March 8, 2000 5:30 PM PST
IKEA enlists friends for email publicity
IKEA, which has near-cult status for its stylish, low-cost furnishings, is offering savings of up to $75 if shoppers send 10 friends an online postcard announcing the opening. For 5 postcards, shoppers score $25 off a $150 purchase.
For the most part, fans of the store are welcoming the opportunity to save at IKEA. But sending unsolicited ads through email, or "spamming," has long been a controversial practice in the Web community, even if it involves friends. Some say turning customers into sales people may be a risky move for the company.
"It's extremely ill-advised for them to encourage people to spam their friends," said Barry Parr, e-commerce analyst for research firm International Data Corp. "People hate to be spammed. (And) they're risking a serious alienation of their customers."
"It's like paying people to spray paint your name on their friends' houses," Parr said.
If this is the case, IKEA, which launched the promotion March 1, has its name on 37,000 houses in the Bay area already. The company, however, says the postcards aren't spam because they include coupons and customers choose who to send them to.
"We thought it would be great to use the Internet to market our new store in the Bay area because we know how tech savvy that area is," said John Niland, new business development coordinator for IKEA North America.
The company, founded in Sweden in 1943 and known for its do-it-yourself designs, has caught on mostly through word-of-mouth. Close to 85 percent of IKEA's sales originate in Europe, with the United States contributing 13 percent.
Because many people are excited about the new store, they may overlook the intrusion of the postcards.
"People are waiting for that place to open. I think there is a cult of IKEA going on," said Tandeeka Torrence Kennedy, an Oakland resident who sent the email to all her co-workers. "(The postcards) are just boosting the anticipation."
But Torrence Kennedy kept the spam issue in mind when she sent it. "I tried to be careful; I didn't want to send it to anyone who would hate that sort of thing," she said.
Although a novel idea, IKEA's promotion falls in line with a brand of online marketing called viral marketing. Using different methods, upstarts are tapping customers to draw new people to their sites by offering such incentives as sweepstakes entries.
PlanetRx, an online drugstore, recently had success with such a promotion, called "Three for Free." Customers could order three items for free, and if they forwarded the promotion to their friends, the company entered them in a sweepstakes for each email sent. "This drove a vigorous response because friends had to register" to become eligible for the entry, said Michele Slack, an advertising analyst from research firm Jupiter Communications.
Group buying sites such as Mercata are relying on viral marketing to make their businesses fly. Their sites let customers drive down prices on products by recruiting more people, via email or otherwise, to buy at the same time. Some sites even give customers tools to promote their services--including printable posters and bulk email programs.
"It's just old-fashioned word-of-mouth advertising. It's just so much easier to get the word out via the Net," said James Nail, an online advertising analyst at Forrester Research, based in Cambridge, Mass.
For IKEA, it's also a money-saver. "For it to pay $75 to get 10 more customers is just dirt cheap in terms of acquisition costs. And the emails are coming with a friend's endorsement," Nail said. Most companies pay $50 or more to acquire a customer through TV, radio or online ads.
The company may use the same tactic again if it works. IKEA plans to open a store in San Diego mid-September and to launch a new site that lets customers track their orders and check product availability.
IKEA's new store opens April 12 in Emeryville, just east of San Francisco.
Until then, customers like Torrence Kennedy can plan a new living room set through its catalog.
"They do have this total cult following. Almost because they have that status, they're better positioned to do this kind of marketing. If it was a new brand, they'd flop," Jupiter's Slack said.