I’m sure you’ve had the experience of buying a piece of furniture from IKEA, and remember the experience you had when you tried to assemble it.
‘The IKEA effect’ was identified and named by Prof. Michael I. Norton of Harvard Business School, Prof. Daniel Mochon of Yale, and Prof. Dan Ariely of Duke, who published the results of three studies in 2011.
‘The IKEA effect’ is a cognitive bias in which consumers place a disproportionately high value on products they partially created. The name refers to Swedish manufacturer and furniture retailer IKEA, which sells many items of furniture that require assembly.
Their study found that subjects were willing to pay 63% more for furniture they had assembled themselves than for equivalent pre-assembled items.
Cake mixes that started to be produced in the 1940s were not so successful market-wise at the beginning.
The manufacturers tried to figure out why these revolutionary products, that should have worked like magic (“Just add water or oil, mix, and put it in the oven for 30 minutes!”), were simply not getting traction.
They found out that although the instant cakes tasted good, whoever made them felt that they couldn’t really take pride in these cakes that they served to their families and friends — because it was too easy to make them!
Only when the cake mixes manufacturers took the eggs and the milk ingredients out of the equation, and the customers themselves had to add them, did sales go up dramatically.
The fact that the customer put some labor into preparing the cakes made their efforts more meaningful — and they simply loved the outcome.
The fact that you value the final product of your work doesn’t necessarily mean that someone else will value it the same way you might expect them to.
For example, my son is very technical and good with tools. He can take apart almost anything and put it back together in no time.
He owns a car that he services by himself, and he does everything on the car.
His car is his pride and joy, and when he eventually decides to sell it, he will, more than likely, ask an over-the-market price for it, simply because of all the labor and extra effort he’s put into it over the years.
A potential buyer would, understandably, think that this car should be sold below the market value, as it was never serviced at the dealers or at an authorized repair shop.
Now, think of entrepreneurs in an early-stage start-up that have just launched their MedTech product on the market.
In the founders’ eyes, they have created the best product or solution on the market. Years of innovation, creative thinking, endless hours of effort, challenges that were put in to create the final product — all cause the founders to highly value their finished product.
On the other hand, there are other considerations that the potential clients or end users may have in mind when being invited to use the innovative product.
This can be as basic as switching costs to whatever they use today. They may be hesitant to be an early adopter for your product, or would like to see peer reviews and other proofs that your product functions the way you say it does.
For this reason, having a KOL or a thought leader vouching for your product should be an important part of your Go-To-Market plan.
It boils down to this: you, the entrepreneur, and your team, know your product inside out, and no one can pitch about it better than you. But sometimes your prospective clients may not necessarily take your word for it, simply on your say-so.
Only someone your prospect trusts, who talks positively about your product at professional conventions, on webinars, in publications and testimonials, will increase your chances of leading your potential customer down the road to conversion.
In some cases, the customer requests to add certain features or functions to your product that you can accommodate, which may create the IKEA effect back on them, as they see themselves inputting some effort and labor, which will add that extra capability, and truly enhance the value of your product.
