In 1943 Ingvar Kamprad was seventeen years old and lived on a farm in Sweden when he started a small business for mail order sales. The company became IKEA, now one of the world's most valuable retail brands. It changed the industry through a logistical method rather than a design style. The business sells furniture in flat packages so that the buyers put the pieces together. Standard economic theories suggest that buyers should pay less money because they perform the labor of the manufacturer, but the buyers at IKEA accept this task anyway. Many consumers value the bookshelves that they assemble themselves more than identical items that a factory completes.
It Has a Name
Psychologists use a specific term for this behavior in how consumers judge worth. It is the IKEA effect, a cognitive bias where consumers give high value to objects they participate in making. The researchers Michael Norton, Daniel Mochon & Dan Ariely identified and named this pattern. They are from Harvard Business School and wrote the significant paper "The IKEA Effect: When Labor Leads to Love". It was first a working paper in 2011 and then appeared in the Journal of Consumer Psychology in 2012. Mochon & Ariely measured the effect through four studies using IKEA storage boxes, origami & Lego sets. In the first study, subjects who built a simple IKEA cardboard box offered to pay more for it, with an average bid of $0.78. Subjects who viewed a pre assembled box offered $0.48. So the subjects paid 63% more when they performed the labor themselves. The builders also stated that they like their boxes more, even though the boxes are plain and functional and provide no ways for the subjects to change the design. In a second study, subjects who made origami cranes and frogs that looked unrefined priced their items at $0.23 on average. This price is nearly five times the $0.05 that non participants offered to pay for the same wrinkled paper. Builders priced their own uneven objects almost as high as non-participants priced professional origami, which received bids of $0.27. The researchers' most important finding came later, in what they call the completion condition. The inflated valuation of the objects vanished when participants built Lego sets and then took them apart, or when the researchers interrupted them before they finished the boxes. Labor causes a person to feel affection for an object only when that labor results in a finished product. The participants who completed their boxes offered prices that were more than 200% higher than the prices offered by participants who left projects unfinished. This demonstrates that the internal reward depends on the final object rather than the physical or mental energy spent during the process. The researchers also found the effect holds regardless of personality. Both the individuals who enjoy building objects themselves and the individuals who have no experience with manual tasks assigned a high value to their creations.
Why We Fall for It
There are multiple mental processes that combine to create the IKEA effect. The theoretical foundation is the work by Leon Festinger from 1957 concerning cognitive dissonance. People feel deeply uncomfortable believing they spent effort on something worthless, and so the individual resolves this tension by increasing the value of the result. This specific behavior of effort justification is present in areas as different as psychotherapy and the forced alteration of beliefs. But similar behaviors are also present in rats and starlings, as those animals choose food sources that require physical work to access. By successfully finishing a task, an individual satisfies a basic requirement to feel competent and to have power over their surroundings. The researcher Albert Bandura studied self efficacy and demonstrated that when an individual masters a difficult task, they feel more capable. The resulting item is a physical record of that success and connects to how the individual defines themselves. To create an object also develops a sense of psychological ownership. This state relates to the endowment effect, where an owner requires a higher price to sell an item than a buyer offers to purchase it. By its nature this isn't just an emotional effect. It causes a measurable increase in the amount of money a buyer will provide.
Built To Sell
Before academic researchers gave the process a name, commercial companies used this behavior to increase profits. The history of Betty Crocker cake mix serves as a well known illustration of this strategy. In the 1950s manufacturers introduced instant mixes to lower the amount of work required in a kitchen. But homemakers in the United States avoided those products because the ease of the process made their culinary abilities seem less important. As a common marketing story claims, the psychologist Ernest Dichter suggested that the company require the user to add one fresh egg. After following this advice, sales improved. Adding manual work to the process seemed to be the necessary component for success. Experts who study the history of food state that the "egg story" lacks complete accuracy. Patents for cake mixes that used fresh eggs existed before the work of Dichter. Original documents do not provide evidence that directly links his advice to the change in sales. In spite of the historical doubts, the general principle remains valid: adding a small, meaningful step can increase perceived involvement and value. The same business strategy exists in many sectors currently. There are shops where customers assemble stuffed bears, shoes that buyers can customize, and meal kit services like Blue Apron or HelloFresh. Other examples include the "build your own" sandwiches at Subway and the furniture that customers must build from flat packages. Studies on how customers collaborate to prepare food, along with reports from meal kit companies, show that when customers participate in cooking a meal, they believe the final dish has more value. To lower costs companies have customers assemble the items, and this process simultaneously makes the buyers want to pay a higher price.
When Love Becomes a Trap
The IKEA effect occurs in areas outside of retail merchandise. It appears early in childhood, and research shows that children as young as five demonstrate this bias. They value the objects they made more than identical objects that others made. This behavior occurs in diverse locations, including the United Kingdom & India. It is also present in professional environments, where employees who participate in the creation of a policy or a product protect that work more intensely. Projects with open source code, like Linux, succeed in part because the individuals who write the code value their own work. The researchers state that those rules are useful when managers design professional roles, so that tasks are effective when they are difficult but possible for the worker to finish. The psychological process that results in satisfaction during furniture assembly creates a cognitive bias, and it doesn't stop at satisfaction. The IKEA effect connects to the sunk cost fallacy, because builders place a high value on their own labor regardless of whether that labor produced something good. This is what causes individuals to maintain unsuccessful projects, errors in design and ineffective concepts long after data indicates that they should stop. The creators ignore critiques, fail to see mistakes and predict a high level of consumer interest for their items. A craftsperson, for example, may expect a high price for a scarf they knitted, insisting it's "worth" that much regardless of what a buyer thinks. Something similar may have played out in 2012, when Facebook released the Timeline format and users reacted badly. Some observers proposed that users resisted the change because they had helped build their previous profiles, though researchers have not proven this specific link. The IKEA effect shows that individuals do not assess the value of objects with complete objectivity. The worth of a product increases for an individual as soon as that individual uses their hands to fold paper, drive a screw or whisk an egg. This personal value is different from the market price of the item, and the research by Norton, Mochon & Ariely proves that the increase is real and measurable. It is a consistent phenomenon: it requires that the individual finishes the task, it appears in every culture, and it exists even in young children. Businesses use those findings as a specific method to increase profits. They ask customers to participate in the manufacturing process and ensure the work is simple, and as a result of this labor, customers feel a strong sense of commitment to the brand. Individuals should view the findings as a caution. You should value the items you build, but you must ask other observers for their opinions before you decide on a price, justify mistakes or base your self image on the outcome. A bookshelf that is unstable might feel very important to you, and that specific emotional connection is the central focus of the study.