Integrated Marketing Plan | COSTCO
SECTION
1 |Product Overview
Introduction
Our group chose to do the integrated strategic marketing plan for Costco.
Costco is a chain of wholesale warehouse stores. In order to shop at Costco,
customers must purchase a membership. This membership entitles customers to
shop at Costco stores, which offers products at lower prices than most retail
stores. In this paper, we will discuss Costco and plans to improve their
marketing strategy.
Problem Statement and Issues
One issue that is concerning about Costco is
the large percent of its revenue that is reliant on California. Approximately
70 percent of Costco’s overall sales come from the United States, and of that
revenue, 32 percent comes out of the state of California alone (Kalogeropoulos,
2015). This is concerning because Costco’s success is too dependent on this one
single market. While it is natural that a large portion of any retailer’s
revenues would be generated in California since “California's GDP is over $2
trillion per year, which makes it easily the biggest market in the United
States” (Kalogeropoulos, 2015, para 7), no other major competitor of Costco has
a concentration that is similar. While California’s economy is currently thriving,
it could falter at any time. If this were to happen, then Costco would suffer
greatly. Therefore, Costco needs to diversify their revenue into other areas of
distribution.
Advertising/Marketing Objectives – Your recommendations
In order to increase stability of Costco’s
revenue, they need to increase their market share throughout the rest of the
United States and in other countries, and increase their online sales. The
first step to increasing market share in other states and countries is to open
stores in other areas. When opening these new locations, Costco needs to have
large “Grand Opening” celebrations offering local residents incentives to come
check them out.
The second step in diversifying Costco’s
revenue concentration is to increase their online presence. Costco needs to
advertise on websites that their potential members are already on. They also
must optimize their search engine placement, ensuring that they come up in the
listing when customers are looking for any of the products that they are
selling.
Aims of your campaign.
Our campaign will be aimed at increasing Costco’s revenues that are generated
in locations outside of California and increase online sales. We will encourage
Costco to open locations in target areas which could support a warehouse. We
will increase online presence to generate additional online sales.
SECTION
2|Product Profile
Costco
is a chain of warehouses that carry quality, brand name merchandise, at low
prices, all over the world. Costco was designed to help smaller, and medium
sized businesses, along with personal needed products to create a pricing
strategy (Trewin, C.). Costco's pricing is low and marketed to businesses, and
larger families. Costco is a public business, but one must buy a membership to
shop at any location. At Costco members can buy in bulk. Costco buys their bulk
products form single vendor, this is to ensure that they can offer lower prices
on their products and reduce the marketing cost, along with pass on their
savings to consumers (Vault. INC). Costco has its own signature house brand
called "Kirkland".
Product Name
Costco doesn’t not carry many multiple brands, but has its signature, private
brand Kirkland (Trewin, C.). Kirkland is known for their quality brand
that offers excellent value, with exclusive product categories such as;
groceries, confectionary, TV media applications, automotive supplies, toys,
hardware, sporting goods, watches, jewelry, health and beauty products,
tobacco, furniture, and office supplies (Vault. INC). Costco offers 330
different private labels that make up more that 15 percent of their sales (Dye,
C.). Costco services
are always trying to create as much value as they can for their customers.
Therefor if the customers is interested in a high-end products that are not
available at stores, the product can be purchased online at Costco.com.
Product Classification
Costco's product classification offers; convenient goods, shopping goods,
specialty products, and unsought goods. Costco's signature private brand
Kirkland, accounts for less than 20 percent of their stock keeping unit
(Lemberfer, V.). A product classification is used to help markets focus their
efforts using customer’s behaviors, to help clearly define a target market.
Costco's target market is small and medium business, along with larger families
(Trewin, C.). The philosophy that Costco has created to abide by is,
aggressively buying bulk from a handful of vendors for members to buy and sell
products in volume. This classification is designed for products to be
purchased and resold by other businesses.
Product Characteristic
Costco has many different characteristics as a business and is very often compared
to Sam's Club, and Walmart. Since 2013 they have become the fifth largest
retailer in the United States, and ninth in the world, offering 4000 high
quality products, 330 private labels, and their own signature brand; Kirkland
(Dye, C.). One major characteristic strength that Costco has is they are a
public membership warehouse, offering high quality products and extremely low
prices. Costco controls their prices while saving cost on overhead such as
packaging, and merchandise bagging; all while still maintaining high-quality
(Trewin, C.). Costco is able to keep their low prices because they aggressively
buy from a handful of vendors. Costco also has a great customer satisfaction
loyalty program. Costco ensures this by offering refunds on all products to not
only ensure the satisfaction of their customers, but to help their customer
retention (Trewin, C.).
Distribution
Costco is a
distribution center; a “facility that is usually smaller
than a firm's main warehouse and is used for receipt, temporary storage, and redistribution of goods according to the customer orders as they are received.
Also called branch warehouse or distribution warehouse” (Web
Finance, Inc. , 2015). Costco’s distribution centers are called
depots. “Costco has 17 Depots around the US” (CNBC, 2012). The
depots receive all the products that Costco carries from health and beauty
items to grocery items daily. The depots then distribute the merchandise
to the local stores.
Product Life Cycle
The
Kirkland brand is Costco’s label.
Consumers love the Kirkland Brand.
Costco uses the product demand life cycle to
its advantage. Costco carries a limited amount of skews in their stores,
these skew numbers include seasonal and “treasure” items. For instance,
Costco has a Vitamix road show twice annually. They sell the Vitamix at a
discounted price to members which includes a hefty accessories package. But
when the show leaves so do the blenders. Consumers know when they see
something they love to but it! Because when it is gone; it may not return
for a very long time. If it returns all. Costco customers are known for going
into the store with a list but coming out with much needed merchandise that was
not on their list.
The
Brand
The brand is what
makes Costco so successful. Customers trust the brand for quality.
Brian Woolf, a global
leader in loyalty marketing published an article on Costco. He did a
retail marketing strategy on Costco and this is what he found about what makes
Costco different:
“What Makes Costco Different?
The
above results are impressive, a result of doing things differently from other
retailers. Consider these statements of Jim Senegal last month:
·
In the US, Costco’s
average Warehouse has annual sales of $168m. In contrast, the average Sam’s is
$91m. That’s $3.1m per week at Costco vs $1.8m per week at Sam’s.
- Costco has 3,700 active SKUs
in their core WH business area. Compare that to a Walmart Supercenter
with 140,000 SKUs.
- Costco’s high sales are
achieved without any advertising (no newspapers, radio, TV or
billboards), apart from targeting marketing when opening a new WH. New
members are added due to positive word-of-mouth of existing members.
- 91% of all members currently
renew their membership in US/Canada (i.e., the attrition rate is only
9%).
- Top management pays extremely
close attention to daily sales, new member sign-ups, member renewals,
average spend per visit and average number of member visits per month.
- Warehouse Mangers are the key
to Costco’s success. Their job requirement is to develop people. The
company can be judged on its WH managers, 76% of whom started as hourly
employees, reflecting its promote-from-within corporate value.
- The employee turnover rate for
all employees is 10%; it’s 6% for employees who have worked over one
year.
- Costco constantly works at
bringing items to market at the lowest cost. Rather than increasing
profits by raising its margins, it chooses to increase profits by selling
more volume at lower margins. If Costco cannot obtain an item at the
lowest cost, it will not stock it.
- Culture is not the most
important thing—it’s the only thing. The same attitude about price,
margin and productivity, etc., is seen throughout the whole company.
- Costco wants to build an
institution that will be here 50-60 years from now” (Woolf, 2014).
The Costco house brand
Kirkland Signature does not attempt to be as good as the top brand in that
category, it demands to be better. The price is not always lower than the
national brand. Consumers, however like the house brand and trust that it
is going to taste and perform better than the leading brand. Costco breaks many
rules of marketing but still is successful.
SECTION 3| The Company
Company
Overview
“We are a membership warehouse club, dedicated
to bringing our members the best possible prices on quality brand-name
merchandise. With hundreds of locations worldwide, Costco provides a wide
selection of merchandise, plus the convenience of specialty departments and
exclusive member services, all designed to make your shopping experience a
pleasurable one” (Costco, 2015). Costco offers three different membership options
for customers to choose from.
o
The basic option is
the “Gold Star Membership” which cost $55 for an annual membership. This gives
a customer the ability to shop in the store and is designed for personal use.
o
The “Business
Membership” is also $55 for one year, and is for business owners and managers,
allowing them up to six additional card holders, giving them all the ability to
make purchases for the business and for personal use.
o
Executive membership
is the highest option, costing $110 annually. This option gives members
additional savings and a 2% reward on many purchases (Costco, 2015). Costco
operates under the philosophy of “Keep costs down and pass the savings on to
our members” (Costco, 2015). They are able to offer the best possible prices to
members by combining a “never-ending quest for efficiency” (Costco, 2015), with
their “large membership base and tremendous buying power” (Costco, 2015).
Business
Description
Costco’s business
strategy is to concentrate on driving sales, and believes that “if sales are
good, everything else will take care of itself” (Lutz, 2014). Costco has a
“no-frills” (Lutz, 2014) approach to marketing and does not advertise. This is
very much the opposite of their competitors such as Wal-Mart and Target. Costco
also has a limited assortment of inventory. “Despite Costco's large
store volume, it has been known to sell a fraction of the number of toothpaste
brands as Wal-Mart, according to The New York Times” (Lutz, 2014). By
limited the variety, they are able to increase the quantity of sales for the
items they do carry, therefore driving down their purchase price on these
select items (Lutz, 2014). One method of cost cutting that Costco chooses not
to use is low employee wages. They feel that it is too important to customer
satisfaction to be able to retain quality employees.
Company
History
Costco opened its
first location in 1976 “in a converted airplane hangar on Moreno Boulevard in
San Diego.” (Costco, 2015). Their name then was Price Club. They start out by
only selling to small business, but eventually opened up to selling to a
“selected audience of non-business members” (Costco, 2015). They found that do
so increased their buying power with their suppliers, so it was a win-win.
The first “Costco
Warehouse” location was opened in Seattle in 1983. “Costco became the first
company ever to grow from zero to $3 billion in sales in less than six years”
(Costco, 2015). In 1993, Price Club and Costco merged to form
PriceCostco. At this point, they were generating annual sales of $16
billion with their 206 locations. They went back to the Costco name in 1997
(Costco, 2015).
Key
People
· Founders - James D. Sinegal, Jeffrey H. Brotman
· Chairman – Jeffrey H. Brotman
· President, CEO, & Director – Walter Craig Jelinek
· CFO, Director & Executive Vice President – Richard A.
Galanti
· Independent Directors – Jeffrey Scott Raikes, Susan
Decker, Richard M. Libenson (The Wall
Street Journal, 2015).
Location
and Subsidiaries
Currently, Costco has
upwards of 71 million cardholders, which is not hard to believe when Costco is
in 40 different countries, with 648 locations. Currently Costco has 461
locations in the United States.
Brands,
Major Products and Services
Costco carries many
different brands, but is known for their own signature brand, Kirkland.
Kirkland is known as a quality brand that offers excellent value, with
exclusive product categories. Costco is known to offer many different products,
in bulk packaging, at lower prices.
Costco carries many
different types of products such as:
• Sundries:
including candy, snack foods, tobacco, alcoholic and nonalcoholic beverages and
cleaning and institutional supplies.
• Hardliners:
such as health and beauty, electronics, appliances, gardening and patio needs,
and sporting goods.
• Soft
liners: including apparel, domestics, jewelry, housewares, media, and home
furnishings.
• Food:
offering a variety of dry and packaged food, as well as fresh food including
meat, bakery, deli and produce.
Costco also offers
different kinds of services such as:
o
Gas station
o
Pharmacy
o
Food court
o
Optical care
o
Photo center
o
Hearing aid care
o
Services for travel
needs.
By Offering these
products gives them an advantage over their competitors. If customers cannot
find a product, they can always check online at Costco's website.
Corporate
Vision
At Costco, their mission is to focus on bringing quality
goods and services to the market at the lowest possible price every day, but to
do it with integrity at every level of the company while valuing the interest
of the stockholder.
Corporate
Mission
Continually provide our
members with quality and services at the lowest possible prices.
In order to achieve
their mission, they must conduct their business with the following code of
their in mind:
Code of Ethics:
•
Obey the law
•
Take care of the
members
•
Take care of the
employees
•
Respect their
suppliers
Company’s
Current Promotional Strategy
Costco uses many different
types of promotional strategies. Costco pairs end cap marketing with
samples. Costco is known for their awesome samples. Costco advertises
many of their items by having unlimited samples of items on special.
During the holidays they may have saplings of different desserts, meats like
ham, pre made salads, different energy drinks and snacks. The employees
serving the snacks are well versed on cooking instructions, recipe ideas, cost
and the quality of the product. The samples are hard to resist. The
samples also allow consumers an opportunity to try something before they take a
chance on an item they are buying in bulk.
Costco also has
terrific online monthly specials on in store items and online only items,
trips, and more. Costco sends out a monthly mailer that highlights all
items on special or available with in store instant rebate. The
advertisements are in full color and show a significant savings on top of the
competitive club price.
Product
Sales History
Costco has a no frills
approach to marketing that yet is still out selling their competition.
Current
Marketing Objective
“The intelligent Loss
of Sales” - Jim Sinegal, Costco’s co-founder and recently retired CEO. In
this article Jim Sinegal explains the objectives & challenges Costco faces
and why they market products the way they do.
Costco: Breaking All
the Retail Rules
Lori Gordon Logan and
Michael Beyman|CNBC
Wednesday, 25 Apr 2012
| 4:42 PM ETCNBC.com
Media
Expenditure
Costco sends a monthly
magazine to their members. The Costco Connection. This is available
in print and online. “The monthly Online
Edition enhances the print version by adding video and audio content for a
selection of articles and ads. This electronic version makes the magazine easy
to find, print and share articles with family and friends”. The magazine is
packed full of news worthy articles and information, recipes, and the household
almanac. The magazine is available in print, on line, as well as
formatted for mobile devices.
SECTION 4|SWOT Analysis
Strengths
Costco strengths are
what make them such a reputable brand. They have a great pricing strategy, and
high buying authority. Costco has a strong brand loyalty and a strong brand in
general, with their private signature brand “Kirkland”. Costco has a great
strength in their extreme efficiency in their resource management.
Weaknesses
Every company has
their weaknesses, but it is how the issue is overcome that matters. The
weakness that Costco has is that they are too dependent on sales from one small
geographical area, California. Another downfall is that Costco is mostly
marketed to an older base of customers, and small businesses. Also, Costco’s
private brand “Kirkland” has had slow growth over the past 20 years. Lastly,
overall, the store offers many products, but it still limits customers’
choices.
Opportunities
As a business, Costco
will always have many opportunities. Costco limits the number of skus and
products. This allows them to constantly reinvent themselves. They
can bring in new products and offerings to their customers on a weekly
basis. The “Treasure Hunt” is an opportunity for Costco to meet their
ever changing customer needs.
Costco also has an
opportunity to increase their interaction with their customers with mobile marketing.
Costco has access to all of their customers through their memberships. Costco
already advertises through monthly mailers and emails. Now with mobile
marketing Costco can bring deals and incentives, as well as recipes and the
Costco Connection magazine into the palm of their customer’s hands.
Keeping them more connected with their customers.
Threats
One threat is online
completion from Amazon & Pronto.com. These businesses are competing
for Costco customers. They are making similar offerings to consumers, and
shipping items in bulk directly to their door. Non-grocery merchandise and
discounted items like stamps are being sold by online distribution
centers. This makes shopping even more convenient for busy shoppers.
SECTION 5|Industry and Marketplace
The
Industry
Warehouse Clubs and
Super-centers
Definition
of the Industry
“The industry is made
up of large stores that primarily retail a general line of grocery products
combined with merchandise items. Warehouse clubs offer customers a wide selection
of goods (often in bulk) at discounted prices in exchange for a membership fee
that is paid by each customer” (Everett, 2013).
Shape
of the Industry
This industry has been
one of the fastest growing among retail industries. The growth of the Warehouse
Clubs and Super-centers industry has started to slow; however, it is still
growing. Memberships of Warehouse clubs are divided into approximately 35%
business customers and 65% personal shoppers (Everett, 2013).
This industry is now
approaching its maturity. “The availability of space for new locations has
become limited, and the introduction of different product lines has been slow
because clubs and super-centers already market a variety of goods. These two
factors have created a saturated market, which has slightly slowed the
industry’s expansion. Nonetheless, the industry continues to outperform the
retail sector as a whole” (Everett, 2013).
Development
of the Industry
Current
Conditions of Marketplace
Costco's current
marketplace conditions have not changed to much over the past couple of years,
other than adding different services (Costco Services). Costco added
their occidental, pharmacies, and hearing aid
centers. Costco still does not advertise (Costco Wholesale, 2014).
By not advertising; Costco is able to save 2 percent of their budget, and
invent more towards not only employees pay but even
benefits(Costco Wholesale, 2014).
Changes
in the Marketplace
Just like any business
sometimes there are changes that need to be made. Costco has had to make
several changes to their marketplace. One of the major changes that Costco had
to make was a small mark-up on their prices. This markup was close to 15
percent on specific products (Lutz, A.). Another change that Costco made was
creating internet sales. Costco now has an online store for the convenience of
their customers. Another change that Costco has made was to when they increased
the price of the membership card. The price of the card is to go up every five
years to keep of with the inflation (Kim, S.).
The
Marketplace
Costco has many
different services that they not only market, market too. Costco is always
welcoming new members into their market place. Within that marketplace
currently they market to home, business, and life; therefor their target market
is directed towards small business owners, large families, and people who look
to buy in balk (Costco Wholesale, 2014).
Costco offers many
different services within their market place. Those services are; the food
court, photo center, optical center, pharmacies, hearing aid centers, auto
centers and gas stations (Costco Services). Because Costco offers these
different services, they offer a more competitive market place.
SECTION 6|Competitive Situation
“Wal-Mart isn't
a behemoth in every business. Costco is the nation's largest wholesale club
operator (ahead of Wal-Mart's SAM'S CLUB) (Hoover’s Inc., 2015). “It operates
more than 660 membership warehouse stores. Primarily under the Costco Wholesale
banner, it serves more than 71 million members in 40-plus US states, as well as
in Australia, Canada, Japan, Mexico, Puerto Rico, South Korea, Taiwan, and the
UK. Stores offer discount prices on an average of about 4,000 products (many in
bulk packaging), ranging from alcoholic beverages and appliances to fresh food,
pharmaceuticals, and tires. Certain club memberships also offer products and
services, such as car and home insurance, mortgage and real estate services,
and travel packages” (Hoover’s Inc., 2015).
Direct
Competitors Include:
Target Corporation,
Wal-Mart Stores, Inc., and BJ’s Wholesale Club, Inc.
Direct Competitor
Comparison: Yahoo Finance
Indirect
Competitors:
Costco indirect
competitors include big box stores such as Trader Joe's, Whole Foods, and Amazon.
Whole foods and
Trader Joe's attract the same type of customer as Costco,
especially their grocery customer. Trader Joe’s and Whole Foods
cannot compete with the pricing that Costco is able to offer, but they are
trying to package special items in bulk.
Whole Foods Business
Summary (Yahoo Finance)
Whole Foods Market, Inc.
operates as a retailer of natural and organic foods. The company’s stores offer
produce and floral, grocery, meat, seafood, bakery, prepared foods and
catering, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins,
and body care products, as well as lifestyle products, including books, pet
products, and household products. As of November 5, 2014, the company had 401
stores in the United States, Canada, and the United Kingdom. Whole Foods
Market, Inc. was founded in 1978 and is headquartered in Austin, Texas.
Trader Joes is a
privately held Company. Costco offers many of the same grocery items available
in organic, in bulk at a reduced price. Costco also competes
indirectly with Home Depot, Lowe's, in the
home improvement, grill, appliance, outdoor patio department.
SECTION 7| Consumer
Stakeholder
Current Consumer
Characteristics:
Costco Customers
value:
· Quality
· Savings
· Service
The current consumer for Costco is aging
quickly, and Costco is looking to the millennial's to
fill the gap. The shopping trends of millennial's are much different than their parents.
”The NGA recently presented
survey results by digital marketing company Santy, which found that millennial's
tend to:
· Avoid shopping for groceries
on a set day of each week (unlike their parents), instead spreading grocery
visits through the week and weekend.
· They prefer short shopping
trips of typically an hour or less”(Investopedia, 2015).
· “More concerned about organic
and natural products than other cohorts [age-groups]”- Industry watcher and
packaging expert Jill Ahern (Investopedia, 2015).
· Millennial's prefer natural and
organic products and are thrifty
Anderson Cooper takes us to Costco and shows
us who shops here and what are they buying?
Current Consumer
Demographics: (PHOTOS
THROUGHOUT COSTCO EMPLOYEES AND OBAMA)
Costco customer
demographics compared to Wal-Mart/Sam’s Club customers:
The Costco customer
demographic
“On the whole, Costco
shoppers tend to be more:
· affluent
· urban
· well-educated
· liberal
Than Walmart shoppers,
which isn't surprising given the marketing and product strategies of each
company” (Gross, 2004), (Quora.com Blogger Ammon Allred, Knowledge Quester, Cultural Consultant,).
Physiographic Consumer
Demographics:
Social Class, Life style
and Personality of the Costco Consumer
Social Class
Upper & Middle class
dominate
Life Style
Aspirer, Succeeder,
Explorer dominate
Personality
Goal Oriented, Driven,
Educated
· 129,000 full and part-time within the U.S
(Costco Corporate Profile, 2015).
· 189,000 full and part-time worldwide (Costco
Corporate Profile, 2015).
· In 2014, Costco was ranked by Glassdoor as the
2nd best employer in the word (Levine-Weinberg, 2014)
· President Obama praised Costco in his 2014
State of the Union address. One of the reasons is because they are “the
undisputed wage leader among big-box retailers” (Levine-Weinberg, 2014) with an
average hourly wage of almost $21. Costco also offers its employees other great
benefits, such as health insurance, which 88% of their employees take advantage
of.
Stakeholder’s
Characteristics
“Primary stakeholders
may have a financial position in your company, whether they invested money to
help you grow or they're employees counting on your paychecks to pay their
rent. Decisions you make can affect their income” (Johnston, 2014). “Secondary
stakeholders, on the other hand, are those whose incomes won't be affected by
your decisions” (Johnston, 2014). “Nongovernmental organizations, activists,
churches and neighbors are common secondary stakeholders” (Hummel, N.D).
Investors
· Costco has been a publicly traded company
since December 5, 1985 (Costco Investor FAQs, 2015).
· Currently, there are 1,716,996 shares of
common stock for Costco (Costco Stock Information, 2015)
· As of 4/27/15 close, Costco’s stock price is
$146.96 (Costco Stock Information, 2015)
· Costco is “A long-term investor’s dream”
(Levine-Weinberg, 2014) because even though they have one of the lowest profits
of major US companies, they have “a very efficient business model that allows
it to consistently generate a strong return on invested capital”
(Levine-Weinberg, 2014). “Costco is also growing much faster than other big-box
retailers” (Levine-Weinberg, 2014).
Secondary
Since Costco is such a
large corporation, it affects not only the communities around its stores, but
really everyone because of the potential impact they could have on the Earth.
Costco “strives to do right by the rest of the world through its business
practices” (Levine-Weinberg, 2014). Some of the things they do include using
solar power and implementing sustainable fishing practices. “As of 2013, it had
the second-largest solar power generation among U.S. companies, trailing only
its much-larger rival Wal-Mart” (Levine-Weinberg, 2014).They also stopped
selling a number of at-risk fish species (Levine-Weinberg, 2014).
Closer to home, Costco
has secondary stakeholders in the residents of the communities surrounding each
of its locations, which includes:
· 474 locations in 43 U.S. States & Puerto
Rico
· 89 locations in nine Canadian provinces
· 26 locations in the United Kingdom
· 10 locations in Taiwan
· 11 locations in Korea
· 20 locations in Japan
· 7 locations in Australia
· 34 locations in 18 Mexican states
· 1 location in Spain (Costco Corporate Profile,
2015)
SECTION 8|Strategic Target Audience
Proposed
Primary Target Audience:
Costco’s primary targeted audience is small businesses
(Costco Wholesale.) .Since Costco’s sells their products in balk packaging it
makes it easier for small business to purchase, and resell the product. When
Costco opens a new warehouse, their marketing team will contact small local
businesses to offer them a membership with Costco
(Khurana, A.). Costco will also use direct mailers to other
business that meet their profile that they have constructed as their target
market.
Proposed
Secondary Target Audience:
Costco's secondary targeted audience is large
families, or individuals that are interested in buying products in balk
packaging (Costco Wholesale.) . These individuals tend to be more affluent,
urban, well-educated, and more of a liberal view (Khurana, A.). Their marketing
team will market to individuals that meet their customer profile. Costco's marketing team also
believes in the marketing strategy, word-of-mouth (Khurana, A.). They do that
by making sure that their members had a positive experience, to attract
potential new members.
SECTION 9|Research Development
Marketplace
Research
There is already a lot
market research available for Warehouse Clubs, such as Costco. Some of the
useful information includes analysis on the industry and sales reports form
Costco itself. Other useful information includes studies about their target
market. There are a variety of reports that you can purchase online that are
already compiled marketplace research, or you can choose to do the research
yourself.
Market
Observation
Costco’s primary
market is small businesses, and their secondary is affluent families. Below are
some market observations that are important for Costco to look at when making
marketing decisions.
Small
Business
· According to the U.S. Small Business
Administration, a small business is generally 500 or less employees (SBA,
2012).
· 2012 the U.S. Census said there was 6,232,434
small business in the U.S. (United States Census Bureau, 2012).
· slightly up from 2002, when there was
6,172,809 small businesses in the U.S. (United States Census Bureau, 2002).
Affluent
Families
· 2013 U.S. Census, the median U.S. household
income was $51,939 and the mean household income was $72,641(United States
Census Bureau, 2013).
· In metropolitan areas, the median household
income was $54,042 and mean was $75,476(United States Census Bureau, 2013).
· This is in comparison to outside metropolitan
areas, where the median was $42,881 and mean was $57,491 (United States Census
Bureau, 2013).
Advertising
Strategy:
Costco's advertising
strategies have been the same for a long time. Costco is a membership only
store, but is rather affordable to get a membership. When Costco has
opened a new warehouse they will generally only market to local small
businesses, for the most part the rest of their advertising is
word-of-mouth (Costco Wholesale.).
Costco sells most of
their products in bulk packaging, which makes it simple for a small business to
either resell a product, or for a large families to consume the products.
Costco also has their own private label, this does make them different from
their competitors. Costco's private brand Kirkland, had more than 330 products,
and makes up more than 15 percent of their sales (Costco Wholesale.).
SECTION 10|Precedent Studies
Precedent Studies:
Costco did not become
the 7th largest global retailer by no surprise, will millions
of products, create customer prices, and great valued products for a fraction
of other retailer’s prices. CEO, Jim Sinegal believe that most of their
successes comes from the way their employees are treated (Srikant, P., & Rajakumari, D.). Costco created a program that is directed
towards investing in their employees (Srikant, P., & Rajakumari, D.). The employees are offered befits to help motivate, and
retained employee loyalty.
SECTION 11| Marketing
Programs and Marketing Strategies
Advertising
Costco sends out:
· Monthly coupon mailer
· Magazine “The
Costco Connection”
These
publications are filled with information about products, opportunities and new
product lines that will be offered at Costco. They have a great smart phone
application, as well as an awesome online store.
Sales
promotions
Costco runs monthly
sales. The coupons are scanned at the checkout, no need to clip or
select any. If you are a member you get the sale price. A mailer is
sent out monthly as stated before complete with all coupon offers as well as
manufacturers INSTANT rebates. Usually store sale items are also the
items that are chosen for samples and direct marketing for that month.
Consumer
Consumers have an incentive to introduce or
refer new memberships and are rewarded for doing so! Consumers can
also chose to have an executive membership and earn points on ever y dollar
they spend. These points are converted into cash and mailed directly
to the consumer in an annual earnings check. Many members use this
check to re-new their membership. Membership becomes free!
Trade
Costco really has a unique sales model so by
design trade promotions are successful at Costco. It is true that
many of Costco’s products are packaged in bulk. However many of
their treasure items are the same size as those you would find at any
store. Bedding, towels, furniture, tools are all examples of
products one does not have to buy in bulk. Costco does buy these items at
bulk at a huge discount. These savings are passed directly to
members. These products are top of the line quality products. Costco
members trust the labels that Costco offers. Costco members also can
buy knowing that if not fully satisfied they can return the product for any
reason at almost any time.
Public
relations
Costco is known for
their wiliness to take back almost any item at almost any time no questions
asked for a full return. They want you to be
satisfied. If there is a recall, Costco lets you know early and
often. The customer service is second to none.
Personal
Selling & Direct Marketing
Costco does an amazing
job with personal selling and direct marketing. Ever visit a Costco
at lunch time? Many customers do. It is a great way to
try out new food items and have a terrific meal while
shopping. Costco always has sales people on the floor selling food;
road show (specialty limited time items), appliances (manufacturer reps), and
ready to speak to you about the product:
· How good the product is for you?
· Why you need it?
· What it is made from?
· Who produces it (locally, regionally, or
nationally?)
The personally selling
and direct marketing are specific ways to engage the end user directly and
entice them to try the product.
SECTION 12|References
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Woolf, B. (2014,
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