Introduction in 1993, operating under the name of

Introduction /
Problem / Aims and Objectives of the Report

Costco Wholesale Corporation is one of the biggest retailers in the
United States and the world. This company started as “Price Club” in San Diego,
California in 1976. Originally serving only small businesses, the company
discovered that it could achieve greater purchasing power serving a select
audience of members outside the company. It was this change that produced the
growth in the industry of the retail discount clubs. However, it was not until
1983 that Costco Wholesale debuted in Seattle, Washington. This company made
history, becoming the first company that reached a growth from zero to 3
billion in sales in less than 6 years. Costco and Price Club merged in 1993,
operating under the name of PriceCostco. In 1997 the name was summarized to
Costco, since then, the company has expanded around the world. Nowadays, Costco
is present in various countries including; United States, Puerto Rico, Canada,
Mexico, Taiwan, Japan, United Kingdom, Australia, Spain, France and Iceland.

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Costco characterizes itself in being a business based on the membership
of its customers. Their mission is “to
continually provide our members with quality goods and services at the lowest
possible prices”. In its mission, the company aims to contribute to the
improvement of the quality of life of people and small and medium businesses
through the reduction of costs, as well as the resale and personal use of
quality products with the best prices in the industry. In order to achieve
this, the company runs the business following their code of ethics; obeying the
law, caring for members, protecting the workforce, respecting suppliers and
rewarding shareholders. The vision of the organization is focused on increasing
the base of partners and stores around the world. Costco aims to provide: the
perfect products, the appropriate location, unbeatable conditions and the best
price.

The objective of this report is to identify how Costco Wholesale
Corporation is incorporating the old marketing DNA into the organisation’s
marketing operations. The greatest peculiarities of this corporation are
providing an excellent service to its members through the best market prices
and high quality products and the success they have achieved despite their
absence of advertising. Zineldin (2000) said in Understanding the New Marketing DNA, that nowadays it’s impossible
to do marketing without the use of technology. Costco is a company that has
struggled integrating marketing in their company and in this report we’ll
explore how even though this company has stuck with the Old Marketing DNA it is
one of the biggest retailer companies in the world. In addition, it will
identify key marketing tools used by Costco and assess their usefulness and
effectiveness. Simultaneously, practical recommendations for Costco as to
adopting the new marketing DNA will be made in this report.

STP Strategy

Costco Wholesale Corporation aims to attract the most affluent customers
in the retail discount club industry. The CNBC reports state that the average
Costco member is college educated, owns a home and earns about $100,000 USD per
year. This
company stands out for its particular operation based system of members that
pay an annual fee for being able to buy their varied catalog products. They
offer two types of membership – Trade and Individual, both with the option of
upgrading to the Executive Membership that has better benefits. It can be
implied that Costco uses a one-to-one segmentation strategy since they have
unique products and services for their members.

Costco reaches a target market where two segments are distinguished:
owners of small businesses looking to buy wholesale products and upper-middle
class families looking for good quality essential products. Although Costco has
traditionally focused its efforts on attracting older customers and areas
located in the suburbs of large cities, the fact is that these days, this
organization is strategically working to attract partners from a demographic
that represents a younger age. In fact, this company is developing a strategy
of attraction for new and young customers, as a consequence, of greater competitiveness
in a large digitalised environment.

In the retail industry, and particularly in the retail discount clubs
segment, there are three major competitors: Costco Wholesale, Sam’s Club (a
branch of Wal-Mart) and BJ’s Wholesale Club. Costco is the conglomerate
targeting customers with greater purchasing power. These retail discount
companies are not really a type of warehouse; rather they represent an
innovative business model. The competition between these discount clubs is
based on factors such as: price, quality of merchandise and selection, customer
service and the distribution of their stores.

The membership club industry has grown noticeably around the world. Companies
that adopt this style of membership that consists of “pay to buy” achieve
two important advantages: differentiation of the competition and the return of
customers. One of the characteristics that represent the success of this
business model is given by the high percentage of renewal of the membership.

Costco Wholesale in the United States maintains over 90% renewal of its member
clients. Simultaneously, the attrition rate is only 9% (Brian Woolf). Regarding
the three discount retailers, Costco is the company that raises the highest
annual revenues and it’s growing at a higher rate than the competition. Nevertheless,
there are certain elements that could put the Costco Wholesale leadership at
risk. For example, the annual membership of competitors is notoriously lower
giving them considerable competitive advantage and their digital presence is
more notable than that of Costco.

Over the years, Costco has extended the variety of products it offers,
this company markets; fresh products (fruits, vegetables, meat, fish, seafood,
bakery, pastries, flowers), clothing, books, software, electronics, computers,
appliances, solar panels, jewellery, art and decoration, tires, wines,
furniture, products pharmacists, processors of photographs, gas stations,
liquors, hearing and eye aid, among other products. Costco also has its own
brand “Kirkland Signature”. This label was introduced in 1995 and,
its name, is due to Costco’s corporate headquarters, which is located in
Kirklan, Washington.

According to Ashley Lutz from Business Insider, Costco has a simple
strategy for being one of the biggest retailers in the world; they just
concentrate on driving sales, meaning they sell a limited number of items that
increases sales volume and helps the company drive discounts. Meanwhile their competitors
focus on advertising and pouring money into marketing techniques, Costco adopts
a no-frills approach and they do not advertise their brand. 

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