IKEA

Ingvar Kamprad founded IKEA in Sweden in 1947 with the first furniture catalogue being published in 1951.

In 1953 the opening of the first IKEA showroom in Älmhult Sweden was an important moment in the development of the IKEA concept, helping create the IKEA that we know today. IKEA opened its first store in the UK in 1987 and currently has 13 outlets in the United Kingdom.

IKEA Group sales in financial year 2004 were 12.8 billion euros and the UK had the second highest sales with 12% of worldwide turnover, equating to over £1 billion sterling. According to IKEA Group, “the catalogue is our most important marketing channel”.

The IKEA catalogue is the largest (by value) retail direct marketing door-to-door distribution activity in the UK with over 13 million catalogues delivered. The catalogue is a vital brand-builder for IKEA and the key driver for attracting customers to the stores.

The challenge

IKEA want to increase the return on investment for the catalogue distribution, which is a substantial investment, and remain ahead of the competition in terms of business strategy.

IKEA needs to ensure that catalogue distribution is targeted to reach people who are likely to be or become IKEA customers in terms of their demographic attributes and their likelihood to travel to the store.

IKEA requires a solution to maximise their return on investment while expanding their appeal and maintaining their dominant market position.

Specifically IKEA’s key objectives are to:

	Identify target consumer types and geographic areas for distribution of catalogue
	Identify types and areas with poor sales potential
	Increase sales return on catalogue expenditure
	Develop business strategy

The solution

CACI’s consultative solution was a Business Consultancy and Catalogue Distribution Optimisation project, which is highly sophisticated yet simple to implement.

The approach used IKEA IKANO card data and a major provider of merchant accounts for credit/debit card processing to establish historic sales performance and customer behaviour. A three-modelled approach was implemented to create the final solution using IKEA customer data, extensive CACI in house data and InSite, CACI’s Geographic Information System.

Working closely with IKEA, gravity-modelling techniques were used to define optimal delivery catchments for each IKEA store in a highly competitive portfolio. ACORN demographic profiling analysis was applied to establish IKEA key customers to pinpoint locations within in the modelled catchments. To add a further element of sophistication sales prediction modelling techniques were used, which ascertain key drivers of sales performance at sector level, to determine market value.

CACI Location Planning consultants used the solution to supply IKEA with an optimal distribution strategy for each store determining which postal sector have the greatest potential for IKEA sales based on location to allocated stores, key customer types and IKEA sales prediction. CACI business consultancy to IKEA further supported this solution giving IKEA complete confidence in their distribution and business strategy.

The results and benefits

IKEA has used the solution to underpin the whole UK distribution strategy of the IKEA catalogue resulting in an increased sales return on catalogue expenditure.

CACI’s catalogue distribution optimisation strategy results in an increased spend of 26% for each delivered catalogue, which equates to an increase in sales of £51 million for the IKEA Group.

Paul Cummins, IKEA Catalogue Distribution Manager says

“Year on year CACI’s consultative and business savvy approach underpins so much of what we achieve with the IKEA catalogue”. Paul Cummins adds, “It’s this strong relationship and understanding of our business, with CACI’s modelling experience, which has been really exceptional and so key for the IKEA business in the UK.”

Outlet Segmenation and Ranging