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Why Middle-Aged White Guys Love Costco

May 5, 2014

CostcoCostco. The name alone gets the blood of middle-aged white men pumping. To them, it’s like porn.

And who can blame them? $13.99 Kirkland jeans, bulk toilet paper, little old ladies cooking up free food to sample…

With 649 locations, Costco is the second largest retailer in the United States. It’s the seventh largest retailer in the world.

How did it get so big?

The answer is Viagra from Costco’s pharmacy. And this…

7 Marketing Lessons from Costco

1. The Treasure Hunt – When you go in a Target, Kroger, or Wal-Mart, it will look the same as the last time you were there. Everything has its place and nothing moves.

Like a leprechaun playing a joke on you, Costco moves merchandise around on a regular basis.

Why? Because “exploring” is part of the Costco experience. And it’s smart business, because instead of the just the 12-pack of deodorant you went in for, you’re going to walk out with a few other things you didn’t know you “needed.”

2. The Coupon Trick – Every month, Costco sends customers a coupon book. They don’t actually take coupons though — you simply show the cashier your book when you check out and she gives you the discounted pricing.

If you don’t show the book, you don’t get the discount. And you can’t just tell the cashier the book is in your car either.

What the hell?

Here’s why…

By having the coupon book in the store with you, you’re more likely to look through it, which means you’ll be more likely to buy something mentioned.

3. The Enemy – Wal-Mart!! I hate them so much!!!

So does Costco.

Other things Costco doesn’t like include extremely high CEO salaries, working on Thanksgiving, and plastic shopping bags.

Every business can use a good enemy to fight against. If you don’t have one, you’re losing money. People (and companies) who like everybody and everything don’t connect with people because “no enemies” doesn’t exist in real life.

4. Treatment of Workers – The average employee wage at Costco is $21 per hour. Almost 90% of employees have company provided health insurance. The company scored 90/100 on the Human Rights Campaign’s Corporate Equality Index and is LGBT-friendly.

You’d think by reading all the propaganda from FOX News about how the Affordable Healthcare Act is killing jobs and lowering wages, there is no way this could happen.

Yet here we are.

Treat your people well. It will save you money in the long run, since you’ll have less employee turnover.

To give you something to compare to, Costco has less than 6% annual employee turnover. Wal-Mart has about 70% of employees leave within the first year.

5. Treatment of Customers – When Costco gets a deal on something, the savings are passed along to customers. The company never marks up products by more than 15%.

Have a problem with something you buy at Costco? They’ll take it back.

What do you do when your customers have a problem?

6. The Exclusivity – Not everybody can shop at Costco. For one, you have to be a member, which costs money. You also have to be willing to pay in via cash, check, or American Express.

Who has money to pay an annual membership fee? Who doesn’t need credit or, if they do, is eligible for an American Express card?

Rich people.

Smart move, Costco.

Who is your company selling to? Do your customers have money or are they broke?

7. The Advertising – Costco doesn’t advertise in the traditional sense. All advertising goes directly to its members.

An example of this is Costco’s magazine, Costco Connection. It’s full of content old white guys love, including articles on things like how to choose a cruise vacation (which you’ll book through Costco), how to keep your teeth clean (using a toothbrush you’ll buy at Costco), and how to tap into the fountain of youth (with pills from Costco).

Should you follow Costco’s lead and drop non-customer advertising? Maybe.

I love advertising, especially direct response advertising. Still, if it’s not working, there is no better way to throw money away.

If you’re doing ads of your company, you owe it to yourself to study direct response advertising. Anything else and you won’t be able to know if it’s working or not.

Final Thoughts

Sure, Costco’s prices are low, but people shop there for the experience. If it were just about a low price, the only store we’d have in this country would be Wal-Mart.

A good experience trumps everything. Nobody is talking about the good experiences received at Wal-Mart. The reason Wal-Mart’s prices are so low is because they can’t compete on anything else.

If you want to compete, remember you have options other than price.

ABOUT THIS SERIES: Every Monday, I analyze the good, bad, and ugly about the marketing behind a common business or famous personality. See other posts in this series here and, if you have a request for something (or someone) you’d like me to analyze for this series, contact me via Twitter.

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