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Costco Companies, Inc.: Marketing 658
Costco Companies, Inc.: Marketing 658
Marketing 658
Frank Fisher
Background Information
• In 1997 Costco had a net income of $312 million on sales of $21.5 billion.
– 16 million member households.
– Earned $400 million in annual fees.
• For Costco, bigger was not only better but imperative. The only way to
continue to reduce costs was to move more people and products through its
building. Possible expansion opportunities included:
– Domestic
– International
– Product Diversification
– Different Formats
Background Information
• After P&G approached Costco with a proposal to purchase their customer
membership data Costco decided to leverage their list of loyal members by
offering a natural market for anything that required the purchaser to trust the
supplier.
Costco’s core operating philosophy was based upon “taking costs out of
the supply chain,” as a result, Costco preferred to do operations by itself.
“We don’t make good partners.” –Jim Sinegal (CEO)
• Salmon & Tyson Foods: Costco worked with the suppliers to improve
supply chain logistics, all the while bringing price down by buying in
bulk.
• Entering the Service industry (Auto, Home, Mortgage…)
• Retention Dynamics:
– Will the new Executive Membership reduce the rate of customer defection?
– Or Increase the longevity of the customer relationships?
– Is this focusing a disproportionate effort on high-profit customers?
3 Revenue diversification.