What make Costco success?

Generally, the aim of the marketing strategy and plan is increasing the revenue and decreasing the cost. So the company can make the more profit.

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The Costco established in America in 1983 and run around 30 years to be the second large supermarket in the world which just behind the first one Walmart. Nowadays Costco appears in many countries around the world and plays a strong role in the market. It is a creditable success in the retail field and creates a lot convenience and value to the customers. The sales revenue in 2015 has achieved 116 billion which even beyond the amount of Woolworth plus Coles.

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Why can Costco make such big success? What is its core competitive capability in the market? How to attract and keep the customer?

The success secret is the suitable strategy and plan they chose which is concentrate on increasing the sale and reducing the cost. Also, the smart way they rolled out.

Increase the sale revenue

Firstly, how they increase their sales amount? The Costco’s dominating strategy is the low price from the very beginning as the cheap always is the main reason which is customer consider about. For keeping the price as low as possible, the Costco only procure the several popular brands in one product and it is able to bid a cheaper price from the supplier. In addition, some products have a big discount even lower than the cost in order to attract the more customers and put the products deep into the store because the customer may buy other products which have high profits. For example, Costco has its own brand Kirkland and it has a high mark-up because it has no middlemen. Besides the Costco provide the high wage to the employee and push them maximally to get along with the customer and sale more products to the customer. The Treacy and Wiersema strategy mentioned customer intimacy. Customer intimacy means the company familiar with the data of customer, they know what customer want and need. And the good relationship like a bridge through the supermarket to customers. The stronger and wider the bridge is, the more flow will be created through it. In the other words, the good relationship with the customer will dramatically promote the sale. When the employee satisfied with their salary they will push themselves to sever the customer well. When the customer satisfied with the service they would happy to come here to purchase the goods next time. On the other side, there are many useful feedbacks from the conversation between customer and sale, the information will help to optimize the service and find problems in the system.

Reduce the cost

Secondly, How the Costco reduce the cost? At first, the Costco has no advertisement it means it assist to reduce the hundred million dollars comparing other competitors each year. The strategy matches the cost leadership in porter’s strategy. The cost leadership means the lower cost in procuring the products and providing the service. The Costco use sending new products information to the old customer by email instead of advertisement and adopt the lowest price and big discount to lure the new customer. The money they save from the product can reuse to lower the price further. Apart from that, the high salary for employee is a wise way in management. In short term, it may increase the cost. However, in the long term running, it enables to save more money, because if the experienced staff quit the job because of unsatisfied with the low salary, the company have to recruit the new employee to fill the vacuum and it will cost plenty of time and money in training. Furthermore, the experienced staff has the rich resource of the customer, if company lose one staff meaning lose the relationship with the related customers. So the high salary is the smart way to reduce the cost.

The future of the Costco

The future of the Costco will still keep the low price and big amount strategy because this strategy is fit in every market in the earth. On the one hand, it will enforce the already sale net and expand it to the more countries if possible. On the other hand, the Costco will use the high technology to assist to change the way to communicate with customer or delivery goods to the customer. So the Costco will go further and bigger in the future under the wise marketing strategy.

Reference

Ashley Lutz 2014, Costco’s Simple Strategy For Outperforming Wal-Mart And Target, Business Insider Australia, retrieved 24 July 2016, <http://www.businessinsider.com.au/costcos-simple-strategy-2014-9&gt;.

Iacobucci, D. (2014), Marketing Management (MM), 4th Edition, South-Western, Cenage Learning, Mason.

Trefis Team 2015, Here’s What Will Drive Costco’s Growth In The Future, Forbes Magazine, retrieved 24 July 2016, <http://www.forbes.com/sites/greatspeculations/2015/11/24/heres-what-will-drive-costcos-growth-in-the-future/#561d09ae1091&gt;.

Vanessa 2015, Costco’s Business Model Is Smarter Than You Think, Investopedia, retrieved 24 July 2016, <http://www.investopedia.com/articles/investing/070715/costcos-business-model-smarter-you-think.asp&gt;.

 

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