Thursday 23 April 2015

The IKEA Singapore controversy: the business case

Hello everyone. I'm sure a number of you have been following the IKEA controversy in Singapore this week, when they have decided to continue supporting pastor Lawrence Khong's controversial homophobic magic show 'Vision' despite the public backlash. I have discussed this in passing in my last blog post prior to their announcement today that they are still going to continue supporting this show and today, I am going to once again, put on my marketing & PR hat and offer you analysis of the situation from a business point of view. There have been plenty of arguments about why IKEA's decision is wrong and offensive from a gay rights perspective. Let us look at the business argument today.
After all, IKEA is a profit-making business and the bottom line for the business case is simple: will IKEA make a profit from doing this deal to promote 'Vision' or would it have caused more harm than good? Such is the nature of a successful business partnership - everyone should be able to walk away from the event saying, "that all went very well, let's do this again soon!" Does it always go this well? No it doesn't - there is always a small risk involved and thus the client needs to weigh out how much benefit doing the event brought them vs the cost of having done the event. And any kind of PR backlash is very, very bad news and precisely the kind of disaster you would want to avoid at all costs. Hence with that in mind, let's analyze how things went wrong for IKEA in this instance. 

IKEA have clarified that they did not sponsor the event - they did not financially contribute to pastor Khong's production, they merely supported it by offering discounted tickets (a 15% discount) through their IKEA Family's partner promotions website. Now what kind of benefit would such a marketing tie-up bring to IKEA then, given that no money changed hands between the production company behind 'Vision'? Well, firstly, there is the issue of customer loyalty - most of us only visit IKEA when we need a new bed or dining table, but when we do visit an IKEA store, we often leave with many random items from cutlery to potted plants to light bulbs to wine glasses to Swedish Lingonberry jam that we have picked up on the way to the cashier even if we did not buy that table we wanted. IKEA does actually make a lot of money from these sales which are essentially 'impulse buys' - they just need to get you through the front door, into their store in the first place. Thus by using loyalty schemes like IKEA Family, they get to engage with their customers regularly through social media in a bid to keep to reinforce their brand identity with their customers. 
Would you get a new sofa from IKEA?

IKEA also needs to engage with their customers through social media because there is a lot of competition out there in Singapore even in their core market for furniture. There are plenty of independent retailers all over Singapore who have been in this business long before IKEA showed up in Singapore in 1978. I remember a small local furniture shop in Ang Mo Kio where my parents used to shop when I was a child - it served a very small local area and if you just needed a chair, it didn't make sense to go all the way to a big furniture store halfway across the island to buy that chair, especially if you then had to carry that chair all the way home on public transport. IKEA however, are trying to persuade you to shop for that chair in their store because it would be a far more interesting experience than your local shop in Ang Mo Kio. Your local furniture shop wouldn't be able to offer you Swedish lingonberry jam or discounted tickets for the latest shows in town, even if they can offer you an equally affordable chair - so this is where IKEA's edge is and that is why social media is so important to them. 

Ironically, IKEA Family is merely the name of their loyalty card programme - it has absolutely nothing to do with promoting family values nor is membership of IKEA Family limited to married couples or those with children. Indeed, anyone can join the IKEA Family loyalty card programme whether you are single, married, divorced, gay or straight. All members can enjoy special discounts when shopping at IKEA and even get free tea/coffee from their restaurants in some stores - members will also receive a free IKEA Family magazine sent out to all members on a quarterly basis. 
What is the business case for IKEA then?

All this falls under the guise of 'soft marketing' (here's a pretty good article on how soft marketing works). Allow me to quote from the article to show you how this can create a win-win-win situation for all involved: 

Partner with related, non-competing businesses: A dry cleaning operation partnered with clothing stores in the community. The store when selling a garment would give a gift certificate to the customer. The gift certificate was good for a free first-time cleaning and pressing of that new garment. The customer thought the store was paying for the dry cleaning. The fact is the dry cleaner was giving the service for free. Customers saw the store as a "hero", the store saw the dry cleaner as a "hero". Both stores gained a load of new and repeat customers.
Will your marketing generate a tangible profit from new business?

Hence in this case, IKEA is offering you discounted tickets to shows and events in town to make sure IKEA is still a part of your regular social media experience, they are not trying too hard to push their products in the process and if it is a really good deal, they are hoping that you would be tempted to share it with your friends as well. Now soft marketing is meant to generate a lot of good will through such offers, it is a cheap and subtle way to drum up publicity for your brand name and maintain customer loyalty - needless to say, most big brand names today do engage in a lot of 'soft marketing' as part of their bigger sales & marketing strategy. When IKEA does a promotion (such as for the show 'Vision'), they are hoping to create a win-win-win scenario: Vision will be able to sell more tickets through IKEA's website, IKEA will be able to offer a discount to their customers and those customers who wanted to see the show 'Vision' will be able to get a 15% discount. However, that didn't quite go to plan in this case. 

Vision did very well out of this - there is no such thing as bad publicity and whilst the show is controversial, the PR backlash probably raised the profile of the show in a way that no amount of money can buy. People who were never going to see the show would have never gone in the first place and the public who wanted to see the show can still get their 15% discount. The only big loser in this episode is IKEA because of the amount of negative PR generated as a result of them choosing to support a show with homophobic content, created by a pastor who is very clear about his stance on homosexuality. IKEA has tried hard over the years to identify with a middle class liberal, progressive clientele with plenty of spending money, such has been the target of their marketing campaigns. They have even been one of the pioneers in the 1990s in using gay couples in their advertising campaigns (see Youtube clip below).  More recently in Italy in 2011, IKEA Family also ran an ad featuring a gay couple and it ruffled a few feathers in Italy too. 
The problem for IKEA in this case is the weight of expectation for them to be a gay-friendly company - or at least one that would not be associated with a production linked to a clearly homophobic church with an anti-gay agenda. This expectation is based on IKEA's track record in the West when it comes to supporting gay rights. If this was some other Singaporean company supporting pastor Khong's show 'Vision', then nobody would bat an eyelid because nobody has any expectations of them to be either pro-gay or anti-gay. However, IKEA is a big global brand with a long track record and an international corporate image to protect: if they continue supporting their support for this show, then it will go against their corporate ethos and image that they have worked so hard to build up over the decades - it would tarnish their reputation because they did not live up to this expectation. Once you stop living up to your expectations, that is when you start losing loyal customers who become disenfranchised with your brand.

There is really no simple solution for IKEA at this stage: the Chinese phrase 进退两难 ("trapped in a difficult situation") comes to mind. If they persist in supporting 'Vision', they will have to content with the PR backlash for having offended those supporting gay rights. If they make a U-turn now, then they look very foolish in having agreed to have supported 'Vision' in the first place and they will face a boycott by pastor Khong's church along with other anti-gay Singaporeans. The fact is, they face a lose-lose situation as both options would cause them to offend some of their customers and lose business to their competitors. In hindsight, they really should have never gotten involved with such a controversial show like 'Vision' in the first instance given the mess they currently have before them: but hindsight is 2020, of course - though any PR or marketing executive should have really seen this mega PR shitstorm coming from a mile away.
What should your priorities be IKEA?

For IKEA to still come out winning after this episode, it needs to have gained more goodwill and new customers (supposedly from the anti-gay Singaporean lobby) than have lost existing customers (who were offended by IKEA's decision to support 'Vision'). As a marketing & PR consultant, I would always advice customers against taking such a gamble when the odds are not in your favour. Whilst some homophobic Christian groups may applaud IKEA's decision in social media, how much of that approval would actually translate to them going to spend money in an IKEA store? Any additional income generated from these anti-gay groups would be negligible compared to the effects of a boycott by those pro-gay Singaporeans who will choose to spend their money elsewhere as a result of this episode. It is incredibly hard to go to IKEA to spend a few hundred dollars of your hard earned money just because you like what they have done but it is very easy to choose to shop elsewhere if they have pissed you off.  Do the maths - no matter how you look at the marketing figures and the business case, there is nothing to gain and plenty to lose by supporting 'Vision'. So why are they still persisting with this bad decision then? I suspect it has probably got to do with someone in IKEA Singapore being a part of pastor Khong's church because there is just no business case to speak of. 

The PR backlash for IKEA isn't going to be in Singapore, but it is going to be in IKEA's other markets in places like Europe. This story has been picked up in the international press and whilst the decision to support (and continue supporting) 'Vision' was made locally by IKEA's management in Singapore, the repercussions of this decision for IKEA's brand image will reach far beyond the shores of Singapore given the way IKEA is such a huge international brand. Back in 2012, IKEA's decision to censor all images of women in the Saudi Arabian version of their catalogues was highly controversial and whilst it was ultimately a local decision in Saudi Arabia to appease a very conservative Muslim market, this decision caused outrage internationally. Ultimately, to try to salvage the situation. IKEA released a statement expressing regret over the issue, saying: "We should have reacted and realised that excluding women from the Saudi Arabian version of the catalogue is in conflict with the IKEA Group values." Would we see a similar statement from IKEA in the coming days? Well, that would really depend on the international outrage over this controversy - if their brand name is sufficiently tarnished internationally, then it can force IKEA to perform a U-turn on this issue but that would probably depend on a (rather angry) phone call or email coming from their head office in Europe. 
Did your marketing campaign please or offend the public?

Thus even if you can try to justify IKEA's decision by arguing that Singapore is a conservative Asian society which isn't gay-friendly, you have to consider that IKEA is the world's largest furniture retailer trying to sell furniture in a total of 46 countries around the world. It is not some small Singaporean company that is only operating locally and doesn't have to contend with what customers far away in Germany, Australia or Canada think about their actions. As in the Amos Yee case, once the story goes international, the outcome is no longer determined by just the locals in Singapore as it is no longer just a local issue. If Singapore wants to be part of the international business community and have big international brand names operating out of Singapore, then you need to stop having this 'island mentality' and start looking at the wider picture. Such is the context for the business case you have to consider. 

That's it from me on this issue. It would be very interesting to see what happens next - what are your views on the issue?  How do you feel about IKEA continuing to support pastor Khong's show 'Vision'? Would you now be boycotting IKEA over this? Or does this really not matter to you and you'll merely be shopping where you can get the best bargains for quality furniture? Please let me know what you think in the comments section below, thanks for reading. 

12 comments:

  1. Hi Alex,

    Good analysis. However, I chanced upon this while browsing IKEA SG's Facebook page - https://www.facebook.com/IKEASingapore/posts/823632911046782

    To be honest, I find your mocking of "Joe" quite disappointing. Yes, he was a little dramatic with his initial response, but I did not think he should be subjected to your constant "buehtakchek" taunts. Not everybody in Singapore speaks or writes good English, but that doesn't mean they don't have a right to comment. Anyway, I also think you're a narcissist, aren't you? Yes, you might be the 14th most popular blogger in Singapore, but I don't think you should get too carried away, even mentioning Joe's mother in your taunt. This is where, admittedly, our kindness movement is all too hollow.

    Cheers,
    Gary

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    1. Hi Gary. Well I never claimed to be nice or polite - I certainly don't suffer fools gladly and I did think that Joe was deliberately writing in bad English because he thought it was somehow funny. Like seriously, his English couldn't have been thaaaat bad, but if he wants to go down that route and speak like an inarticulate uneducated fool, then I shall treat him like one. Heck, even Xiaxue takes no prisoners when it comes to attacking her haters and it hasn't affected her popularity.

      Do I write well and provide good analysis of current events and topical issues? Yes I do. Did I ever claim to be polite or kind? Erm, no Gary, I don't recall ever claiming that. Am I honest? Yes I am - and that's my honesty coming out at Joe.

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  2. Regrettably ikea seems to be consistent with their anti gay stance...

    http://m.huffpost.com/us/entry/4337223

    https://itsmesarahjane.wordpress.com/2013/12/31/why-ikea-singapore-disappointed-me-and-let-down-the-singapore-gay-community/



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    1. Hi Koen, nice to hear from you again. Hoe gaat het met jou?

      Thanks for the links. I have a few theories about why IKEA is not consistent on their stance when it comes to LGBT equality issues. They would NEVER get away with this in the UK, Belgium, Netherlands or Scandinavia but in Russia, Malaysia and Singapore, it is a different issue.

      Firstly, there is no culture of PR in places like Singapore - I am aghast at just how blunt marketing and PR is in Singapore, it is about 20 years behind what one would expect in Europe or America. This is particularly true in the field of politics, where PAP politicians know that they will win regardless what happens, so they have no need to turn on the PR machine and charm the voters and this sets the tone for the country. Companies like IKEA can do what they want and not bother to explain themselves or justify themselves - for most cases, they can get away with taking a stance like that because Singaporeans, in most cases, will just shut up and not say anything.

      It has also got to do with the way Singaporean men have been through national service: even if you are incredibly pissed off during NS, the culture is to keep quiet, not complain, not speak up as speaking up would probably get you into far more trouble. After decades of this, people get used to believing that they don't have the right to question those in authority and this reflects the way they allow themselves to be treated as customers by big companies like IKEA.

      IKEA doesn't give a shit about the gay community in Singapore because they know they can get away with it - in Singapore. Is it bad PR? Of course it is - but then again, they can get away with it in a place like Singapore, as long as the rest of the world doesn't sit up and take notice.

      Secondly, with all big international brands, the head office cannot micromanage every aspect of operations in all the branches around the world. A lot of the local decisions taken by IKEA Singapore would be taken locally without the need to consult anyone outside Singapore. Hence this will account for the big differences in business culture say between IKEA in Sweden and IKEA in somewhere like Singapore & Malaysia.

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    2. Hi can anyone would help me by telling me more information about ikea competitors in Singapore. I need for my research.

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    3. Yeah, Ikea's competitors in Singapore are "your mum sucks cocks in Geyland furniture Pte Ltd" and "your mum's a fat whore furniture superstore". If this is the way you do research, then the Singaporean education system has well and truly failed you. Go do some real work instead. This is fucking pathetic.

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  3. The magic show will involve anti gay preaching ?? If not, what is the big deal ?

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    1. Yes it does actually. I did wonder about that and I did some research: Vision is not just a 'magic' show which consists of a series of illusions. There is a whole narrative involved about the relationship between a father and a daughter, both of whom are magicians. The daughter feels that her father cares more about his magic than her and so she creates a series of challenges for him where he needs to use his magic to resolve. There is a cast of 16 dancers involved as well, so there's not just illusions, but dancing, music, story telling and definitely, a narrative which does involve "anti gay preaching".

      There is indeed an illusion about freeing gay people trapped in a birdcage, implying that gay people need to be freed from their homosexuality. So it is a big deal as that's offensive to gay people. The fact is pastor Khong is vehemently homophobic, given half a chance he will get a homophobic anti-gay message into his show, so what were you expecting? Why do you think people are protesting?

      Nobody is asking the show to be canceled. Nobody is asking you to boycott the show (or IKEA). We do however, have a right to ask IKEA why they chose to support such a controversial show in the first place.

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    2. Lawrence Khong had that "illusion" in his performance??? I remember that eons back in my undergraduate days when I attended his church, before eventually leaving it after all his weird antics and refusal to heed people's words anymore once he crowned himself titles and special appointments spiritually, he was already running his "Magic" show. What I did not know specifically then was the exact nature of his performances, the storylines involved or the exact tricks, although the premise of using "illusion" to promulgate "truth" (Biblical principles) is seriously a very flawed premise to begin with......

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    3. What is clear is that this is not just light entertainment - pastor Khong goes out of his way to load his anti-gay homophobic rhetoric into his show, the way he does with his sermons.

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  4. Limpeh, this whole IKEA saga reminded me of a particular controversy back in 1989 when Madonna had a deal with Pepsi.

    Madonna had a commercial done with Pepsi, although she refused to hold the can of Pepsi and say the word Pepsi in the commercial. By the next day, her official video with the same song to promote Pepsi was released and all hell broke loose due to its highly controversial content of blending race, politics, homicide, sex and religion in the video.

    Pepsi, being a mainstream American brand was horrified and immediately cancelled and let Madonna keep her 5 million dollar pay cheque after calls for boycott by prominent Catholic priests.

    Madonna received tons of publicity and her song spend on #1 on UK, US charts for more than 3 weeks.

    This whole idea reeks of corporate censorship where, corporations should not air their views on controversial subjects such as race, sex, religion and politics for fear of losing their customers.

    https://www.youtube.com/watch?v=rDnUIXF2ly8
    https://www.youtube.com/watch?v=rM-0rmUgOnY
    https://www.youtube.com/watch?v=rQPfSw_hBhw
    http://en.wikipedia.org/wiki/Like_a_Prayer_%28song%29

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    1. Hi there, thanks for your comment. Yes, ironically, pastor Khong has done very well out of this whole episode.

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