If there is one thing a Dutch cannot live without in his everyday life, it is his bike. And Dutch bikes are an attraction themselves. Some people have painted theirs in the national color(s), decorated it with flowers and others even mounted a basket on it to carry their groceries. Imagine you have put your time and effort into beautifying your bike and you are very proud of the horn that you successfully installed to make sure that everyone knows who’s bugling behind them. In your opinion, this is the best bike ever.
And then one day your friend tells you: “Man, your bike is falling apart. If you’re lucky, you might sell it for 20€ or something.”
So how come there is such a gap in the valuation of this item? This example can be related to what Norton et al. defined as “the IKEA effect” where people tend to value their successfully self-made products similar to those from experts or professionals. In order to understand this phenomenon, several studies have discussed how people relate to labor, which is one of the least pleasurable activities but also one of the most rewarding ones. However, it will only be perceived as rewarding if the creation is successfully completed. In this context, items from the Swedish company IKEA are a very suitable representation since their products often require some extent of assembly after purchase. Moreover, they usually do not offer any opportunity for creative customization as opposed to the customizable shoes by Nike. Therefore, the focus solely lies on the component of labor. In the experiments of Norton et al., builders valued their origami creations four times higher than non-builders did for the same items.
What is interesting about this phenomenon is that it does not only relate to DIY projects but it actually also applies to how people feel about their own ideas and their own projects. So in a work environment or also in a group assignment at university, a person would value their own contributions a lot higher than those of others regardless of whether it is actually better or not. Obviously, this creates a managerial pitfall and risks for an organization. On the upside, this effect also supports value co-creation with consumers, as they would feel very positive about the output from such collaboration. A prominent example is the creation of Lay’s Joppiesaus as a result from a flavor-making crowdsourcing contest.
Nevertheless, other potential drivers of “the IKEA effect” cannot be neglected. For example, Norton mentions a social utility of labor, which everyone has probably seen on social media. I’m thinking of that person who likes to share their first (or maybe 100th) self-cooked meal on Facebook. So it is possible that this person deems his dish to be worth more due to social utility. Another driver could be the mere enjoyment of completing this task where the process of achieving a certain result is actually overvalued rather than the result itself. As an extension, it would be interesting to understand the opposite side of successfully completing a task and receiving negative feedback for it. Would the valuation of the product decrease, increase or remain the same? And how likely would it be for the same person to engage in a similar task in the future? This could be an interesting thought, as there are usually many submissions entering a crowdsourcing contest of which only a small proportion actually reach the final stage. Do the “losers” feel differently about their submission and would they participate again? In such a setting, a “loser” might feel negatively about the organizer of this contest.
Norton, M., Mochon, D. and Ariely, D. (2011). The ‘IKEA Effect’: When Labor Leads to Love. SSRN Electronic Journal.
White, Matthew P. and Paul Dolan (2009). Accounting for the Richness of Daily Activities. Psychological Science, 20 (8), 1000-08.