One major reason Costco appeals to customers is that the company excels at building a loyal customer community. First and foremost it may be the low prices it offers, but there are also several other reasons the retailer ranks among the leaders in its industry for customer satisfaction.
From a customer’s point of view, Costco has managed to capture the mind of its consumers due to its
- It is a Membership based warehouse: Regular membership is $55 a year for the primary cardholder. Executive membership with added benefits, including a 2% annual purchase rebate, is offered for $110. Not only does it reward the higher spending members but it encourages all Executive members to seek out other Costco items and services to buy, such as its lower-cost insurance and travel offers. It works: 38% of members who are Executive generally spend more than others and their share of sales continues to grow.
- Costco constantly works at bringing items to market at the lowest cost. Rather than increasing profits by raising its margins, it chooses to increase profits by selling more volume at lower margins. If Costco cannot obtain an item at the lowest cost, it will not stock it, this targets value-conscious consumers.
- Costco is always changing its brands and introducing new products in order to provide customers a sense of excitement, urgency, and a need to visit frequently, Costco provides a flow of in-out items continually throughout the year thereby giving consumers with pleasant treasure hunt experience.
With so many options provided for the consumer to make their shopping experience better with each step, Costco provides services such as: Concierge service: Costco offers a free “concierge” service to members who purchase electronics, to help answer questions regarding setup and use and avoid potential returns due to not understanding how to use the products. A guarantee of quality. Their model promises fundamentally “100% satisfaction” and they mean it. Their return policy stands out among the best in many retail categories and they are exceptionally relaxed about fulfilling it. Costco will take back an empty package of any food, if you are not satisfied, and give you your money back.
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The Bottom Line is consumers don’t turn to the company due to its high profits they turn to it because the company fulfills a market niche. Ask yourself: how many retailers do you know of that make the majority of their profit by selling the right to shop? Customers are loyal to Costco because they get quality products and good prices.
