November 29, 2023

The Power of Loyalty Programs: How IKEA Builds Customer Loyalty‍

Riya Shah

In today's highly competitive marketplace, customer loyalty plays a crucial role in the success of any brand. Companies are constantly striving to enhance their customer relationships and retain their valuable clientele. One brand that excels in this area is IKEA, a renowned home furnishings retailer. IKEA has successfully implemented a loyalty program called IKEA Family, which has gained immense popularity and helped the brand strengthen its relationship with customers. In this article, we will explore the various strategies employed by IKEA to develop customer loyalty and understand the impact of their CRM loyalty program.

Image Source: FreeImages

Understanding CRM Loyalty Programs

Unlike traditional loyalty programs that rely on complicated schemes and points, CRM loyalty programs focus on building customer loyalty through a simple value proposition. These programs aim to encourage customers to engage with the brand by identifying themselves. IKEA Family is a prime example of a CRM loyalty program that adopts this softer approach. By providing a range of benefits and personalized experiences, IKEA has successfully developed a loyal customer base and positioned itself as a formidable competitor in the market.

The Evolution of IKEA Family

IKEA Family was introduced in the US in 2011 with the primary goal of identifying and understanding their customer base better. Over the years, it has grown to become the world's largest loyalty program, boasting a staggering 150 million members. As an Everyday Low Price retailer, IKEA has strategically introduced new benefits that align with its brand values and support its key business objectives.

Behavior Drivers: Incentivizing In-Store Purchases

One of the key aspects of IKEA Family's strategy is the inclusion of behavior drivers that motivate customers to make in-store purchases. In September 2022, IKEA took a significant step by introducing a 5% discount for in-store purchases. This move holds particular significance as IKEA's prices have increased by an average of 9% due to supply chain cost escalation. By focusing the discount on in-store purchases, IKEA not only incentivizes customers to buy from retail locations but also leverages the advantages of physical stores over online competitors like Wayfair. Customers can touch and feel products before making a purchase, giving IKEA a unique selling point.

Additionally, IKEA Family members receive a small discount on various delivery and set-up options when ordering online. This not only enhances the overall customer experience but also generates additional revenue for IKEA through its services.

Sentiment Builders: Enhancing the Customer Experience

IKEA Family program offers a range of benefits that enhance the overall customer experience and build loyalty sentiment. These benefits include free coffee/tea in-store, 90-day price protection, extended playtime for children in the supervised play area, surprise birthday offers, and saved purchase history for easy replacement parts ordering. IKEA also introduced the Buy Back & Resell service, which allows customers to receive credits for their used furniture, aligning with the brand's focus on sustainability. These sentiment builders not only make customers feel valued but also provide an incentive to remain loyal to IKEA for future purchases.

Engagement Activators: Personalized and Timely Communication

To keep customers engaged, IKEA Family employs personalized and timely omnichannel messaging. The brand caters to customers at different life stages, from college students to newlyweds, growing families, and homeowners. By leveraging customer data, IKEA tailors its communications to align with these different life stages. For example, new movers receive specialty web experiences, and gift registries are available for special occasions.

In-store engagement is also a priority for IKEA. The brand offers opportunities for customers to scan and win IKEA gift cards during their store visits, increasing capture rates even when no purchase is made. Furthermore, IKEA hosts interest-based workshops in-store to educate and engage its members. These engagement activators allow IKEA to leverage the data captured through its CRM loyalty program and provide personalized assistance to customers based on their specific needs.

Ease of Use: Seamlessly Integrated into the Brand Experience

One of the key strengths of IKEA Family is its seamless integration into the brand experience. Unlike traditional loyalty programs that rely heavily on points, IKEA Family focuses on value exchange. This approach resonates with over 150 million members worldwide, highlighting the effectiveness of a simple yet compelling value proposition. With the introduction of the 5% in-store discount, IKEA is likely to attract even more members and encourage existing members to actively participate in the program.

Loyalty Levers Take: A Strong Example of CRM and Loyalty Program Integration

IKEA provides a strong example of how to effectively merge CRM strategies with a loyalty program. As a brand known for its iconic catalog, IKEA needed to find alternative ways to engage customers, educate them about its product range, and build brand affinity in a competitive marketplace. The IKEA Family program has successfully addressed these challenges, earning a rating of 8.5 out of 10.

The program's ease of use, along with the consistent efforts to make members feel special, has contributed to its success. IKEA Family continues to evolve to meet the ever-changing market dynamics, and further enhancements and changes are expected in the future.

Conclusion: Building Lasting Customer Loyalty

IKEA's CRM Loyalty Program, IKEA Family, exemplifies the power of a well-designed loyalty program in building lasting customer loyalty. By adopting a softer approach and focusing on a simple value proposition, IKEA has successfully engaged its customers and strengthened its brand image. Through behavior drivers, sentiment builders, engagement activators, and seamless integration, IKEA has created a loyalty program that resonates with millions of customers worldwide.

As the retail landscape continues to evolve, the success of IKEA Family serves as a testament to the effectiveness of CRM loyalty programs in driving customer loyalty and achieving key business objectives. By consistently prioritizing customer satisfaction and building meaningful relationships, brands like IKEA can create a loyal customer base that contributes to long-term success.

So, whether you're a retailer or a brand looking to enhance customer loyalty, take inspiration from IKEA's CRM Loyalty Program and start building lasting relationships with your customers today.

Continue Reading