After receiving a new set of instructions, [product developer Per] Carlsson strolls up to the showroom on the third floor of Ikea's headquarters, where each of the company's kitchen items is marked with a large red-and-yellow price tag. Then he applies what Ikeans refer to as "the matrix."
Ikea's product managers use a price matrix to identify holes in the company's product lineup -- and how much to charge for a new product. Demonstrating how the matrix works, Carlsson draws a tic-tac-toe grid on a piece of paper, explaining that he can plot the price and style of any Ikea item within it. Ikea has three basic price ranges -- high, medium, and low -- and four basic styles: Scandinavian (sleek wood), modern (minimalist), country (neo-traditional), and young Swede (bare bones). To identify market opportunities, Carlsson takes a product council directive, plots his existing product lineup on the grid, and looks for empty spaces.
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