Page 12 - Summer 2025-Final_Neat

Harnessing the IKEA Effect

BY CHRIS NICHOLS

When surveyed, homemakers felt that they were “chea�ng” and that the
We often talk about mix could not be “fresh.” P. Duff and Sons solved this problem by removing
the powered egg and forcing customers to add their own egg. Bam! The
“frictionless banking,” product took off. Adding that counterintui�ve extra step created just enough
making it easy for the customer to open effort in the process to make instant cake users proud of their work.
an account or add deposit balances.
However, as banks design future When Pinterest or Spo�fy force you to configure your page or channel, they
products, they should consider taking are tapping into the same Ikea Effect. Food delivery services such as Blue
into account the “Ikea Effect” to help Apron or Hello Fresh do the same thing except they are able to charge a
increase customer life�me value. In this premium for the ingredients compared to if you purchased them separately
ar�cle, we explain what the Ikea Effect yourself.
is and how to apply it to banking
product design. How can bank’s leverage the Ikea Effect?

The Ikea Effect Let Customers “Assemble” or Influence Their Own Account
Building furniture is no fun. However, the cri�cal factor to Ikea’s success in Banks can create or choose vendors that provide products where user inputs
furniture sales was the fact that by packaging furniture flat, Ikea could save allow for a customized experience. Here are some examples of where other
cost on shipping and storage, while making it easier for the customer to take banks have offered modular, build-your-own account features when it comes
the furniture home. Part of the cost savings was passed onto the customer. to deposit products:
The equa�on of lower cost and physically manageable furniture offset the
hassle of pu�ng the furniture together. Business schools have o�en lauded • Pick Your Perks: The user interface allows customers to choose the
this equa�on as being the fuel behind Ikea’s rocket growth. benefits of their deposit account or treasury management package to
However, the equa�on is incomplete. include loyalty points, foreign ATM fee refunds, overdra� protec�on or
cash back op�ons.
• Tiered interest/rewards boosts: Let users unlock higher yields by
adding direct deposit payments, using addi�onal products, maintaining
balances, providing referrals or for longevity.
• Se�ng Goals: The act of se�ng deposit goals usually locks the
customer to the bank for the dura�on of that goal. Goal se�ng helps
increase deposit dura�on and boos�ng deposit performance.
• Debit Card Design: This is a common, but an easy solu�on to allow your
customers to choose their own card design.
Business psychologist Michael Norton, Danieal Mochon and Dan Ariely,
conducted a study around customer sa�sfac�on using, in part, Ikea
assembled furniture. What they found was that when you assemble your
own furniture, you overes�mate the value of the final piece and your
sa�sfac�on in the product increases. This helps explain why people love their
Poang Armchair.

Performance Hack: The more �me and thought the customer puts into
building the account, the more ownership and sa�sfac�on they feel, making
them less likely to go dormant or churn.

The Ikea Effect in the Wild Gamify the Onboarding Flow
Inventors thought they were brilliant when they introduced the instant cake Instead of a sta�c form, turn onboarding into a step-by-step “progress
mix to America in the 1950’s. All you must do is add water and s�r and poof builder”:
– instant cake ba�er. The powdered milk, eggs and fats were already in the
mixture to be recons�tuted with water. The product was a flop. • Show a visual tracker: Visualiza�on of progress not only provides
feedback on where customers are in the onboarding process but also

Arkansas Community Banker | 12 | SUMMER 2025