Of cake mixes & IKEA furniture…
With all the advancements in production after the industrial revolution, we want everything to be ready-made for us. From clothes to take-out food; there is no denying that we all have become a bit lazy!
Given that this is true, one may think that products where one has to put in some work to make them functional must not have much of a demand but the reality proves quite to the contrary.
IKEA, the ready-to-assemble furniture mammoth, is still scoring big, with €41.3 billion as its global revenue in 2019. In spite of having to read manuals, watch tutorials and sometimes scratch our heads to solve the furniture puzzle, the world didn’t really move on from IKEA. Ever wondered why?
Prof. Michael Norton (Harvard Business School), Prof. Daniel Mochon (Tulane University) and Prof. Dan Ariely (Author-‘Predictably Irrational’,Duke University) studied this very phenomenon. Their research was published in the ‘Journal of Consumer Psychology’, in 2011.
For the experiment, they created two groups of people:
One group would build origami objects (Lego structures, IKEA boxes too) while the other group would be provided with the exact same things already built for them. The two groups were then told to bid a price for both the categories of objects. The ‘builders’ associated a higher price with their origami work (even though it wasn’t perfect) as compared to the ready-made ones. In other terms, they valued their crooked paper cranes more than the perfectly crafted ones. As per the study, they were willing to pay up to 63% more for their own work than the pre-built items.
Even though we might miss a bolt or build a shelf with wobbly surfaces,the psychology of ‘Labour leads to love’ (as presented in the paper) is the reason why we still go for it. Since we put in work and feel greater connection to something we build ourselves, we attach a greater production value to it. This is very similar to the Endowment effect- a cognitive bias which states that we tend to associate more value to something that we own as compared to something that isn’t owned by us.
Their paper also discussed the similar case of Betty Crocker cake mixes.
General Mills, a food company in the US wanted to up the sales of its instant cake mix brand – ‘Betty Crocker cake mixes’. Before this, the company used powdered eggs in its instant cake mix. The customer just had to add milk to it and bake. But this wasn’t yielding huge sales. Hence, in the 1950s, psychologist Ernest Dichter was appointed to aid General Mills. Dichter, also regarded as the ‘father of motivational research’, conducted group experiments. He advised the company not to use powdered eggs, instead let the customer add milk and fresh eggs on their own. Fresh eggs were considered to be a key ingredient in baking fluffy cakes. People felt an increased sense of ownership due to the manual addition of fresh eggs. As a result, there was a big jump in the sales of Betty Crocker cake mixes.
This behavioural economics concept was given the name : the IKEA effect.
The IKEA effect was stated in the research paper 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.”
In the industry, companies can use this cognitive bias to increase profits. They can keep their product very customizable with some minimum work that has been done already. This way, the customers will value the product even more while the manufacturing cost will be comparatively lesser. Maintaining long term customers also becomes a lot efficient due to this, since a kind of connection and attachment is kindled.
As is with most things, there is a catch. As per the research paper:
‘Just as completing tasks has a positive psychological impact, failure to complete tasks has corresponding negative psychological consequences: People ruminate more on tasks that they failed to complete than on those that they successfully completed, leading to negative affect and regret (Savitsky, Medvec, and Gilovich 1997; Zeigarnik 1935).’
Hence, if there is an unsuccessful completion of labour, the use of the IKEA effect might backfire!
FY B.Sc Economics