Won’t it be a holy grail to have customers do part of the work whilst making them feel great about the value they get? The global economy as we see it today has continuously evolved since the beginning of time. Making the consumer’s life as simple as possible at a cost they are ready to pay has been the undeniable plan of commerce and trade; putting greater emphasis on the need of individuals to specialise and produce things they are most efficient at. However, similar to other classical propositions, the fallacy of individuals to act “irrationality”, has brought to light a much different observation.
Behavioural sciences are based on some basic tenets; one of the most prominent being behavioural biases. One such bias which has a rather interesting implication on how economic agents behave is the IKEA effect, named after the famous Swedish furniture company and their self-assembling model. The term ‘IKEA effect’ was coined in 2011 by Norton, Mochon and Ariely. They realised that individuals tend to get attached and give undue emphasis to items to which they have contributed somehow. They carried out 3 experiments to solidify their hypothesis. In one of these experiments, participants were given instructions to create origami art. They were then asked about their willingness to pay for the product they created. A similar question was asked to a group of non-participants who had to bid on the origami creation of amateurs and experts. It was noticed that participants who had created the origami valued it as high as non-participants valued the products created by experts. The participants were willing to pay 2x-3x the price non-participants were willing to pay because of their role in the creation process.
Source: the IKEA effect: when labour leads to love by Norton, Mochon and Ariely
They described the IKEA effect as “labor alone can be sufficient to induce greater liking for the fruits of one’s labor: even constructing a standardized bureau, an arduous, solitary task, can lead people to overvalue their (often poorly constructed) creations.” However, the IKEA effect has been in play long before it got its name and has been often used by product designers.
There are some anecdotes which are too good to be left out, and the story about cake mixes is just that for the IKEA effect. Now if one thinks for a moment, cake mixes seem like a pretty good deal? You can assemble a good delicious cake at home any time you want with minimalist effort. However, easier might not always be better. When they were initially brought to the market, they were not as popular as they are today. The reason for this was soon identified as the lack of satisfaction on the part of housewives who actually used the product. They didn’t feel satisfied as they had to put close to no effort whereas making a cake from scratch required significant effort. To deal with this problem the company decided to change the instructions; now the consumer had to add a few readily available ingredients from their side which made them feel like they played a more hands-on role in the whole process.
Few other examples where companies exploit the IKEA effect include the Build-a-Bear experience and visibly IKEA itself. What is noticeably interesting about these companies is that they charge you money for your own labour. Although it might seem unusual at first glance, these companies save a large amount of money by making the consumer play a part in the assembling process. In the case of IKEA, they save the money of assembling as well as storage of assembled furniture which undoubtedly takes more space than unassembled furniture stored in boxes at its store. The story is similar to the case of Build-a-Bear. Now although the latter provides the customers with a degree of freedom in customisation while creating their teddy bears, we end up paying a substantial amount for this customization (somewhere around $20 – $50+, whereas a similar teddy on amazon would cost $12 – $25), add to it the fact that we are putting in our own labour to create it.
The question that then arises is why do we pay more for such products?
Psychologists have identified the innate need of people to feel competent to be one of the reasons why this bias takes place. Individuals like being in control and knowing that they can accomplish tasks, thus, feeling successful. Researchers have identified that the need for the completion of the project undertaken is a necessary condition for the IKEA effect to take place. Furthermore, putting in labour to create a product leads to us being more emotionally involved and attached to the item as the experience of successfully being able to do something creates a positive correlation and attachment. Another reason might perhaps be the phenomenon of effort justification. It refers to the tendency of individuals to justify their actions of putting in labour by attaching a higher objective value to an outcome where they have put in substantial efforts.
A further extrapolation of the IKEA effect:
Who says you can’t have your cake and eat it too? The integration of the IKEA effect into business models can easily knock off this year’s adage. Having noted the subtle yet significant influence of the IKEA effect we can now explore possible ways in which it can be implemented in the upcoming economy.
One way that the IKEA effect could come into play is by allowing the customer to play a role in the customization process. More and more companies, especially from sneakers, chocolates to perfumes and digital products are exploring and undertaking this practice. Not only does it make the customer feel more valued it also makes them feel more involved in the end product, thus, making them feel attached to the product and by extension the company. Other business models which can get in on the action are perhaps the ones providing pre-measured and pre-prepared ingredients with instructions to get mouth-watering meals at home. These brands seek to minimize some efforts required for cooking without completely taking out all the work, thus perfectly balancing the desire for convenience and home-cooked meals with concerns of healthy eating and the pleasure of cooking.
Passion Economy and IKEA effect
Everyone will agree that we live in the age of information, where ideas and procedures are available at the mere click of a button. Fostered by digitisation and the pandemic which left more than ample time in the hands of individuals, we saw ever-increasing participation in DIY projects; everyone of us must have picked up something or other over the year. The word DIY (do-it-yourself) surfaced initially in the 1950s and 60s however came back in trend a decade ago when a throng of people started doing/creating products themselves which they were earlier buying from the markets or outsourcing to professionals. This included not only the activities undertaken as hobbies to showcase one’s artistic abilities but also included putting in efforts to repair or upcycle existing items and to design every inch of a new house. This overarching need of DIY-ing is perfectly complemented by another trend that has been picking up momentum; the trend of passion economy. Passion economy lets creators build an additional source of revenue by utilising their passions. The growth of platforms such as patreon or skillshare can pay homage to the fact that creators can create digital content and resources which can be used again and again by consumers.
The amalgamation of the DIY streak, passion economy and the IKEA effect can be used by creators and businesses to leverage a larger customer base. Many businesses have started providing their customers with a knack for DIY projects: the instruction, the material to undertake a project and videos to follow along with. For example, many small artists have started providing their target audience with the option to undertake creative projects with follow-along tutorials/online classes by delivering all the needed items at their doorsteps; not only does this provide an overall experience but it also leaves the consumers with a product of their own sweat and hard work. The IKEA effect can be used in such circumstances since having put in efforts into creating the end product would create greater satisfaction and aid the customers in justifying their want to pay a higher price than purchasing ready-made products. Thus changing the status of users from passive consumers to co-creators and providing them with a solvable challenge, might just be the way to go.
By Nehal Kaul