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The IKEA Effect: Why Customer Labor Builds Loyalty

Michael Norton is a professor in the marketing department at Harvard Business School. His areas of interest include consumer psychology and social enterprise. Norton and his colleagues have researched the way consumers value products more when they have been involved in the labor of making them, a concept they call "The Ikea Effect." I talked to Norton about why this works and how some companies are finding ways to capitalize on it.

BNET: Would you define "The Ikea Effect" for us?
Harvard Business School marketing professor Michael NortonNorton: The Ikea Effect is this notion that we had a few years back. The archetypal example is a horrible looking mug sitting on someone's shelf. Do they just have bad taste? Why is that ugly mug there? A lot of people have ugly things lying around because they made them themselves; they went to some pottery class when they were 23 and made a vase that is lopsided and hideous and no one would ever buy it. But people hold on to these possessions like they are worth a million dollars.

There's something about imbuing a product or an endeavor with your own labor that makes you come to overvalue it. It becomes part of you; the more labor you put into it, the more you value it. From a retailer's or a marketer's standpoint, that seems quite strange. The more labor a customer has to put into assembling something themselves, the less you can charge for it because people don't like to assemble things themselves. Think about the nightmare of assembling a bicycle on Christmas morning.

It would appear like you would have to charge less, but after the fact, people seem to have really enjoyed assembling these products. So, now they overvalue them compared to what other people would pay for them.

BNET: Then how does a company get consumers to value the process of labor rather than dread it, so it can make its products more popular?
Norton: Prospectively, people try to avoid labor, but retrospectively they really like the experiences they've had. People are making a mistake; they believe they want to avoid labor, but they really like doing it more than they thought than they would. So, the challenge for the marketer is to make them value that experience prospectively.
It's that way with many things in life. In general, people don't want to try new things...they want to sit home and watch TV. But if you interview people, the things that are most meaningful in their life are the things they really had to try very hard for, like doing well in an extremely difficult class that they did not want to take.

Some companies are trying to make the self-creation process more fun. Converse, for example, has a strong design-your-own-shoe component on their website. The labor that you are engaged in is virtual. You are getting some of the same aspects of self-assembly and self-expression that you would get if you had to make something on your own. But Converse removes some of the difficulties of working with tools and makes it more fun, so customers are willing to engage in it.

Some companies don't have you do the labor, but they make sure to show you the labor they engage in on your behalf. People not only value their own labor highly, they value the notion of people laboring for them. Effort equals value. On the travel site, when you search for flights, they show you every airline they are looking through for you over time. Orbitz just shows you a progress bar and then pops out the results. We've done research that shows that when Kayak reveals this exhaustive process on screen, users think Kayak is working harder for them and they like the search results better.

BNET: How do you create a convenient consumer experience while still getting the buyer to appreciate it?
Norton: There's a tension between services that happen really quickly versus those that take longer. My graduate student Ryan Buell has looked into the fact that when service occurs instantaneously, you lose the ability to signal that you are providing a valuable service. People receive their money from an ATM machine instantaneously -- and they do value the convenience factor, inherently -- but they also seem to place a separate value on the work a teller does for them when they get cash, even though it takes longer. We're researching this balance of providing service quickly but still slowing it down enough so customers realize the value of what you are doing for them.

In general, when encouraging customers to take on some of the labor involved, you shouldn't just think rationally about what they should value but really look at what they do value. If they value their time at all, they should value you assembling things for them. They should always favor fast over slow. But slowing things down so they understand the value being provided is a little bit of a strange concept.

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