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IKEA and Luxury?

Our branding project is on IKEA, not exactly the height of luxury.  So what can a bargain furniture maker learn from luxury goods purveyors?  A lot, I think.

In the Burberry case, the discussion of the branding issues created by the Chavs reminded me of the issues IKEA is facing in some ways as a result of an association between their products and 18-24 year old broke college and grad students.  Despite having arguably better quality than various amazon sellers of flatpack furniture, IKEA is perceived as being lower quality and not a product you want to buy as you enter your 30s. 

This perception limits their ability to sell their higher priced products to a demographic with the disposable income to afford them.

Similar to how luxury brands must understand how to address their three clientele: absolute, aspirational, and accessible, so too must IKEA learn to understand how to target both their primary customer and one with slightly more purchasing power.  

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Predicting Diffusion: IKEA Expansion

In the reading prior to class, we looked at 4 examples of “Product Diffusion” – that is, the “rate and scope of product adoption amongst the target market”.   In our branding project we won’t be taking a look at a new product, but instead at pushing an existing product -- IKEA’s more premium lines of furniture--to a new market: 25-35 year old adults typically moving on to “upgraded furniture” but who are still price conscious enough for IKEA to appeal to.

It was difficult to find an exact parallel (or even something similar) within the case, as all spoke of largely new products.  However, I’d focus on Satellite Radio in gleaning our takeaways.  It was a “new” product that performed a similar function as an old one, specifically targeted at dissatisfied customers of the old product (traditional radio).

Satellite radio successfully garnered adopters.  To me, there are two lessons applicable to IKEA: first, have a product that fits an existing need, and second, have a product that improves on the alterative.   Seems obvious, but the peanut butter slices didn’t do both after all.

On the first point – IKEA furniture does fit a need for affordable, functional, aesthetically pleasing items in your home.  The task in expanding their customer base up the age bracket is to convince them that it fits their specific needs at the moment, when they are prioritizing quality more highly.

On the second, the task is making IKEA furniture look more attractive than the alternative to our proposed demographic.  To me this is a combination of marketing IKEA’s more premium furniture as aesthetically pleasing and high quality (maybe conducting some quality tests vs competitors) while also maintaining the competitive price point. 

#MITSloanBranding2024B

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Wine: Drinking Branding

The wine industry is a fascinating case study in branding. Producers not only have to contend with the fact that consumers typically prioritize the “brand” they’re drinking, often ignoring the rated quality, but that they care so much about the brand of the country or region producing the wine.  This later factor, while it can be influenced by individual producers, stretches beyond the reach of the typical branding issues tackled by producers of consumer products.

For example, in the case they reference a test of Texas wine (not perceived as a high quality producer of wine) where testers ranked three wines – one from “France”, one from “California”, and one from “Texas” (that were in reality all Texas wine).  As you might expect, they ranked them France, California, and then Texas despite the reality. 

This is a difficult task for an individual wine brand to solve – how do you raise the perceived profile of an entire region or country without some outside force pushing it forward?  I’m thinking of what happened to Napa Valley following the 1976 “Judgment of Paris” depicted in the movie Bottleshock.   Prior to this, Napa was perceived as an inexpensive wine region, and all “good” wines came from the “Old World” (Western Europe).  Of course, after this event, where Napa wines won over Old World wines, prices skyrocketed – land that had been cheap became wildly expensive and wine brands were able to significantly increase their prices.

As Concha y Toro moves forward, they mention they have significant acquisition opportunities.  With their strong distribution network and infrastructure, I see two primary paths for them in an acquisition context.  First, they could attempt to acquire an existing premium Chilean wine brand to expand and keep separate– much like the examples given in the case around cars – Toyota keeps Lexus at arm’s length, as does Ford with Volvo.  Alternatively, they could double down on the budget segment and expand their production volume in order to capture economies of scale.   Given the expansion of the moderately premium segment ($10-$25), I think the former option makes more sense if they can identify the correct acquisition opportunity and commit to maintaining and expanding the separate brand. 

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15.846 - Corona Beer

Beer is a commodity.  While niche, unique, craft beers exist, I would argue that in the mind of the average American consumer looking for a miscellaneous “beer”, while they might have a preference, many of those light beers are interchangeable in their mind.    

I agree with the Heineken team when they argued that people “don’t drink beer, they drink marketing”.   And Heineken and Corona have pursued very different branding and marketing strategies within the US market. 

Corona has a distinct brand.  Close your eyes and think about what Corona Extra (or Corona Light) recall.  Beaches, palm trees, warm weather.  Maybe served in a bucket in the sand or washing down a plate of delicious Mexican food. 

Corona’s entry strategy and subsequent marketing created and reinforce this perception.  By choosing neighborhoods to enter based on beer consumption and the existence of a Mexican grocery store, they entered primarily heavily Hispanic neighborhoods.  This generated a higher consumption of Corona by Hispanic Americans, reinforcing the perception of Corona as a “Mexican” beer (more so than a generic imported beer).  They then followed this up with marketing referring to Corona as “vacation in a bottle”.

While this is a strong brand (and a brand I enjoy – Corona is great), if their goal is to expand beyond that to become the leader in the premium imports beer market, they need to reach a wider audience than those specifically seeking out a beer that represents “fun, sun, beach”. 

The marketing of Heineken sought to emphasize that it was a “premium” beer, and higher price points served to emphasize this to the consumer (presuming consumers often use price as a proxy for quality).  This perception compared to Corona was helped along by various challenges Corona experienced – rumors of cancer causing chemicals or urine present in its beer.

Their strategy was marked by a certain arrogance – if they produce a good product and create a strong brand, that the little “upstart”, Corona, could never touch them within the premium import segment of the market.  This is a strategy of complacency. 

If Corona is to make inroads within Heineken’s core market, they need to create a better perception of their quality compared to Heineken and break out beyond their perception as a “vacation” beer or a beer focused only on the Mexican market.