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Setting Price for Ikea

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Submitted By dblakely71
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Case Study 1- IKEA: Design and Pricing

IKEA: Design and Pricing
Considered the world’s largest furniture retailer in the world, Swedish retailer IKEA has dominated the market in more than 314 stores and 42 countries and now has set its sites on North America (US and Canada). The company offers a vast array of space conscious furniture units as well as kitchen ware and accessories for the home. The marketing strategy- “make less expensive items without making them cheap”, in other words, the company relies on its current success of making good quality products with low prices. Prices typically run 30 to 50 percent lower than that of its competitors and although cheaper, the idea is not to leave the customer with an inferior product. The process of keeping prices down from product conception and design to final distribution, these are the mainstays for this world leader. We will briefly describe the steps taken by IKEA in order to a produce one of its most famous products, the Trofe’ mug.
The first step is establishing and setting the price of the product. During the process of product development also known as bringing the product to life. This involves numerous factors such as color, design, suppliers and most importantly, product price and in the case of the trofe’ mug, the price had to be extremely low, relying on sales volumes to generate sales and profits.
As the development process of the product continues and once the price has been established, the next step is to choose a manufacturer to produce it. By choosing factors such as changing the design of the handle, shortening the overall length of the mug and streamlining its packaging to make shipping more cost efficient. In addition, by creating, establishing and maintaining relationships with manufacturers can also generate cost reduction...

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