- The cost of producing the product: If a business is to make a profit, then it clearly needs to charge a price that covers the cost of making and selling the product.
- The price charged by competitors: A business might want to charge a price at or below that of its competitors. However, if the product is sufficiently unique and superior, then the business might feel it is acceptable to charge a price above that of its competitors. IKEA excels here, in the sense that it offers prices cheaper then its competitors, putting them ahead of the game.
- The price customers are willing to pay: This is determined by the value of the product to the target market. If consumers in the target market believe that they can gain significant benefits from the product, then they will be willing to pay a high price. However, if the product provides few benefits, consumers will only be prepared to pay a low price, for example, the price someone is willing to pay for a house will depend on its location, the number of rooms and other factors such as the size of the garden.
A business will consider all these factors before deciding on a price for each of its products. In certain situations, it may be appropriate to set a relatively high price. For example, Ikea may set a premium price on a high quality piece of furniture that is widely recognised as being superior to other similar products made by competitors. In other situations a business may opt to set relatively low prices. For example, a new company operating in a very competitive market may set low prices relative to its competitors in an attempt to win business and build a customer base.
IKEA are renowned for their cheap prices and high quality products. This has helped them build a huge reputation, and ultimately there cheap prices are a unique selling point, when people think, where can I get good, yet cheap furniture from? Instantly in most cases they think IKEA. IKEA is renowned for being value for money.
c)
Promotion is a series of marketing activated designed to make consumers aware of products. The ultimate aim, of course, is to persuade them to buy those products. Promotion is an important part of the marketing mix, and business can use a variety of different types of promotion.
One of the methods is advertising, advertising is a means by which businesses pay for communication with actual and potential customers through newspapers, television, radio, the internet and other media. It can be expensive, but advertising is often highly successful in influencing consumers’ purchasing decisions.
Advertising can be informative, by setting out to increase consumer awareness of a product. This type of advertising is based on facts rather then images. On the other hand, persuasive advertising attempts to convince consumers to purchase a certain product. Persuasive advertising aims to persuade that the advertised product is better than the competition.
Sales promotion is any activity that provides a financial incentive to purchase a product. For instance Ikea may hand out free samples of food in their newly built restaurant or perhaps have demonstrations of how to put together some of their products to show customers that’s its easy, and can be done by anyone.
IKEA advertising in the UK is intended to raise awareness of the IKEA brand and drive traffic to the stores. Some people love IKEA’s unique style of retail advertising, some hate it, but everyone who sees there advertising has a strong opinion and subsequently it provokes conversation and debate. Despite having some of the most controversial television advertising campaigns in the UK this includes criticising the taste of the British public, invisible furniture, an exaggerated homosexual man advertising for IKEA. IKEA have raised awareness of there brand, let people know they are different to other home furnishing companies and most importantly increased sales. The advertising department includes all aspects of advertising and brand communication from television advertising and sponsorship to magazine and radio promotions. Advertising is used to support many different areas of the business including brand awareness, store themes, catalogue drops and store openings.
The term merchandising covers a range of tactics used by businesses at the point of sale (the location at which the products are actually purchased) to achieve higher sales figures.
For example, a business might offer retailers special display stands or point-of-sale adverts to encourage them to place the business’s products in a more favourable and prominent position withen stores.
Merchandising can be important when:
- Consumers make decisions at the point of sale. – This includes a lot of information about the product, making it bright, clear and attractive.
- Competitors make extensive use of merchandising.
- A variety of rival products are on display in stores.
- Rival products have only minor differences.
Businesses seek good publicity, and public relations (PR) is designed to improve businesses standings in the eyes of consumers and other interested groups,. Larger organisations have their own PR staff. Ikea engage in a variety of PR activity including:
- Making donations to charities – IKEA support unicef to help young children in less fortunate countries around the world.
- Sponsoring sporting and cultural activates, and IKEA support the local community by donating products to schools which don’t sell in stores, this is very popular in the community, and keeps the public happy, which creates good press for IKEA.
- Allowing the public to visit the business – Makes the customer feel more welcome, and at home with IKEA if they feel involved by learning more about the company.
Public relations can be a very expensive form of promotion, and it can be difficult for businesses to assess the effect of public relations on sales.
Catalogues are a huge part of advertisement for IKEA, it’s relatively cheap when compared to TV adverts, and its fairly easy to get to the customer, IKEA print 131 million copies of there catalogue making it the most widely distributed commercial publication in the world. Having picked up a couple of the latest IKEA catalogues and handbooks, it’s clear that IKEA thrive on simplicity. The IKEA text is the same font on all brochures, with the traditional blue and yellow logo on the bottom hand side of the page this creates continuity which means people recognise it straight away when they see it again, the traditional yellow and blue logo is based on the colours of there home country Sweden. The background images are warm, cosy, family pictures, one containing a large sofa with numerous pillows, the other an aqua blue kitchen. This gets the message across to the reader that there is a large range of products available, furthermore on the front cover they get the message about there prices, “Pay less, enjoy more” and “your 100 page guide to making an affordable, inspired choice”. This encourages the public to go through the IKEA catalogue. Furthermore the catalogue brings the IKEA store into your home, it’s the best way to prepare for a visit to IKEA.
d)Place is another term for distribution. It covers the range of activities necessary to ensure that goods and services are available to customers. Deciding on the right place involves a range of decisions.
A business needs to consider the most cost-effective way of getting its products and service to the customers. It needs to look at the implications for its profit margins of each means of distribution.
The growth in use of the internet has encouraged even small businesses to use websites to sell their products to what can be a global market. This can be highly cost effective means of reaching a wide target audience, but is not suitable for all business and all products.
Businesses seek to design marketing mixes that are complementary and work together to benefit the business and to maximise sales. For example, Ikea promotes itself to its target audience on the basis that it offers the lowest possible prices. Place is important to Ikea, and the company locates stores in areas where it costs less to set up, eg on the outskirts of major cities. Which targets both high income earners and low.
IKEA’s transport methods are highly effective, large volumes in combination with flat packages are important in helping IKEA to transport products economically from the supplier via the stores to the customers. Flat packs mean that IKEA do not have to pay for transporting or storing unnecessary air – and that not only means lower warehousing and distribution costs, but also less impact on the environment. At present 20 % of all IKEA goods are transported by rail.
6)
It makes sense for Ikea to target a wide range of customers. This is referred to as mass marketing. But there’s the other side of it where in some situations they will target small sections of the market. Taken to the limit, this might involve catering for a small select group of customers – a target market that has very specific needs. I.E children’s section.
In mass marketing, Ikea would aim their products at most of the available market and normally try to sell a range of similar products to all customers. Mass marketing is possible if the products are popular and purchased by many different types of people. For example Ikea’s furniture products are well suited to being sold in mass markets.
Businesses must be able to produce on a large scale if they are to sell successfully in a mass market. A company may have to invest heavily in resources such as buildings, machinery and vehicles. Usually, firm’s also have to be very price competitive to flourish in mass markets.
By contrast, niche marketing involves companies identifying and meeting the needs of relatively small areas of the market. The aim is to cater for the needs of customers that have not been met sufficiently by other business, and niche marketing is one way in which small businesses can operate profitably in markets that are dominated by large firms. An example would be Ikea and their play pen for younger children.
Market research helps businesses to identify whether they should adopt a mass or niche marketing strategy. In general, this would depend on:
- Whether the needs of customers within all parts of the market are being met.
- The extent to which a business can provide specialist products capable of meeting the needs of select groups of customers. – This gives IKEA good idea whether there is a need for a unique product on the market, or a product aimed at a special selection of customers, doing this research could potentially uncover new opportunities for them.
- The degree to which competitors are currently meeting the needs of all customers within the market.
7) Market research is the systematic collection and analysis of data to enable a business to take better quality marketing decisions. In simple terms, market research allows businesses to find out what customers want. There are a number of reasons why businesses invest in market research.
To determine whether IKEA should focus on mass marketing or niche marketing, they can use market research. Most products are only likely to be mainly purchased by particular groups of customers: the market of young working-class males, for example, is very different to that of middle aged wealthy couples. Market research can assist a firm in identifying which parts of the market are most likely to buy its products.
It is vital for a business to know who its customers are. This allows the business to:
- Design products to best meet the needs of these customers This makes it more efficient at what it does as it specifically meets the needs of IKEA’s customers, meaning its something which grabs there attention, or they can relate to and want to purchase.
- Target advertising, promotions and special offers at these groups People like a bargain, once they see a discount on a product they are looking for they are likely to purchase it from IKEA.
- Conduct further in-depth research with specific groups of customers to uncover their needs as fully as possible.
5) Businesses need to know what’s happening in the market. To be able to plan its product and marketing effectively, a business like Ikea needs to address three important questions.
What is the size of the market?
A way of measuring the size of the market is to consider the volume of sales made by all businesses selling furniture.
What is the structure of the market?
This means discovering the number and size of businesses that make up a market. Are there, for example a few large firms, or many small firms? Or a mixture of large and small firms? If a business is in competition with large firms, it may decide to avoid competing on price terms as larger firms may be able to produce their products more cheaply.
Is the market growing or shrinking?
Market research can reveal what is happening to sales in market over a period of time. A business may feel more confident about entering a market which is growing, as it should be easier to win sales when some customers are not yet loyal to particular brands or manufactures. The market for DIY furniture has kept growing recently mainly due to Ikea’s success. If IKEA are planning on releasing a new product, its likely they will do research into other products in a similar field to see whether the market for them specific products are increasing or decreasing. This will give them a good idea whether it is worth a full-scale launch of the product they have in mind.
9)
Total Quality Control is the most necessary inspection control of all in cases where, despite statistical quality control techniques or quality improvements implemented, sales decrease.The major problem which leads to a decrease in sales was that the specifications did not include the most important factor, “What the customer required”.
To maintain their quality and standards is vital to IKEA, the quality and reliability and workmanship of their products is crucial to there brand. Both to keep their customers and to be legally correct.
- Marketing had to carry out their work properly and define the customer’s specifications.
- Management had to confirm all operators are equal to the work imposed on them and holidays, celebrations and disputes did not affect any of the quality levels.
- Inspections and tests were carried out, and all components and materials, bought in or otherwise, conformed to the specifications, and the measuring equipment was accurate, this is the responsibility of the QA/QC department.
- Any complaints received from the customers were timorously and satisfactorily dealt with. This will help keep IKEA a favourites with the customers.
To conclude, the above forms the basis from which the philosophy of Quality Assurance has evolved, and the achievement of quality or the “fitness-for-purpose” is “Quality Awareness” throughout the company.
IKEA hire highly trained quality control workmen, to check that the products in the warehouse are looked after sensiblely and that they are delivered to the customer effeciantly. Quality control is to check that there product meets customer demands and possibly look for ways to improve it. Its important for a business like IKEA to have regulary quality control checks to make sure that the products they sell are always up to standards, making sure the high IKEA standards don’t drop without them being aware. To make sure of this IKEA have a test lab in Almhult which tests both textiles and furniture, around 50,000 tests are carried out in accordance with current standards each year. For several years in succession the IKEA Test Lab has been accredited for it quality system and test methods in accordance with the international standards. All these tests have been developed to correspond to many years of regular use in a domestic enviroment in the areas for which the product is intended. IKEA not only test products during development, but also selects random samples from among the products on sale in the stores. As IKEA say “It is our customers that we want to come back – not our products” This makes sure that IKEA’s customers get there full value for money and a long lasting product.
