Marketing Objectives
High sales volume per warehouse
Be the current low cost operator in retail
Open 33 to 35 new warehouses every year
Increase the number of warehouse club memberships
Target Market Strategy
Primary target customers.
Direct mail marketing
Word-of-mouth publicity to attract new members to the company.
Marketing Mix
Product
Costco offers their customers low prices on selected private and a limited selection of
nationally branded products in a wide range of merchandise categories.
Costco currently carries 330 private label items which make up 15% of their sales
Their major products are appliances, books, DVD movies, VHS movies, music
systems, computer and peripherals, electronics and camera, furniture, hardware
and outdoor living, health and wellness, jewelry and apparel, wine and food items.
Their major services are auto and home insurance, auto financing and refinancing,
real estate agent service, mortgage services, life insurance, travel, small-business
loans and lines of credit, and health insurance.
High-end products that are not available at stores can be purchased online at
Costco.com.
They carry only around 4,000 active stock keeping units.
Price
Costco refuses to mark up any item more than 14%, in contrast to supermarkets and
department stores, which often carry markups of 25% to 50%
The Gold Star membership is a personal membership available for
$45.00. An additional card is available for spouse or domestic
partner at no additional charge.
The Business membership is required for business purchases,
purchasing for resale, and writing business checks. The Business
membership is priced at $50.00 for two cards. Member can also
purchase upto six other membership cards at $40 each for partners.
The Executive card gives members 2% reward or up to $500
(whichever is lower) on their purchase, except for gasoline and
cigarettes. The rebate check from the executive card is guaranteed
or your money back.The Executive membership is priced $100.00
for two cards.
Place/Distribution
Costco currently operates 573 warehouses, including 417 in the United States and
Puerto Rico, 79 in Canada, 22 in the United Kingdom, seven in Korea, six in Taiwan,
nine in Japan, one in Australia and 32 in Mexico.
Costco has had success using an infill strategy when selecting an area to build a
warehouse. An infill strategy is the use of land within a built-up area for further
construction.
Costco is tentative when entering new markets because they rely on word-of-mouth ,
and they are fearful of the lack of familiarity with the warehouse.
Promotion
Advertising: direct mail & word of mouth.
Public Relations: Costco allows their customers to sample many of their products as
they walk through their warehouse. It gives customers the ability to try a product
risk-fee. They will provide a complete refund at the purchase price if the customer is
not completely satisfied, with the exception of electronics after 90 days and
cigarettes.
Personal Selling: When it comes to Costco employees selling goods and services at
their warehouses, they are generally informative, cheerful, and are known for their
experience because of Costco’s low turnover rate.
Sales Promotion: The card offers businesses 5% annual rebate for gasoline
purchases, 3% cash back for eating out, even takeout or delivery, 2% cash back for
traveling on airlines, for hotel stays, car rentals and cruises, including booking
through a travel agency.
Presentation
Costco operates in a warehouse-type setting. The average size of their warehouses is
around 140,000 square feet.
The first things you see when you walk into a Costco are the most expensive
products.
It is the job of the store manager to understand their customers in a given location,
and then present items in a way to entice these customers to maximize their sales.
Personnel and Customer Service
Costco employees are paid pretty well having their minimum wage at $10.50 per
hour.
There are no commissioned sales people that work at Costco. With no commissions,
customers do not feel pressured by Costco workers to purchase a given product.
people are satisfied with the benefits they receive from being a Costco member; this
is illustrated by a strong renewal rate of 87% .
Costco Return Policy
On merchandise: offering a full refund, subject to certain product specific
limitations.
On membership: refund membership fee in full at any time if a customer is
dissatisfied.
