How Costco Creates Fans
Note: Costco’s success is well documented, but this weekend I’m going to talk not about their fiscal success, but how they’ve created evangelists and why I am among them. They exemplify a brand that is worthy of a weekend.
To me, the exciting thing about Costco evangelists is that lurk in unexpected places. There are lots of people who do not need to pinch pennies or stock a house to feed a family of 12 who will still go out of their way to shop at this membership warehouse. Here’s my take on their ingredients for success:
Amazing Customer Service – How do they achieve this? They take care of their employees (paid an average of $17/hour) which reduces turnover and supports a knowledgeable sales staff. Costco both creates internal evangelists and makes the connection between taking care of employees and their motivation in taking care of customers.
Return Policy – They return everything for any reason. They have only recently limited electronics to a 90 day policy due to the amount they were losing on those tech returns.
Controlled Markup – Costco marks prices up by no more than 15% over wholesale. So no matter what a great buy they make, they pass along the savings to customers.
The Treasure Hunt – This is the secret sauce. Costco goes out of its way to surprise and excite its visitors with limited availability designer items. This solves two major challenges faced by warehouse stores – with products sold in such huge quantities, why visit regularly and why buy now? According to CEO Jim Sinegal last month:
“We have used the analogy in the past that one time they may come in and see that we have some Coach handbags and they come in the next time and the Coach handbags aren’t there, but perhaps there are some Fila jackets. The attitude is that if you see it, you have got to buy it because it may not be there next time. We purposely try to merchandise to that type of mind-set…We carry about 4,000 stock-keeping units, and about 1,000 of them are constantly in that changing mode, where they provide that treasure-hunt atmosphere.”