra importance to people (McCollKennedy & Kiel 2000, p.328). Marketers can reach their customers by using the marketing mix.

The seven Ps are price, promotion and place. In service marketing, there are three distinct elements: people, process, or physical evidence.

McCollKennedy (2000, p. 45) describe a product by describing it as “A combination of attributes (benefits),” that a seller offers potential buyers to meet buyer’s needs. It is the combination (Kotler 2001, p.69).

Price refers to the price customers must pay in order to receive the benefit (product/service). The final price is a reflection the customer’s perception of value and market competition (Barnes Meyer McClelland Wiesehofer & Worsam 1997, p249). This is a crucial issue for both consumers and marketing managers (McCarthy Perreault und Quester 1998, P 46).

The third option is promotion. These activities communicate the product’s value to customers and persuade them to buy it. Kotler et all, 2001, page 69. Advertising, personal selling and sales promotion can all be classified as promotional activities (McCollKennedy & Kiel, 2000).

McColl-Kennedy and Kiel define the fourth place as “The marketing channel and physical delivery of logistics to get a product on market”. It covers objectives, channel types, intermediaries, store locations, and so forth (McCarthy Perreault, Quester, 1998. p 44). “Placement” refers to the company’s logistics, marketing activities, and distribution of the final product to customers (Kotler et. al. 2001, p.69).

Extended marketing includes people, process, physical evidence and other elements. They are used for consumer marketing. Kotler et.al. 2001, p. 342) describe it as “Products that are purchased by end consumers for personal consumption”. These three Ps are important because furniture retailing is a consumer market. It focuses on employees, managers, as well as all employees working in service industries.

First, people. Barnes et.al (1997, page 250) stated that the people involved in transactions have a key role and can play a major part in customers’ decision making.

“Process” is then defined as “The actual processes, mechanisms, or flow of activities that are used to execute the service” by McColl-Kennedy & Kiel, 2000. This is the documentation that was used to make the purchase. It also includes the stages of negotiation and the complexity or simplicity of making it happen (Barnes Meyer, McClelland & Wiesehofer 1997, p 250).

McCollKennedy, Kiel (2000, page 328) describe the environment in which the service is delivered, the place where the firm interacts with the customer, and any tangible components related to the service as the last P. This includes brochures, reports and letterheads. Business cards and facilities are also included (McCollKennedy, Kiel, 2000, page 328).

You will find products from “Work IKEA” such as computer tables, home offices chairs, home offices desks and organisational tools. Computer tables are designed to hold your monitor, mouse, keyboard, printer and other workspace requirements. The entire unit is compact and can be placed in the corner. IKEA workchairs are adjustable in height and can be adjusted to fit your space. Letter tray, magnet board, pen holders, cable reel and magnet board are some of the organizational tools that IKEA offers. IKEA storage boxes can be purchased in many sizes, colors and materials. You can label your boxes outside to keep track of what has been stored inside. IKEA work lamps are stylish and functional, too.

IKEA charges a lower price than most furniture retailers in Australia, as well. FREEDOM, the largest competitor, is considerably more expensive than IKEA. The price of working chairs is around $100-$300 and the price of computer tables is around $100-$500 (http://www.ikea.com.au). The 2003 IKEA catalogue states that if a customer finds a cheaper price elsewhere within 30 days of purchasing an item from IKEA they will refund the difference and provide a free meal at IKEA’s restaurant. IKEA gives customers the confidence to purchase at the lowest possible price.

IKEA has been able to offer many promotions to its target customers over the past few years. This has helped increase their business’ popularity. IKEA Catalogue is the most popular. IKEA releases a catalog every year to local resistances in order to bring the latest products to their stores. IKEA has also set up websites around the globe. It is possible to view the entire range of office furniture from your home, rather than visiting a store. IKEA also promotes their products by advertising on TV.

It’s all about where products are distributed and how they are promoted. IKEA Australia has four stores. Two stores are located in Melbourne. The Richmond store is the one, while the Moorabbin store is the other. Both stores are large and only recently opened.

IKEA doesn’t just focus on the customers; it also cares about its employees. A well-trained staff can provide better customer service. They have spent time training and recruiting them. IKEA will continue to be chosen by customers who are happy with its services.

The whole process of providing a service is called the process (McCollKennedy & Kiel 2000, p328). IKEA offers a fast and easy way for customers to get what they want. IKEA is well-known for its self-service method. The best way to find office furniture is to search in the area. After that, you can go to the marketplace to purchase the items. They can then pay at checkout. IKEA also offers home delivery for customers who are unable to transport the goods.

Physical evidence means all tangible elements such as brochures or facilities. IKAE, for example, provides excellent store conditions to its customers. This store portrays simplicity and modernity. Customers can see the furniture in many different ways. A show room is available for you to see the finished work space. Customers can easily recognize IKEA by its physical evidence.

TV Ads Yearly Hand out Catalog, Information on Website, Frequency Ads on TVEasy To Get Information

PlaceStores Information and products Show rooms

PeopleStaffTraining: formal, polite, professionalBeing satisfied

ProcessChoose the products, go to market hall and check them out.

Evidence Physical Good hardware

There are many products that can be purchased at “Children’s IKEA”, including bed linens. Children love the brightly colored bed linens. Furniture for children is durable, safe and designed with children’s imaginations and needs in mind. The furniture is built to adapt to their changing needs. The storage box for kids will give them more storage space and allow them to have more play time. IKEA has toys for kids. The toys are tested and approved to withstand the roughest of child’s play (http://www.ikea.com.au).

IKEA’s tenet is to have lower prices and higher quality. The products that are sold by “Work IKEA” have very low prices. These prices are affordable for most people who work. It is very affordable to buy furniture for children. For children, the cost of bed linens is between $60 and $150. The cost of a child’s bed ranges from $100 to $300

IKEA has been able to offer many promotions to its target customers over the past few years. This has helped increase their business’ popularity. IKEA Catalogue is the most popular. IKEA releases a catalog every year to local resistances in order to bring the latest products to store shelves. The catalogue is issued in September and lasts for one year. The catalogue’s validity guarantees that prices will not rise. The catalogue contains information on furnishings, accessories, room setting, sizes, price, and care. You can then plan your next IKEA shopping trip from the comfort of your home. The catalog is completely free. Content for children includes: toys, furniture, and lamps for children. IKEA has also set up websites around the globe. The entire range of office furniture can be viewed online so that customers don’t have to visit a physical store. IKEA also promotes their products by advertising on TV.

It is all about the distribution and marketing channels used to obtain products. IKEA Australia has four stores. Two stores are located in Melbourne. The Richmond store is the one, while the Moorabbin store is the other. Both stores are large and only recently opened.

IKEA staff are friendly and accommodating. They can provide better customer service because they have well-trained staff. They have spent time training and recruiting them. IKEA will continue to be chosen by customers who are happy with its services.

IKEA offers a fast and easy way for customers to get what they want. IKEA is well-known for its self-service method. The best way to find office furniture is to search in the area. After that, you can go to the marketplace to buy the products. They can then pay at checkout. IKEA also offers home delivery for customers who are unable to transport the goods.

IKAE offers a great store environment to its customers. This store portrays simplicity and modernity. The store is equipped with a playground that children can enjoy. Customers can see the furniture in many different ways. Children will love the opportunity to see the furniture in person and to encourage their parents to purchase it.

ConclusionThis report studied two distinct segments of IKEA customers and their different marketing mix. The seven P’s were examined by people who work from home and those with children. These customers have different behaviors so IKEA has a different marketing strategy to appeal to them. This report shows how important segmentation is to all customers and potential customers for a company. It helps marketers to focus on their target customers and provides some useful programs for them. In the meantime, marketers can analyze the characteristics of each group of people to create marketing strategies that work for them.

Author

  • luketaylor

    Luke Taylor is an educational blogger and professor who uses his blog to share his insights on educational issues. He has written extensively on topics such as online learning, assessment, and student engagement. He has also been a guest speaker on various college campuses.

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