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What Is The Reasoning Behind IKEA's Strange Pricing?

by Martin Luxton
20 replies
I was in my local IKEA and noticed their mini ice cream/hot dog bar near the entrance had a strange pricing policy.

Soft Drink (refillable cup) = 1.25
Soft Drink (refillable cup) + Hot Dog = 1.25

So, if you're going to buy a soft drink, you might as well ask for the hot dog as well.

Does anybody know the marketing strategy behind that?


Martin
#ikea #pricing #reasoning #strange
  • Profile picture of the author Matt Morgan
    Originally Posted by Martin Luxton View Post

    I was in my local IKEA and noticed their mini ice cream/hot dog bar near the entrance had a strange pricing policy.

    Soft Drink (refillable cup) = 1.25
    Soft Drink (refillable cup) + Hot Dog = 1.25

    So, if you're going to buy a soft drink, you might as well ask for the hot dog as well.

    Does anybody know the marketing strategy behind that?


    Martin
    As long as you are not a vegetarian that is lol.

    Did you ask the cashier?

    Perhaps the hotdog has some secret ingredients which manipulate the brain to want to 'purchase' more goods.
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  • Profile picture of the author SantiSantana
    With one hand occupied, you will easily walk away. With two hands occupied you will probably sit down and eat. If their marketing people have figured out the longer customers stay on shop ( on average) the higher the gross sales ( or margin, or whatever KPI they are trying to achieve) they will use whatever techniques allow them to increase your time in there.

    Have a look around where you sit and see if there is anything you could be tempted to buy within sight (small items that are grab n go) Or if there is any big promotional billboard strategically pointed at that area to let you know of an upcoming promotion.

    Just my 0.02
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    • Profile picture of the author x3xsolxdierx3x
      Originally Posted by SantiSantana View Post

      With one hand occupied, you will easily walk away. With two hands occupied you will probably sit down and eat. If their marketing people have figured out the longer customers stay on shop ( on average) the higher the gross sales ( or margin, or whatever KPI they are trying to achieve) they will use whatever techniques allow them to increase your time in there.

      Have a look around where you sit and see if there is anything you could be tempted to buy within sight (small items that are grab n go) Or if there is any big promotional billboard strategically pointed at that area to let you know of an upcoming promotion.

      Just my 0.02
      Genius....

      Now, I feel kinda stupid writing my last post... (Thanks!) lol
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    • Profile picture of the author Martin Luxton
      Originally Posted by SantiSantana View Post

      With one hand occupied, you will easily walk away. With two hands occupied you will probably sit down and eat. If their marketing people have figured out the longer customers stay on shop ( on average) the higher the gross sales ( or margin, or whatever KPI they are trying to achieve) they will use whatever techniques allow them to increase your time in there.

      Have a look around where you sit and see if there is anything you could be tempted to buy within sight (small items that are grab n go) Or if there is any big promotional billboard strategically pointed at that area to let you know of an upcoming promotion.

      Just my 0.02
      Santi,

      The pricing there is very low and there is very little space to sit down (just small, high tables).

      As a result that area is always heaving with people - creates good social proof. And it's just after the checkouts so they can take a bit more of your money before you go.


      Martin
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    • Profile picture of the author Scott Ames
      Originally Posted by SantiSantana View Post

      With one hand occupied, you will easily walk away. With two hands occupied you will probably sit down and eat. If their marketing people have figured out the longer customers stay on shop ( on average) the higher the gross sales ( or margin, or whatever KPI they are trying to achie
      That reminds me of marketing story from an appliance store. On a hot summer day if a couple came to look at an appliance, but were going to walk out, the salesman would say, "just a moment" and give them a half gallon of frozen ice cream as a gift.

      He knew they were likely going to shop other stores for a better price. With the ice cream in hand they had a problem. The ice cream would melt fast in the summer heat. This almost guaranteed their last stop was this appliance store because they would go home to avoid melted ice cream.

      When the couple got home the last appliance in their mind was from this particular store. The salesman also gave them a gift. They were more likely to stop shopping at other stores and return for the purchase.
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    • Profile picture of the author Martin Avis
      Originally Posted by SantiSantana View Post

      With one hand occupied, you will easily walk away. With two hands occupied you will probably sit down and eat. If their marketing people have figured out the longer customers stay on shop ( on average) the higher the gross sales ( or margin, or whatever KPI they are trying to achieve) they will use whatever techniques allow them to increase your time in there.

      Have a look around where you sit and see if there is anything you could be tempted to buy within sight (small items that are grab n go) Or if there is any big promotional billboard strategically pointed at that area to let you know of an upcoming promotion.

      Just my 0.02
      That sounds logical, but for one small factor: in all the IKEA stores near where I live the hotdog/drinks station is after the checkout tills. So all making people sit down to eat a hotdog does is clutter up the exits.

      Martin
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  • Profile picture of the author x3xsolxdierx3x
    Originally Posted by Martin Luxton View Post

    I was in my local IKEA and noticed their mini ice cream/hot dog bar near the entrance had a strange pricing policy.

    Soft Drink (refillable cup) = 1.25
    Soft Drink (refillable cup) + Hot Dog = 1.25

    So, if you're going to buy a soft drink, you might as well ask for the hot dog as well.

    Does anybody know the marketing strategy behind that?


    Martin
    Strange....

    Usually the only time someone gives something away for "free" is if it can further benefit them through increased exposure/branding of their products/service.... (I'll give you this _____ with my company logo on it, for free, knowing that you'll walk all around town with it.....etc)

    In this case, the hot dog would be quickly consumed...and, it's holder/trash thrown away....

    Not entirely sure what the reason is behind this one...
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  • Profile picture of the author Andy Fletcher
    Human beings make decisions based on relative positions not on absolutes. Adding a worse option for the same price makes the desirable outcome more likely.

    Believe it or not more people will buy a soft drink and a hot dog for 1.25 if they are also offered a soft drink for 1.25.

    Studies (mostly by Dan Ariely) show that this relative reasoning is most effective with three options. Two of which are nearly the same and the third is a worse option of one of the two. The result being it skews people towards the option that is the "better" version.

    Dan Ariely's example -

    People are offered the choice between -

    An all expenses paid trip to Rome
    An all expenses paid trip to Paris

    People are split roughly 50/50

    Another group are offered -

    An all expenses paid trip to Rome
    An all expenses paid trip to Paris
    An all expenses paid trip to Paris except you have to pay for breakfast each day

    This skews the result 2-1 in favour of the all expenses paid trip to Paris.

    Another example -

    Print version of book $47
    Instant access to digital version of book $97
    Print + Instant access to digital version of book $97

    People that never read things on their computer suddenly want both versions simply because of the presence of the "silly" choice.
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    • Profile picture of the author SantiSantana
      Thinking about it, Isn´t the food counter at IKEA fairly close to the hot dog stand?

      Don´t they sell imported stuff from Sweden there?

      What´s the margin on all those upsells on food) (something you normally don´t buy at ikea)

      How good is it for the brand that it is perceived to give great value on certain items ( from a customer point of view) while increasing ATV for them ( and possibly margin).

      I don´t know if the brainwash I received to become a store manager at a Starbucks competitor in another life is a good or a bad thing. I see marketin gtricks all over th place. The charlie´s have me surrounded!

      Colonel Trumaaannnn!!!
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  • Profile picture of the author ShaneRQR
    That's exactly it, Andy. Excellent examples.

    The only thing that strikes me as strange about the above IKEA example is that there isn't a third option.

    On the other hand, they're playing a very low-price game and I guess different rules apply. Usually, you'd exploit relative reasoning to change price perceptions, as shown in Andy's example above.

    Even without a silly choice, it can still work wonders.
    If there's a choice between a cheap and an expensive bottle of wine, many people will go for the cheap one. Add a really expensive wine to the lineup and now the formerly expensive one suddenly becomes the "in the middle" choice and many will take it because they don't want to settle for the cheapest option.
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    • Profile picture of the author Martin Luxton
      Originally Posted by ShaneRQR View Post

      That's exactly it, Andy. Excellent examples.

      The only thing that strikes me as strange about the above IKEA example is that there isn't a third option.

      On the other hand, they're playing a very low-price game and I guess different rules apply. Usually, you'd exploit relative reasoning to change price perceptions, as shown in Andy's example above.

      Even without a silly choice, it can still work wonders.
      If there's a choice between a cheap and an expensive bottle of wine, many people will go for the cheap one. Add a really expensive wine to the lineup and now the formerly expensive one suddenly becomes the "in the middle" choice and many will take it because they don't want to settle for the cheapest option.
      Sorry Shane,

      I should have mentioned a single hot dog was 1.00 so the combined price of hot dog plus drink would be 2.25, as opposed to the special offer of 1.25.



      Martin
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  • Profile picture of the author Paul Hancox
    What Andy said.

    Also, some people ... in a rush, might also look at this offer and think to themselves, "Ooh, free hot dog!"

    Even though the hot dog has no doubt been factored in to the price.

    Pricing is a very psychological affair.

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  • Profile picture of the author x3xsolxdierx3x
    ....and, building on that, what is the propensity for others to 'talk' about this pricing arrangement? Whether they are just trying to figure it out, or have already, it sparks a uniqueness that could certainly stimulate positive conversation about IKEA and the IKEA brand. "So, I finished getting all my stuff, and I ended up getting a soda and a hot dog for the same price as just a soda...."

    (of course, this is intriguing enough to find it's way onto Warrior Forum, as well....lol)
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  • Profile picture of the author samstephens
    Santi raises a good point - the two hands full, thing. And mix that with Martin saying that there is very little space to sit down.

    So what do you do when you've got two hands full, and no where to sit? Wander up and down some isles and look at stuff you normally wouldn't. And with the time it takes you to eat the hotdog, that's extra time in the shop.

    And then the psychological feel of being warm and well fed? It wouldn't suprise me if "well fed" people tend to browse for longer.


    ....though imagine if it was just a "typo", and here we all are analysing it.

    cheers
    Sam
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    • Profile picture of the author Paul Myers
      Some good answers here.

      One other factor in the equation may be something I've noticed fairly consistently in some tests I've done. If you give people a real discount, no matter how large or small, they tend to spend more than the original price by adding other items if they're available. "I just saved some money, so let's get this, too." Partly reciprocity, partly rationalizing the split discount as a total thing.

      And one much less complex factor: If they have to go out and do shopping during lunch, they might just pick the place where they can get lunch, too, quickly and cheaply. I'd be surprised if that isn't a BIG factor.

      I wonder if the store is near a lot of other businesses? If people go there often for lunch, it becomes a physical anchor for them. Many people tend to go to places they're familiar with and have positive associations with over other places. Add in the social factor of the milling crowd...


      Paul
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      • Profile picture of the author Martin Luxton
        Originally Posted by Paul Myers View Post

        I wonder if the store is near a lot of other businesses? If people go there often for lunch, it becomes a physical anchor for them. Many people tend to go to places they're familiar with and have positive associations with over other places. Add in the social factor of the milling crowd...
        Paul
        It's in the best location of the most popular shopping mall in a city of 4 million people. They also have massive signs everywhere. For the last two years, whenever we tell our toddler we're going shopping, he chants "IKEA! IKEA!" (The shopping centre is actually called Forum Bornova).

        Not sure how I feel about my son being a walking brand advertisement :confused:


        Martin
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  • Profile picture of the author Trapped
    Perhaps because people tend more to grab a cup of coffee, and I would not really want to mix coffee with hot dog...now, it would make sense to have coca cola and hot dog perhaps...said that, i might just say "oh how nice, a coffee and a hotdog" but I would most likely buy just the coffee if its coffee I want.

    But bottom line would be, there is no sense in such an offer..at least to me.
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  • Profile picture of the author Steven Carl Kelly
    IKEA works hard on the psychology side of buying. Why else do you think you can go to the IKEA restaurant and eat a full meal for free?
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  • Profile picture of the author Trapped
    Perhaps those prices are just to payback for the material used ... could be just a courtesy to clients..
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    • Profile picture of the author Pluton
      Originally Posted by Trapped View Post

      Perhaps those prices are just to payback for the material used ... could be just a courtesy to clients..

      No, I think I know the particular store that Martin is referring to, but I could be wrong, and the reason for the strange low cost package is that the store prices are so high they want to sweeten things before you leave!:rolleyes:

      Try the next nearest store for a cheaper deal.
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