From the video, one can describe Costco’s business model, which includes: high volume purchasing, efficient distribution, reduced handling of merchandise, high operating efficiency; low price, limited selection of quality merchandise and rapid inventory turnover. Operating efficiency and rapid turnover determine thin margins, but huge profit volume. From the business model, one could name several of multiple marketing concepts used by Costco.
1. Consumer Buying Behavior Concept
Any customer who makes a decision in regards to a purchase has to answer three simple questions: Will I get the right product for my needs? Will the product be of high quality? Will I get the best price available?
The answers that Costco gives these questions are satisfying
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In order to give the customers an opportunity to save about 30% compared with other retail shops Costco undertakes several measures. For one thing, the Company’s markup is only 15%, compared to typical 25% or even 50% in others. Also, the Company merchandises the products on industrial pallets in order to decrease cost of handling, packaging and placing. In addition, the Company undertakes any possible efforts to decrease the selling cost, meaning it orders square jars for cashew nuts instead of round ones in order to save space in transportation. That practice actually had significant results, because it saved the Company around 400 trucks a year. Costco tries to save on everything possible, in order to provide customer with more than a fair price, a good illustration of this is the price for a hot-dog and soda, which is kept $1.50 since 1985, being an extraordinary s symbol of Costco’s pricing …show more content…
Promotion Concept
• In regards to advertising, it should be mentioned that Costco limits its advertisement to direct mail to potential new customers. Forming and maintaining good customers’ relations is a key part of Costco’s business, most advertising at Costco is done through word-of-mouth after a membership base has been already established. Word-of-mouth is where Costco obtains most of their customers.
• Also, in relation to sales promotion, Costco focuses its marketing and promotional activities to new warehouse openings. The Company uses direct marketing to existing customers to promote merchandise. For example, there is the Executive Membership program that offers additional benefits to customers, such as annual 2% Reward on most Costco purchases, and extra benefits on member services. In order to attract more business owners, Costco works with American Express and creates new benefits for business owners, such as the opportunity to purchase a special card that offers businesses 5% annual rebate for gasoline purchases, 3% cash back for dining and
Promotion: Costco doesn’t have any conventional marketing/ promotion strategies like their competitors as they are not big on advertising. They email and mail their members flyers and product descriptions which help them maintain their customer retention. However, they don’t actively advertise to new customers, primarily relying on their current customers to advertise by word of mouth like Kimberley Peterson, the
Costco Wholesale Corporation was an uncommon type of retailers called wholesale clubs. These clubs differentiated themselves from other retailer by requiring annual membership purchase. Especially in case of Costco, their target market is wealthier clientele of small business owners and middle class shoppers. They are now known as a low cost or discount retailer where they sell products in bulk with limited brands and their own brand. The company is competing with stores like Wal-Mart, SAM’s, BJ’s, and Sears.
Costco Wholesale Corporation is an international chain of membership warehouses operating on the concept that offering members lower prices will produce high sales volume and rapid inventory turnover (“Annual Report” 4). While Costco warehouses are designed to help reduce costs for small-to-mid-sized companies, memberships are also available for individuals (“Company Profile”). The two memberships offered by Costco include Business and Gold Sta...
Compare your shopping experiences at retailers like Costco, Nordstrom, or Whole Foods with experiences you may have had at Walmart, Sears, or Kroger.
Costco also entices their customers with low prices on designated set apart products available only at their stores. Within these designated products, Costco provides a limited selection of nationwide brand-named merchandises in some wide categories. Their approach comprises of selling a limited number of items, keep their costs down, maintain a high volume, compensate employees well, ensure that customers buy their memberships, and target upscale small-business owners through their business only
The warehouse offers products such as appliances, clothing, handbags, computers, electronics, health & beauty, jewelry, office products, grocery, pet items, home items, gift cards etc. The Costco Services which supports all member’s needs from mortgage services, life insurance, payment processing, auto program, identity protection, dental plans, parts and service discounts, travel discounts etc. The company also has its own in store services, tire service, pharmacy, optical center, hearing aid center, photo center, propane and gas station which provides savings/discounts and rebates on products sold through these
As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is their expenses, which include merchandising costs and pre-opening expenses, have been increasing steadily and they need to balance this out to keep a positive net income. Analysis: Key Issue #1: Costco has many competitors, with the primary two being Sam’s Club, a wholesale business managed by Walmart, and BJ’s wholesale club. Sam’s Club offers the same services as Costco.
Being a stocker for Costco Wholesale is a straightforward job. The stocker comes in each morning and presented with the day 's’ tasks. The stocker is monitored throughout the day by the department manager to make sure all tasks are being met in a timely manner. Costco Wholesale works less like a business and more like a well tuned machine. If one cog in a machine is faulty or rusty then the whole system will run inefficiently. Managers need to work with subordinates to further improve productivity. To avoid ineffective managers, managerial candidates should be democratically elected by future subordinates.
Promotion is advertising to potential customers in and effort to create an awareness of your business. It is reasonable to believe that without the ability to advertise a company would have a difficult time generating new customers.
This essay describes how Costco has undergone evolutionary changes from its inception to present through its value chain model to become a success story. For example, in its distribution system, Costco utilizes the cross-docking technology to help in the conveyance of products in the different locations. This ensures that there are no product delays in the respective markets (Guo, 2016). Accordingly, Costco can attract more customers who prefer the warehousing services provided by the company.
Starbucks has many business-level strategies, such as cost leadership strategy. Starbucks focused on increasing its profits and compete with other competitors (Starbucks,n.d). According to Starbucks (n.d), “a cost leadership business strategy focuses on gaining advantage by reducing its economic costs below all of its competitors. Although Starbucks targets product differentiation as their main business strategy, they have also implemented cost savings strategies in an effort to maximize profitability. An example of Starbucks cost saving strategy can be identified between 2007 and 2008 when their operational expenses increased by more than $125 million while sales for the same time period were beginning to dip. As outsourcing for distribution contributed to 70% of Starbucks operational expenses, they began targeting these outsourcing agreements for renegotiations in an effort to bring down costs.” Starbucks intended to reduce their
Throughout the cost control, I have realized importance of the waste controlling and using seasonal ingredients. When we decorate, it is nice to use colorful fruit, but it rises the cost if you use them when they are not in season. Then I realized that we use lots of fresh fruit for decoration, and never concerned too much about the cost. VCC sells the baked products in lower price than outside. So we need a critical thinking about the cost as well. Otherwise, there will be no profit.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
Promotion. Finally comes promotion - informing the customer on the qualities and advantages of the product so that the potential buyer learns about the product, prefers it to those of the competitors, and has an opportunity to buy it at some place.
For e.g. Cadbury put their prices at the same as most of their competitors and at the price their customers are able to pay. 2. Cost plus pricing Pricing methods which are based on the cost structure of Cadbury that are favoured by accountants because they are supposedly more accurate and reliable. Cadbury is trying to maximise it profits. This method works successfully because all costs need to be accurately accounted.