How does Starbuck or IKEA create the customer experience in their marketing - Essay Example

How does IKEA create the customer experience in their marketing? IKEA was started up in 1943 in Sweden, since then the company has grown into a huge conglomerate with a large employee base and diverse global presence. It generates its highest sales volumes from Germany, followed closely by USA and France. Its top three purchasing countries however are China, followed by Poland and Italy (Ikea.com). This paper talks about how IKEA creates customer experience through their marketing efforts. It will look at this issue in collaboration with important factors such as the marketing mix, brand image, CSR and CRM. Customer experience is generated when the customer engages in “contact” with the company (Meyer and Schwager, 2007). This contact can be generated “directly”, that is through purchase of product/service, use of product/service and after sales service provided by the company. Contact can also be created “indirectly” where customer experience is created through means such as advertisement, promotion, reviews and recommendations (Meyer and Schwager, 2007). The internet is becoming an important tool in forming an indirect contact between the company and its customers and hence in creating customer experience in this modern business landscape. A flourishing customer experience can be created by entrenching all the company’s products with the company’s core value proposition. Another important nugget is that the expectations of the customer are shaped in part by the type of experience they’ve had with the company recently. So if they had a good experience, they will expect more out of the company and its product offerings (Meyer and Schwager, 2007). IKEA goes out of the way to create customer experience for its customers. Its website is welcoming and easy to navigate. It guides the customer through the whole process of coming to IKEA and making a purchase from the store. Things like “make a list before you leave home” and “make yourselves at home” serve to engage the customer in a warm and trusting relationship. Further, IKEA has an in-store restaurant in case customers get hungry. They also have a play area for kids where parents can leave them under supervision and shop at the store in peace. These little things may not seem much, but added up they add immense positive value to the store’s customer experience. They also offer very competitive prices for their products and make the whole process easier for the customers by allowing them to pay through several different modes; any of which is more convenient to the customer (Ikea.com). Recently, IKEA has also launched an application for its catalogue to increase customer experience. The company has picked up on the changing trends and increasing reliance on and usage of cell phones and thus has launched a mobile app which will enable customers to “browse IKEA’s product range, check product information and stock availability” (Tode, 2012). Furthermore, what really makes IKEA great is it’s in depth and accurate understanding of its customers (Carroll, 2008). The store already incorporates everything the customer might need and keeps updating according to customer needs frequently. According to Berry et al. (2002), an important part of customer value is the emotional aspect of it. Although functionality is also important, emotions need to be managed with increased thoroughness to reap continuous benefits and form valuable and lasting relationships with the customer. But this effort will have to be thoroughly implied throughout the organization in order to show results; simply “tweaking” and putting in “isolated pockets” will not have the desired positive effects and result in a failed attempt to gain advantage of fruitful customer relations. In this aspect, IKEA puts forward one of its best moves as being a child friendly store. Their website is designed in a cheerful and loving way with a hand drawn cartoon on top and a picture titled “IKEA loves families”; this puts parents at ease about taking their kids to IKEA with them and they feel safe leaving their kids in the play area while they shop (Ikea.com). This way the kids are happy and safe and the parents are happy and get their work done. Emotions are key here, and something that IKEA is banking on to get a positive response from this initiative. Companies can use various combinations of the marketing mix elements to achieve the desired results from their customer relationships. Yoo et al. (2000) suggest that the value of brand equity in the eyes of the consumer increases its value in the eyes of the firm. Thus if the customer has had a good experience with the company, they will place a higher value on its brand equity and it will thus become more valuable to the firm. Brand equity is an important factor in creating customer experience. For example, if a customer is browsing through products by Apple, Inc. he/she will know exactly what to expect from the product/service quality due to the level of brand image and brand equity developed by Apple, Inc. in the market due to which the customers associate a certain set of qualities with its products. In comparison, a company with no brand image and no brand equity will have given the customers nothing to base their expectations upon and thus the customers will have no established relationship with the company/brand. To build brand equity and customer experience through it, the company must indulge in marketing efforts using the elements of the marketing mix. To promote its products and itself as a brand, IKEA keeps innovating. It recently introduced ‘self checkout systems’ in hopes of increasing customer experience by saving their time at checkout (Gagliordi, 2012). Unfortunately, however, customers could not get the hang of it and it backfired. As a result, IKEA withdrew the self checkout option from its stores. The marketing manager of a firm thus becomes a “mixer of ingredients” who sometimes acts according to past plans, sometimes modifies them to suit his needs and other times experiments to create completely new ones as needed (Borden, 1984). A marketing mix is further explained here and contains elements related to product, pricing, branding, distribution, personal selling, advertising, promotion, packaging, display, servicing, physical handling and factual analysis. Any number of elements from this mix can be picked up and employed by the company as required by its marketing plan. According to Cavusgil and Zou (1994), there is an established relationship between marketing strategy and the company’s performance. Often when customer experience and its creation and retention is important for a firm, it might pursue a defensive marketing strategy through customer complaint management. The idea is to reduce customer complaints to optimal level so that the much costlier cost of offensive marketing, like advertising can be reduced (Fornell and Wernerfelt, 1987). According to the theory presented in this paper, even if customers are dissatisfied and have had a bad experience with the company, they can still be retained if they are given a “voice” by the company. This means that if the customers think that their concerns, demands and objections will be heard and acted upon by the company they will still choose to remain loyal to the company and its product offerings as opposed to the scenario where their voice will not be heard, in which case they will shift loyalties to substitute brands/products in that category. According to Rust et al. (2004), there are certain drivers of marketing which when developed properly result in improved customer experience with the company. This happens because the customer is more attracted to the company and its product/service offering and thus is more likely to remain retained and loyal to the company as opposed to losing interest due to dissatisfaction and shifting loyalties elsewhere. Enhanced customer experience will increase customer equity and result in an improved return on marketing efforts by the company. Dickson and Ginter (1987), talk about how product differentiation and market segmentation are important elements in developing a rewarding marketing strategy and creating favorable customer experience because these elements increase the level of recognition of the product in the consumer’s eyes and thus the products/services are more able to “meet human wants” as compared to competitors’ products. CRM and KM have recently gained a lot of attention (Gebert et al., 2003) by scholars and business people who are using both measures to improve a company’s competitive advantage in the industry. According to theory, this brings in the element of personalization for the customer. When product and service offerings are personalized and customized to match exactly the customer’s demands, he/she are likely to be more satisfied with the product/service and this will lead to a positive and favorable customer experience and thus a strong customer relationship. Knowledge Management is important here because it provides information to the customer about the company and also to the company about the customer. In a scenario where both parties better know each other, it is more likely that a valuable relationship will be formed. According to Gonroos (1994), a marketing mix helps companies attend to their customers’ needs by structuring their activities according to the needs of the market. Important concepts that come into consideration when concentrating on building a positive customer experience and attracting and retaining customers include building trust with the customer, strengthening customer’s belief in brand and making sure that it is easy for the customer to communicate with the company about feedback and complaints. Change need to be brought about on two essential levels, business strategy and customer strategy (Payne and Frow, 2005). For increased effectiveness, both strategies must be integrated and aligned to each other so that the company can reach maximum benefits with both strategies working in unison. If the company invests resources in these decisions it leads to “value creation” for the company. Value creation is a process through which the outputs of any process both “create and extract” value for the company. One important thing is to make sure that value is created for the customer as well as the business firm (Payne and Frow, 2005). Further research by Reinartz et al. (2004), talks about how customer relationship management can be measured and what effects it has on the company’s overall performance. The theories presented in this paper concentrate mostly on the distribution of information about the customer base within the company so that everyone is on one page about on the customer front. If the customer relationship management process is improved and valuable and lasting relationships are formed between the customer and the business then the business will have two distinct advantages; firstly, its perception in the customers’ eyes will increase which will in turn positively benefit future customer experience, secondly, its objective value based on functionality will increase in the market. In the same vein, Winer (2001) says that even though CRM is beneficial, it means different things for different firms and thus it is hard to pinpoint which course of action should actually be taken to improve customer relationship and experience. Verhoef (2003) says that scholars have often even questioned the effectiveness of CRM but he prove otherwise, that CRM is indeed beneficial for companies if the program is followed with commitment and also has economic benefits. An important paper related to this topic is written by Park (1986) who talks about brand concept and brand image in relation to a company’s customers and the effect these two factors have on customer experience and relations. Brand concept is formed based on the customer needs which may be symbolic, functional or experiential. The concept of brand image comes in when the company starts active management of its brand concept. Brand image is cultivated in the market by efforts of positioning and differentiating. If managed effectively, this will result in loyal customers and an extended brand lifecycle. IKEA believes in creating a branded experience, due to this even though sometimes customer are not too pleased with the in store environment, they keep on loving IKEA and remain loyal to it because they admire what IKEA stands for as a brand and that branded experience is what keeps them coming back for more. Creating the branded experience then, becomes more important than being customer centric because we have seen that the former supersedes the latter in terms of benefits (CustomerThink.com). Often when companies are on one hand investing in activities to improve customer relationship and experience, they end up being caught red handed in activities which create negative publicity for them and end up depleting their customer relationship levels and destroying their customer experience. Corporate Social Responsibility (CSR) is the modern term for the company’s right to take only those actions that will not damage the environment of the society. Many companies have been involved in CSR lawsuits where the public has sued them for deception, unfair treatment, societal or environmental damage. CSR also takes “sustainable business development” under its umbrella (Jamali and Mirshak, 2007). There are critics of CSR too; an article by Frankental (2001), questions of CSR efforts are just public relations strategies in effect. By showing that the company is more responsible towards the society, it tries to improve its image in the eyes of the people/customers and gain their favor. Oftentimes companies may indulge in these efforts with just PR in mind and not the actual good of the society. How beneficial are these strategies then, really if they have such a myopic view of circumstances? The market system does not reward ethical activities, per se. It rewards profit levels, efficiency, and product quality and market alignment. Furthermore, there is yet a clear cut definition of CSR and thus it ends up being different for every company and thus invariably has different results as well. Also, companies are more often than not, reluctant to admit that their CSR strategy is wrong per se and thus with the inability to realize their mistake, they are unable to correct them. This strategy may be boosting their PR, but it may not be socially responsible. Other important points are that their CSR policies often don’t align with regards to human rights issues. Further, CSR departments are not properly integrate with the business side departments and thus are working almost in isolation of the business side and can’t be more effective until integration takes place and business strategy is aligned with CSR. In 2010, IKEA was named one of the most ethical companies across the globe for the fourth consecutive year (IKEA, 2010). However, even with IKEA there have been some hurdles along the way. In early 2007, IKEA was accused of indulgence in operating unsustainable business activities as well as child labor (Wadsworth, 2007). Even though IKEA managed to offer explanations to the contrary, these events were hurtful for its brand image and levels of customer experience. Porter and Kramer (2002) write about how companies that are more socially proactive and apathetic end up gaining a competitive advantage over their competitors who are non indulgent in this concern. But the article goes on further to elaborate how not all efforts of philanthropy on the organization’s part will reap benefits, but only the strategic ones. The idea is to manage “pure business” and “pure philanthropy” in order to get best results. Basically, how philanthropy induces increased efficiency is that it improves factor conditions, demand conditions, context for strategic decisions and competition and conditions of related or supporting industries. Porter and Kramer (2006) further this debate and explain how this societal centered objective needs proper strategy to function as intended. An important step they say is to create a corporate social agenda, map your strategy and take initiatives according to your set strategy. The agenda on hand should assimilate internal factors with external factors to reap maximum benefits. Moreover, the company should permanently add a “social dimension to their value proposition” that is, their social or philanthropic cause should reflect visibly in their product and/or services. Another important aspect of creating customer experience is social media. With time internet usage across the world has increased, and with globalization on the rise social media websites have become important places to advertise and promote businesses and remain in contact with the customer base. The method is preferred by many companies because it is not costly and very, very convenient in achieving its objectives. IKEA recently launched an advertising campaign on facebook where people could tag themselves on pictured objects and win them; this scheme garnered much success and critical acclaim from people of the field (Warren, 2009). Mangold and Faulds (2009) say that social media has become so important for the corporate landscape today that it has become a constant part of a company’s promotion mix. Kaplan and Haenlein (2010) explore some challenges and opportunities with respect to the online social media landscape. Some important aspects highlighted are projects accomplished in collaboration, online blogs, online communities and social networking websites etc. The paper suggests that companies using social media should be careful of some factors, the gist of the matter is that the internet is an open and flexible arena and the business must be careful to be original, active, interesting yet humble and honest in order to make a valuable relationship with its customer base and to generate positive customer experience. For example, IKEA’s 2012 campaign claimed that homes needed to be smarter not bigger, thus implying that whatever your size of home, IKEA could bump you up a level just by the furniture and décor (Thau, 2011). IKEA has also used YouTube as a social media vehicle to promote its business and create positive customer experience where it shows you a video of a digitally designed customized bedroom with IKEA furnishings based on the personal preferences of every consumer. This helps customers decide what items they want and to pick and choose many more by altering the customized 3D room to match their preferences (Cater, 2011). In sum, IKEA works extensively to create customer experience and has by far, according to research conducted, succeeded tremendously over the years. References Berry, L. et al. (2002) Managing the Total Customer Experience. MIT Sloan Management Review, 43 (3), Available at: http://worldwide.streamer.espeakers.com/assets/9/8379/25327.pdf [Accessed: 27th Dec 2012]. 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