Wednesday, February 13, 2013

MLMers, beware the IKEA effect

An IKEA Store along Alexandra Road in Queensto...
An IKEA Store along Alexandra Road in Queenstown, Singapore. (Photo credit: Wikipedia)
What is the IKEA effect? It's when you absolutely love the crap you put together from IKEA (leaning shelf, any one?) But the fact is, if you have to put labor into it, you'll love it more than you should even though it's just a piece of crap.

For those who don't know what IKEA is, IKEA is a Swedish furniture maker where you buy it unassembled, and usually of merely adequate quality, so it's cheap, and you need to assemble it yourself. From build-a-bear to custom-built PCs to DIY kits to cake mixes to orange concentrates to IKEA and other You-Assemble furniture, the IKEA effect is everywhere, when you love the stuff you "built" even when it's crap. It leads to exaggerated sense of self-worth.

When Duncan Hines and other food makers introduced instant cake mixes in the 1960's (where you just mix and put in a pan to bake), housewives HATED it, as they don't feel involved in the process. The makers responded by removing some ingredients so the preparer must add eggs to the mix. Housewives loved it. Now they feel involved in the baking process.

Dan Ariely (whom have been quoted many times in this blog), cited the IKEA effect as far back as 2009, though the most popular citing is a paper in Harvard Business Review in 2011.

Such an effect is further exacerbated when people, not wanting to embarrass you, decided not to tell you the whole truth (such as what you made is junk).

MLM is notorious in exploiting this cognitive bias.

MLM always seek to involve you and/or your money. Once you have money into the scheme, you are hooked. You'll defend it with your life and reputation. You'll repeat what your upline said like a parrot in the face of all the facts, and anybody who tell you otherwise must be working with the competition or the devil (or jilted ex-affiliate) no matter what their qualification. "They just don't understand."  And you'll confess to your group about your failures to convert / recruit people and strive to do better.

Not only are you financially invested, you are emotionally invested in the scheme. You will take any one questioning your product and your company as challenges to your personal reputation. In other words, you just got a few chips on your shoulder.

It often takes a year or more for someone to "wake up" and get a reality check, if they ever do (esp. if they have a powerful upline who lead them into more schemes), during which they could have lost tens of thousands of dollars that they can ill-afford.

This is one of the cases where a MLM is much more like a cult than a business.

Beware of someone taking advantage of the IKEA effect to make you say yes when you should NOT have.

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