The “IKEA Effect”: When Labor Leads to Love

“Price is what you pay and value is what you get”.The existence of a gap between the value of a product and the actual price can be seen in any settings that include negotiations: markets, auctions, and even when bargaining for compensation packages. It is this gap that marks a good product from rest.

A multitude of companies have emerged that offer consumers to create and design their own products, such as T-shirts, coffee mugs, greetings etc. Local Motors even offers the unique experience of being involved in the assembly of one’s own automobile. LEGOs, Build-A-Bear, furniture and a variety of products offer us co-creation.

In short, consumers are increasingly acting as co-creators of goods rather than as just passive recipients. Why is this becoming so popular? What is the underlying process behind people’s willingness to pay more and be more attached to a co-created product?

In the 1950’s instant cake mixes were introduced, as part of a broader trend to simplify the life of the American housewife by minimizing manual labor. Initially, the housewives were resistant. But soon enough, the mixes made cooking too easy, making their labor and skill seem undervalued. As a result, manufacturers changed the recipe to require adding an egg; while there are likely several reasons why this change led to greater subsequent adoption, infusing the task with labor appeared to be a crucial ingredient. Which brings us to a direct result of this, effort increases valuation.

Even constructing a standardized craft, an arduous, solitary task, can lead people to overvalue their (may or not be as well-constructed) creations. This phenomenon is the “IKEA effect”, named in honor of the Swedish manufacturer whose products typically arrived with some assembly required.

The fact that self-created products are in demand is due to their role in fulfilling a deep identity-related desire of consumers: their desire to signal a competent identity to themselves and others. Self-assembly of products fulfills the need, by building things themselves, people are both controlling and shaping their environments;proving their own competence; and displaying those creations demonstrates that competence to others. According to Dahl and Moreau “feelings of competence” was the most commonly mentioned motivation for engaging in creative tasks. Each of us complete any task as we associate a self identity with it.

Self-created products or as such any task one associates himself/herself to can be used to signal a competent identity to the self. In addition, completed products signal a competent identity to others. As such, consumers actively use products to signal their identities to others and have been shown to use certain products, as a way to signal their competence.

Research says people rate their jobs as among their least pleasurable activities but they also rate them as among their most rewarding. This ironic link — between the arduous, unpleasant nature of tasks and their simultaneously rewarding properties — has received extensive attention by researchers exploring “effort justification”.But, essentially the psychological process by which labor leads to love requires consideration of an additional crucial factor: The extent to which one’s labor is successful.

It is proved that participants list words such as “accomplished” when asked to describe feeling proud, and pride is associated with dominance among mammals — offering further evidence that pride is closely linked to feelings of success and competence. Feelings of competence and hence pride, would similarly drive consumers’ increased willingness to pay for even mundane self-assembled products.

The IKEA effect was essentially identified by Michael Norton of Harvard Business School, Daniel Mochon of Yale, and Dan Airley of Duke, who published the results of three studies in 2011.

In the first experiment, the subjects were given the task of assembling IKEA furniture. Researchers then priced the items the experimenters had assembled as well as pre-assembled IKEA furniture. The final results showed that the subjects were willing to pay 63% more for the former than for the latter.

In the second experiment, researchers asked subjects to make either origami frogs or cranes. They then asked the subjects how much they were willing to pay for their own work. Following this, researchers gathered another group of subjects who had not taken part in the origami creation. The new subjects were asked how much they were willing to pay for an origami built by the participants. They were willing to pay more for the latter.

The third and final experiment involved two sets of subjects. The first set were told to completely assemble a piece of IKEA furniture. The second set were also instructed to assemble a piece of IKEA furniture, but only partially. Both groups then took part in bidding over these objects. Results showed that individuals who had built the box completely were willing to pay more than the individuals who had only partially built the item.

Gibbs and Drolet (2003) showed that raising consumers’ energy levels can persuade them to select experiences that involve greater effort. But companies have been warned not to challenge consumers too much, lest they be unable to complete a task and thus end up dissatisfied.

Written by — Janhavi Lande




The Finance & Economics Club (FEC) functions as a platform for enthusiastic students to come together and learn the intriguing and fun world of finance.

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Finance & Economics Club, IIT Guwahati

Finance & Economics Club, IIT Guwahati

The Finance & Economics Club (FEC) functions as a platform for enthusiastic students to come together and learn the intriguing and fun world of finance.

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