When Ikea’s head of sustainability, Steve Howard, suggested that the world had reached “peak stuff,” there was a collective intake of breath from marketers around the world. But…isn’t Ikea one of the main producers of…stuff? (For anyone that’s wandered down the aisle in Ikea and not bought anything, I salute you.) A pioneer in consumable goods that are easily affordable and equally disposable, Ikea has controversially addressed the trend toward the experience economy, facing up to the fact that consumers value doing rather than owning.
Over the past 10 years, we’ve seen a decrease in physical ownership due to tech innovations such as music streaming, e-books, and on-demand video. Still, we are actually consuming and experiencing more. There will always be a human desire to consume, but there is a groundswell moving toward consumerism without the shackles of ownership.
Brands should consider how this growing trend will impact their futures. There are certain key steps they can take to meet and keep up in this new landscape. But first, some background.
What is changing?
In the Australian Trade Commission’s 2016 report, chief economist Mark Thirlwell referenced U.S. data showing how consumer spending has decreased since 1970, with spend on services increasing as material consumption decreased. This statistic clearly shows the “less is more” mindset that has taken root with millennials, challenging the long-held belief that happiness is tied to the number of things we own.
In fact, many consumers are now subscribing to this philosophy. Just consider the popularity of Marie Kondo, who espouses that people should “tidy up their lives” and surround themselves only with things that spark joy. She shares how decluttering your home can lead to a healthier, happier life. Similarly, the duo behind the popular podcast “The Minimalists” advocates making room for more of the things that matter—passion, experiences, growth, and contentment—over superficial, material objects. With a fan base of over 20 million, their message is resonating with consumers that value experience over things.
Environmental awareness is also a major factor in the shift toward less is more. It is driving a behavioral change away from the previous “throwaway” mentality of traditional consumerism due to our heightened understanding of the impact of plastic and waste. Reusable cups and bags are not new, but brands have been slow to respond to consumer trends. With home ownership increasingly unattainable for younger generations and a growing concern around jobs and future finances, younger consumers are choosing smarter ways to spend their money. In line with this shift, consumers are looking for ways to reuse and fix instead of buying new.
What can brands do to keep up in this new landscape?
Here are four simple changes brands should consider:
1. Offer different, offer more
It’s time to shift from the mentality of “sell more” to “offer more.” Brands need to expand their product ranges by offering fix-it kits and other add-ons that improve consumers’ experiences with existing products. There is an opportunity to offer premium services that unlock better versions or additional facets of a product or brand, allowing tiered levels that keep consumers tied to a product. Offering more means the ability to add premiums within a commodity market, increasing loyalty and brand engagement.
2. Put sustainable innovation at the heart of your business
Product innovation has always been the lifeblood of brands—it attracts new consumers and keeps existing ones coming back. But in today’s world, brands should consider whether there’s a way to create new experiences instead of just new things. Local breweries offer reusable growlers that customers can return and fill up (while no doubt encouraging them to stay and enjoy a few). Could drink manufacturers offer the same in-store experience? It’s a benefit to retailers because it creates a differentiated experience (more vital than ever as Amazon Delivery looms closer), and it doubles as a simple branding and loyalty exercise for the supplier. Best of all, it reduces packaging and waste across the board, helping the planet and the brand’s bottom line. It’s time for brands to think laterally about innovation—beyond just the next flavor, model, or limited edition.
3. Rethink the transaction equation
The age-old “money for things” exchange is shifting. Leasing is the current frontier, but what comes next? A refreshed approach to loyalty programs? Perhaps it’s partnerships between different brands and suppliers that offer goods or services—similar to Uber picking up clothing donations for Red Cross. There is great potential to disrupt the traditional transactional approach for a brand brave enough to tackle the challenge.
4. Work harder to be worth it
The role of brand remains as important as ever. You need a clear and compelling purpose for engaging your consumers. Create a reason for existing in their world. Ultimately, being useful is imperative to staying relevant with demanding consumers.
Branding for experience-focused consumers
Ikea has shifted the landscape with its dramatic U-turn, but this doesn’t signal the end of its business. In fact, Ikea has targeted doubling its sales by 2020. By anticipating the shift in consumer mindsets, Ikea is rethinking its business model, moving away from being just a creator of things. It aims to become a more circular business, where it can focus on repair and recycling. This is a monumental change for one of the world’s most successful businesses. The challenge now is for other organizations to think differently to keep pace. Isn’t it time yours did?
This piece was originally published in Marketing (11 July 2018). Republished with permission.