Term Paper, 2008
29 Pages, Grade: 1,7
1 IKEA’s main Stakeholders within Relationship Marketing / Scope of Study
1.1 Customer market
1.2 Supplier market
1.3 Employee (Recruitment) Market, as part of the internal market
2 Discussion and Criticism
Appendix: IKEA’s influence market and referral market
This report has shown that Ikea is likely to establish a vital relationship marketing.
They put the customer at the heart of the company and align their interaction with other stakeholders like suppliers and employees by customer’s needs and wants. They are aware of an uniform value communication towards the customer and offer customers relational benefit. In turn the customer, according to theorists like Gwinner, Morgan and Hunt etc, is likely to develop a long term relationship loyalty with IKEA.
Although IKEA therefore seems to establish a fundament for customer loyalty, it cannot be used as an evidence for their striking relationship marketing.
Firstly, IKEA stresses on corporate communication, service and social benefits but fails to introduce monetary benefits for customers as a point discount system attached to their IKEA Family Card. Secondly, the reasons for customers long term relationship with companies can be hardly measured and finally even harder evidenced as a result of efforts put in to relationship marketing solely.
Within relationship marketing three main dimensions can be found on purpose, nature and its role. While some theorists identify economical advantages (for example the customer life time value: Anderson and Jacobsen, 2002) maintaining the purpose of relationship marketing, others stress on its interactive nature (exchange of relational benefits: Gwinner et al, 1998) or the role of psychological impacts (building up trust, loyalty: Morgan and Hunt, 1994) achieving that. G rönroos (1994, p.9) sums it up as follows:
“Identify and establish, maintain and enhance and when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties involved are met; and this is done by mutual exchange and fulfilment of promises.”
This is a key definition as it explains how all the above mentioned dimensions play together achieving vital relationship marketing and therefore profitability. It also shows the customer centricity and the involvement of other stakeholders.
IKEA is chosen as a case study for relationship marketing. The Swedish world market leader in furniture is a particular good practical example of how the different dimensions of relationship marketing are applied in practice. There can rarely be found another company with such a strong corporate culture and close interaction with stakeholders.
In theory, this interaction with stakeholders is displayed in the „Six Markets Model“ (Peck et al, 1999). According to this model, relationship marketing is an on-going interactive process between the company and its stakeholders. While the customer, as the company's main interest group within relationship marketing, is at the center all others are attached to it. That means the other markets are sub-items. Aligned by customer’s needs and wants these markets help to enhance the company's service offering and their customer relationships.
IKEA’s most important partners doing so are suppliers and employees (as part of the internal market). Achieving and keeping their promise to “create a better everyday life for many people”, IKEA rely on suppliers delivering them with reasonable materials/products as well as on staff reflecting their service approach.
Therefore, this report takes the „Six Markets Model“ as a starting point and focuses on IKEA’s predominant stakeholder groups: customers, supplier, and employees. Each group refers to relevant theory reflecting the three different dimensions of relationship marketing mentioned introductorily.
Maintaining relationship marketing, Peck’s, Payne’s, Christopher’s and Clark’s „Six Markets Model“ considers different groups which a company has to interact with.
The “Six Markets Model” consists of the supplier, internal (employee/ recruitment market), referral, influence and predominantly the customer market. That is why it is displayed in a central position within the model. Hence, this report will focus on the customer market as it best reflects the intention, nature and role of relationship marketing. Attention is also paid to the supplier market and employee/recruitment as part of the internal market due to the fact that they directly determine the provided corporate service offering and consequently also the companies interaction with customers.
The most indirect stakeholder group that a company has to deal with is the referral and influence market. They cannot easily be influenced by the company and affect their interaction with customers to a lower extent. Hence, these markets do not contribute much to the customer focus of relationship marketing which is used in this report. Thus, they are only roughly mentioned in the appendix.
illustration not visible in this excerpt
Figure 1 : Scope of study according to the “Six Markets Model“
The customer market is in the centre of the “Six Markets Model“.
Two main directions of marketing activities can be distinguished: acquiring new customers and building loyalty among the existing customer base. Particularly in saturated and highly competitive markets, such as the furniture business, the emphasis of relationship marketing activities is on building loyalty.
The building of strong customer relationships has been suggested as a means for gaining a competitive advantage (McKenna, 1991) because loyal customers (Gwinner, Gremler and Bitner, 1998):
- Lead to increased revenues for the firm
- Result in predictable sales and profit streams
- Are more likely to purchase additional goods and services
- Typically lead to low customer turnover,
- Sales, marketing, and setup costs can be amortized over a longer customer life- time
In order to achieve loyalty, the company has to invest in getting the customer’s trust and commitment. According to Morgan and Hunt’s “Commitment-Trust Theory” (1994) this can be reached through an effective communication towards the customer, values shared and relationship benefits.
illustration not visible in this excerpt
Figure 2 : “The Commitment-Trust Theory” (Morgan and Hunt, 1994)
In the following, we describe Ikea’s communication, shared values and relationship benefits in more detail. Finally, the level of customer loyalty at Ikea is mesured by identifying the stage their customers currently are at on the “Ladder of Loyalty” (Peck et al, 1999, p. 45)
Entering the IKEA website, the first thing that is noticeable is that IKEA uses informal speech to the customers. For instance, they say ‘ my account ’ instead of ‘ customer account ’, or ‘ my shopping trolley ’. The loyalty card of IKEA is labelled ‘ IKEA Family card ’. The name of the card implicates that the customer, who owns this card is automatically member of the “IKEA Family”. These factors are an indication that IKEA tries to personalize their speech to the customers. This could be linked to the social and psychological benefits of Carlell (1999). At the link “About IKEA”, the customer gets a well formulated impression, when he reads ‘good quality products at low prices’, which can be related to the economic benefits.
(IKEA (2008) Welcome to IKEA United Kingdom)
IKEA communicate their values through “advertising, publicity, the Internet, an IKEA “customer club”, and directly in the IKEA stores with customer placement and by co-workers interact with customers” (Edvardsson, Enquist, Hay; 2006 p 241).
Messages are often sent in a provocative way to customers, to challenge them and to encourage them to respond, through words and expressions that express values (for instance, “co workers”, “democratic design”, and “trade with responsibility”).
These values are understood and communicated by employees and through marketing communication, because of a deeply rooted organisation culture of IKEA.
The IKEA website tells the website visitor that the ‘IKEA Family Card’ is launched in 1984 and has today about 15 million members. Compared to 522 million customers, who visited IKEA in 2007, there would be still potential. (IKEA (2008) Facts and figures)
A list of the ‘IKEA Family card’ features, should give an impression of the benefits for a member of ‘IKEA Family’.
These are: discounts on selected IKEA products, free home furnishing magazine quarterly, new up-dates via email and discounts on exclusive IKEA Family products.
Nilsson maintained, “Customers join because they have an interest in interiors and feel that IKEA contributes to improving their life at home. ‘IKEA Family’ offers are more about knowledge and activities than collecting bonus points” (Capell et al., 2005).
IKEA communicates their values through public advertising (for example television spots), online over the internet, IKEA's “customer club”, and directly in the IKEA stores with customer placement and by co-workers who interact with customers. (Edvardsson, Enquist, Hay; 2006 p 241)
Advertising messages are often formulated in a provocative way in order to challenge the customers and to encourage them to respond. Common used words which express shall express the IKEA values are for example “co workers”, “democratic design”, and “trade with responsibility”. These values are understood and communicated by employees and through marketing communication, because of a deeply rooted organisation culture in IKEA. (Edvardsson, Enquist, Hay, 2006)
The article “Values-based service quality for sustainable business” reveals that IKEA is driven by economic values, social values (co creation and loyalty), and communications (sharing). The values of IKEA are interpreted as:
- Long-term relationships. ‘IKEA Family’ is concerned with knowledge and activities that contribute to improving customers’ lives at home.
- Equality. The ‘IKEA Family’ promotion does not have a bonus system; all customers are
treated equally and have the same opportunities for access.
- Co-creating value. The product is developed and improved through customer feedback.
- Shared development. Sharing values, ideas, and working together.
(Enquist, Edvardsson, Sebhatu; 2007 p 391)
It seems that ‘ IKEA Family ’ has no bonus points system to do not make any differences between people, who can afford or who can not afford spending more money for products, according to ‘Equality’. However, this must not be the point of view from a customer perspective either. The customer might see first of all some parallels to other loyalty cards from competitors, who have a bonus points collecting system as a benefit for customers.
Another weak point about the ‘ IKEA Family Card ’ could be that the member benefits are often natural habits for other companies, for instance giving free home furnishing magazines and new up-dates via email. Thus, there is no outstanding benefit for the very important customers.
Applying for ‘ IKEA Family ’, the customer will be asked about “Personal information”, “Additional information” and “Additional addresses”. (Ikea (2008) My member page)
IKEA does not ask about family income, which could be interesting and useful information. However, IKEA appeals with its vision "To create a better everyday life for the many people" to the broad masses. Furthermore as mentioned above, IKEA tries to treat its customers equally no matter what they can afford. On the contrary, the question about income, would therefore maybe communicate that IKEA put customers after all in different stages.
Relationship benefits – for all customers
IKEA is a customer-oriented, family-friendly furnisher that is driven by a strong corporate culture influenced by the Scandinavian way of thinking. Based on this, every IKEA shop represents a tangible image of this approach. Examples of benefits are:
- Child care at no charge enabling parents to shop without stress
- Swedish food at a reasonable price in the IKEA inhouse restaurant
- Sufficient parking space
- Possibility to test and touch all furniture products which are arranged in an inspiring and aesthetical way
- Shop with typical Swedish groceries, for example “Köttbullar” (Swedish for meatballs)
All these benefits make shopping at IKEA an overall fulfilling experience which satisfies customers beyond the mere buying process.
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