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SERVICE LEADERS
Values-based service brands:
narratives from IKEA
230
Bo Edvardsson and Bo Enquist
Service Research Center, Karlstad University, Karlstad, Sweden, and
Michael Hay
IKEA North America
Abstract
Purpose – The purpose of this paper is to present a model for values-based service brands grounded
in values-based service management. In undertaking this task, the paper addresses two research
questions: “What is the role of values in creating customer value and corporate identity?” and “How
can values and corporate identity be communicated to customers and thus contribute to
customer-perceived service value?”.
Design/methodology/approach – Based on five narratives from a value-driven company, IKEA,
the paper proposes a model of values-based service brands in action. The model is based on
interpretations of how IKEA manages and communicates values in practising values-based service
management.
Findings – The study distinguishes four types of “values” in the example of IKEA: economic, social,
environmental, and communication-based. These are incorporated into the model.
Originality/value – This is the first study of the role of values-based service brands in creating
value in use for customers.
Keywords Value added, Brands, Customer service management, Corporate identity
Paper type Research paper
Managing Service Quality
Vol. 16 No. 3, 2006
pp. 230-246
q Emerald Group Publishing Limited
0960-4529
DOI 10.1108/09604520610663471
1. Introduction
Brands are among the most fundamental and enduring assets of a firm (Martin et al.,
2005). However, in services-management research, little attention has been devoted to
the question of how a perception of value-in-use can be communicated to customers
through values-based service brands. The importance of communicating values in
business is illustrated in the contemporary utilisation of such approaches as “corporate
social responsibility” (CSR) (Zadek, 2004; Kotler and Lee, 2005) and “triple bottom-line
thinking” (Elkington, 1997, 2001) to create stakeholder value (Post et al., 2002). In
accordance with these approaches, companies try to avoid aligning themselves with
negative values – for example, environmental pollution or exploitation of cheap labour
(especially child labour) –which can result in negative publicity and value being
destroyed. Rather, companies strive to be associated with attractive values – for
example, high ethical standards in dealing with employees and customers,
contributing to society, and applying recycling principles whenever possible.
Vargo and Lusch (2004a, b) stressed value-in-use for the customer. In accordance
with a service-centred view, Vargo and Lusch (2004a) argued that value is defined by
and co-created with the customers, rather than being embedded in output, in defined
products or service attributes. According to this view, value is perceived by the
customer on the basis of value-in-use, and value creation through service is described
in terms of linked activities and interactions provided as solutions to customer
problems (Edvardsson et al., 2005a, b).
The present paper argues that corporate values also bring value-in-use to
customers. Excellent companies are distinguished from average companies by values,
and not merely by logical, value-for-money outcomes and cognitive assessments
(Johnston and Clark, 2001).
The aim of the paper is thus to present a framework for values-based service brands
grounded in values-based services management. The focus is on how values are
communicated and bring value-in-use to customers. The new model is based on a
literature review and an interpretation of how one particular values-based firm, IKEA,
nurtures and communicates values in its customer relationships. IKEA is the largest
furniture retailer in the world (Kotler, 1999), and has a growing global business. IKEA
corporate identity is determined by a strong culture based on well-defined company
values.
In pursuing the aim described above, the paper addresses two research questions:
(1) What is the role of values in creating customer value and corporate identity?
(2) How can values and corporate identity be communicated to customers and thus
contribute to customer-perceived service value?
The paper is structured as follows. First, the study presents a literature review and
theoretical framework for describing and understanding values-based service brands.
Second, the study presents five narratives describing how IKEA communicates
company values in creating total customer value. The paper then relates its empirical
findings to previous research and suggests a model for values-based service brands,
values-based management, and corporate image. Finally, the paper discusses the
research contribution, managerial implications, and suggestions for future research.
2. Theoretical framework
To attract and retain customers, and thus make a profit, companies are constantly
searching for new and better ways of creating value for customers and differentiating
their market offerings (Shaw and Ivens, 2002; Bendapudi and Leone, 2003). However, it
has been argued that technical and functional qualities are not enough; attractive
values also form part of a favourable customer experience (Cronin, 2003; Sherry, 1998).
This view is in accordance with Mano and Oliver’s (1993) study of utilitarian
consumption judgments and hedonic consumption judgments. In a similar vein, the
concept of “value-in-use” (Vargo and Lusch, 2004a, b) has been extended from a
traditional focus on cognitive evaluations to include evaluations of values and service
experiences. Brands are used to communicate these values to the customer.
Brands and service brands
The essential role of brands is to differentiate a product or service from others in
satisfying a given customer need. As Kotler and Keller (2005, p. 274) observed:
These differences may be functional, rational, or tangible – related to product performance of
the brand. They may also be more symbolic, emotional or intangible – related to what the
brand represents.
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Keller (2000) identified ten attributes in the world’s strongest brands – for example,
that the brand excels at delivering the benefits consumers truly desire; that the pricing
is based on consumers’ perceptions of value; that the brand is consistent; and that the
brand is given proper and sustained support.
“Brand equity” is the value added to products and services by a brand, and is
reflected in the way that consumers think, feel, and act with respect to the brand. As
Kotler and Keller (2005, p. 276) observed:
Brand equity is an important intangible asset that has psychological and financial value to
the firm.
According to Aaker (1991), brand identity is particularly important for building brand
equity. Ind (2004) stress the importance of “living” the brand – which has to do with
“living up to” norms and values in various ways – for example, how employees
interact with customers, how internal relationships are conducted, and how
relationships with suppliers and partners are maintained. According to this view,
the culture forms a basis for the “living brand”.
Brands thus communicate the values of an organisation to customers to create a
distinct and favourable image. A service brand can often equate with the whole
company, which implies that the service becomes the corporate image (Rindell and
Strandvik, 2005).
Hatch and Schultz (2001) have argued that the three essential elements of vision,
culture, and image must be aligned in a successful branding strategy. Vision
represents senior management’s aspirations for the company; culture refers to the
values, behaviours, and attitudes that reflect how employees feel about the company
they are working for; and image is the outside world’s impression of the company –
not only the impression of customers, but also that of other stakeholders (including the
media and the shareholders).
Values, value-creation, and total customer value
´
Ramırez (1999) has noted that the concept of “value” has been studied since at least the
time of the ancient Greeks. Moreover, “moral value” and “economic value” were part of
the curriculum of moral philosophy until the eighteenth century, when economics
became a field of study in its own right. Since then, a division has arisen between the
economic aspects of value and the ethical aspects of value. On the economic side, value
is usually expressed in terms of utility. On the ethical side, it is essentially about
´
individual judgment. As Ramırez (1999, p. 50) has observed:
Judgments of what is true, beautiful, and/or good, and the values these supposedly express,
led to notions like “scale of values” and “values system”, differentiating one culture from
another.
The present study argues that it is important for a “value-driven firm” (Gummesson,
1999) to create meanings. These meanings are concerned with collective identity
(Castell, 1997). To create meaning among customers, it is also important for firms to
´
co-create, assess, and communicate value in association with their customers (Ramırez,
´
1999; Prahalad and Ramaswamy, 2004). Ramırez (1999) argued for “value
co-production”. He claimed that a value co-production framework provides a helpful
vocabulary for understanding the organisational and inter-organisational systems that
can make competitive offerings available.
Gummesson (1999, pp. 99, 104) discussed the concept of a “green relationship” and
the fact that firms that subscribe to “green values” can be seen as “value-driven firms”.
Gummesson (1999) provided the example of the retailer “Bodyshop”, whose founder in
the UK, Anita Roddick, has spoken about societal responsibilities (in which she
included environmental improvements).
Berry (1999) studied service companies that had been successful in the long term,
and concluded that values and employee commitment provide energy and direction to
such organisations. Value and values are co-produced with the customers as well as
with the other stakeholders.
The differences between the economic “logic of value” and the ethical “logic of
values” can be summarised as shown in Table I – which is based on a case study of
IKEA (Edvardsson and Enquist, 2002).
In their case study of IKEA, Edvardsson and Enquist (2002) demonstrated that a
strong service culture – based on the “logic of values” – made sense inside the
company and created meaning outside it. This culture was a driving force in creating
value for customers. The case study showed that an economic logic of value-creation –
focused on quality, time, and price – should be supported by an ethical logic of values
if corporate strategy and competitive advantage are to be established and maintained.
As a former chief executive officer (CEO) of IKEA observed: “IKEA is a commercial
company, but there is a social side to our vision and our business idea” (Edvardsson
and Enquist, 2002).
The concept of “value” thus has both a moral dimension and an economic
dimension.
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Values-based management, corporate identity, and service brand
In the complex contemporary environment, it can be counter-productive to attempt to
control a business from a financial perspective alone. For this reason, values-based
management (Pruzan, 1998; Elkington, 2001) has been discussed for some years, and
Pruzan (1998), in particular, has argued for a move from “management control” to
values-based management and values-based accountability.
The value logic
The logic of values
Homo economicus
Economic calculations
Focus on economic utility
Commercial and financial focus
Quality, time, and price
Focus on the structural and process aspects of the
formal organization
Focus on business and service production
processes
Homo sociologicus
Ethical and social calculations
Focus on ethical and social benefits
Social and human focus
Ideals and trust
Focus on values and meanings as cultural
expressions
Focus on cultural processes and sensemaking
Table I.
The value creation logic
and the logic of values of
IKEA
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Values-based management is premised on a stakeholder perspective of leadership,
responsibility, and ethics (Pruzan, 1998) incorporating the concept of a “triple bottom
line” (Elkington, 1997). The notion of a “triple bottom line” includes three aspects of
sustainability: economic, social, and environmental (Zadek, 2001). In this context,
Elkington (2001, p. 50) has argued that:
Successful companies tend to: have strong, positive, values-driven cultures; make lasting
commitment to learning and self-renewal; continually adapt, using both internal and external
feedback; build strategic alliances with internal and external partners, customers and
suppliers; be willing to take risks and experiment; and have a balanced, values-based
approach to targeting and measuring performance.
Service brands can also benefit from being values-based. Berry (1999) developed a
service-branding model, which differed from a goods-branding model in that human
performance was seen to play a critical role in building the brand in labour-intensive
businesses such as services. In this context, Simones et al. (2005) focused on corporate
identity and argue that identity forms the basis for brands and that values are a key
component of corporate identity. As Simones et al. (2005, p. 153) observed:
Creating a strong corporate identity and image is a way for companies to encourage positive
attitudes towards their organization.
Such an identity can be viewed as a vehicle by which a company’s character is
conveyed to customers and other stakeholders. Brand identity has thus been referred to
as the brand’s distinctive “fingerprint” (Upshaw, 1995). Aaker (1996, p. 68) defined
brand identity as:
[. . .] a unique set of brand associations that the brand strategist aspires to create or maintain.
Simones et al. (2005, p. 156) emphasised that the core component of brand identity is
“[. . .] its ‘soul’, brand values and underpinning beliefs”. In a similar vein, Ind (2004,
p. 13) argued that:
[. . .] a corporate brand is more than just the outward manifestation of an organization – its
name, logo, visual presentation. Rather it is the core of values that defines it.
The same values are also vital when it comes to directing a company’s activities (de
Chernatony, 1999). In service organisations, brand can play an important role in
making the service tangible. As Berry (2000, p. 18) noted:
Strong brands enable customers to better visualize and understand intangible products. They
reduce customers’ perceived monetary, social, or safety risk in buying services, which are
difficult to evaluate prior to purchase.
Keller (1999) emphasised that the way in which a brand is communicated and
explained is critical to the employees’ internalisation of the brand. Corporate
communication can be orchestrated by a sustainable corporate story (Van Riel, 2000).
Berry and Bendapudi (2003) talked about “clueing-in customers” and demonstrated
how the corporate story of the Mayo Clinic in the USA involved sending the right
signals through “clues in people”, “clues in collaboration”, and “clues in tangible”.
Haeckel et al. (2003) also observed that delivering the brand is connected with
communicating the core values of the company.
In summary, three categories of “values” emerge from the literature:
(1) economic values that are related to quality, price, and cost (that is, “value for
money” from the perspective of the customer);
(2) environmental values that are connected with ecological protection,
improvements, and responsibility; and
(3) social values that are connected with ethical and community responsibilities
and benefits.
To analyse value-in-use for the customer, the present paper utilises a dialectic between
the logic of value creation and the logic of values (Edvardsson and Enquist, 2002). In
what follows, corporate stories are used to illustrate values-based management –
which is taken to include the creation of corporate identity and integrated marketing
communication.
3. Values-based narratives
Research design
The empirical context for the narratives that follow is the large furniture retailer,
IKEA, whose culture, concept, and approach to business are documented elsewhere
(Edvardsson and Enquist, 2002; Normann and Ramirez, 1998; Kling and Goteman,
2003; Brown-Humes, 2003).
Five narratives were selected for presentation here:
(1) “Democratic design” (narrated by Michael Hay, co-author of the present paper);
(2) “Chuck out the chintz” (narrated by Michael Hay, co-author of the present
paper);
(3) “Outlooking” (narrated by Michael Hay, co-author of the present paper);
(4) “Code of conduct (IWAY)” (derived from The IKEA Way – Social and
Environmental Responsibility (IKEA, 2003)); and
(5) “Boycotts are not the solution” (derived from The IKEA Way – Social and
Environmental Responsibility (IKEA, 2003)).
Taken together, these narratives reveal how IKEA builds a values-based service brand
and maintains values-based service management. The first two narratives describe
external marketing activities whereas the other three are directed towards employees
and partners forming the basis for the service culture and corporate identity.
Narrative 1: “Democratic design”
The narrative. In 1995, outside the Milan Design Fair, which is the most prestigious
´
exhibition fair in the world for elite furniture designers, a sign proclaimed: “Il design
democratico” [“Democratic Design”]. The sign pointed to a building that housed the
IKEA exhibition outside the fair.
In developing the notion of “democratic design”, Ingvar Kamprad, the founder of
IKEA, had asked: “Why must well-designed furniture always be so expensive? Why do
the most famous designers always fail to reach the majority of people with their ideas?”
In his view, well-designed products were only for the rich and privileged; the multitude
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of people with less money, were excluded. Furniture was no exception. Kamprad’s idea
with IKEA is to offer a wide range of home furnishings of good design and
functionality at a price low enough to be affordable to most people. This is a
“democratic idea” that had originated from IKEA’s roots in the poor farming
˚
communities of the County of Smaland in Sweden.
The three dimensions of “democratic design” are form, functionality, and low price.
No other furniture manufacturer is producing designed home furnishings that featured
all three of these elements. With respect to the third dimension – low price – IKEA
designers are always asked to use design to decrease prices, not increase them. In
effect, the price tag is “designed” first, beginning with a decision on what price the
majority of people can afford to pay. A production line is then designed to produce
furnishings that satisfied the other two dimensions. To achieve this, designers work on
the factory floor with production staff, rather than in a prestigious office in a distant
city.
The proclamation of “democratic design” at the Milan Design Fair in 1995 provoked
outrage among organisers of the fair, designers, and furniture companies. In contrast,
members of the public flocked to the IKEA exhibition, the Italian media provided much
publicity, and consumers visited IKEA’s stores in unprecedented number to buy
“democratically designed” furnishings.
Interpretation. This narrative reveals that the notion of “democratic design” was
driven by a combination of social values (reaching out to the majority of people); and
economic values (low price relative to good functional quality).
The values of IKEA revealed in this narrative are:
.
a “down-to-earth” approach: as exemplified by the designer working on the
factory floor, rather than being located in a prestigious office in a distant city;
.
respect and responsibility: as exemplified in its “democratic approach” to the
majority of people; and
.
innovative thinking: as exemplified by its integration of form, functionality, and
low price.
Narrative 2: “Chuck out the chintz”
The narrative. In 1997, St Luke’s was a small (but energetic) advertising agency in
London (UK). St Luke’s was asked by IKEA to undertake a radical change in IKEA’s
image in the UK. The agency’s marketing analysis revealed that 60 per cent of the
market was traditionally minded and disliked anything foreign and new, including
IKEA. A smaller proportion (30 per cent) of the market was more innovative, and
might like IKEA. The remaining 10 per cent were undecided. St Luke’s strategy was to
induce the “traditional” 60 per cent of the market to dislike IKEA to an even greater
degree, induce the 30 per cent to like IKEA to a greater degree, and induce the 10 per
cent of undecided to make a decision.
The main barrier was style. Many people who lived in small terraced homes covered
their walls and floors (and even their toilet seats and toilet-paper holders) with
flowery-patterned coverings – commonly referred to as “chintz”. Many people also
filled their already crowded homes with fake antiques – another form of “chintz”. St
Luke’s launched a television advertising campaign with the slogan: “Chuck out the
chintz”. This advocated a more “modern” style that would give people a new identity
and change the homes of Britain. Blue-and-yellow waste-disposal “skips” were placed
in the streets for people to discard their “chintz”.
The campaign had the desired effect. IKEA was transformed from being a strange
foreign company to being a fashionable name that reached into the private lives of
Britons in their homes. The television commercials ran only once, but for years
afterwards people referred to the slogan “chuck out the chintz”, and associated it with
IKEA.
Interpretation. This narrative again reveals that IKEA is driven by social values.
The values of IKEA revealed in this narrative are:
.
informality: that IKEA represents a modern and casual style; and
.
respect: providing people with a new identity and changing the homes of Britain.
It should also be observed that these values were communicated in a particular manner
that challenged the established views and habits of the people. There seems to be
distinct set of values behind the way in which the values were communicated.
Narrative 3: “Outlooking”
The narrative. As noted above, IKEA “designs” the price tag first. The company
decides how much a product should cost to make it affordable the most consumers.
The product is then designed to achieve this low price while maintaining excellent
function and good quality. The designer works on the factory floor to find the best
solution at the best price.
An example of this process was the company’s “LACK” range, which was initially a
door produced by a manufacturer in Poland. The door was placed horizontally on a
trestle to become a table. It was then cut into pieces to produce shelves. These were then
subdivided into coffee tables. The pieces were then placed horizontally and vertically to
become bookshelves. The resulting “board-on-frame” construction used only 30 per cent
of the energy and materials required to produce tables. Moreover, it could be packed flat,
was light, and saved space in transport. This combination of qualities was considered
environmentally friendly, and the product was placed in IKEA stores.
The price to the consumer of a “LACK” table is now only about 30 per cent of its
original price in 1990. The production volume in the past 15 years has increased
approximately ten-fold.
Interpretation. This narrative again reveals that IKEA is driven by a combination of
economic values (low price in relation to quality) and environmental values (saving
resources). This narrative also reveals the company’s willingness to challenge
established views.
The values of IKEA revealed in this narrative are:
.
cost consciousness: by emphasising resource saving;
.
simplicity: in manufacturing, distribution, and use (which is a driver of low
costs);
.
innovative thinking: with the low price posing a challenge that provokes smart
solutions; and
.
responsibility: for the environment.
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Narrative 4: “Code of conduct (IWAY)”
The narrative. In 2000 IKEA established a code of conduct (known as “IWAY”) for the
manufacture of its products. The code of conduct requires its producers to manufacture
products under acceptable working conditions utilising suppliers who, themselves,
take responsibility for the environment.
The experience of Nicolae Borsos, an IKEA supplier in Romania, demonstrates the
way in which the code of conduct operates. In 1999, with IKEA’s help, Borsos bought a
run-down furniture factory in the town of Nehoiu. Since then, an investment program
has increased profitability and improved conditions for the factory’s 680 employees.
All new investments were required to meet IKEA criteria f…
