Wednesday, November 15, 2006

Breeding Costco Loyalty...

DH's had this argument with many a friend, either you love or you hate Costco. You either kneel at the alter and worship the deals, or you think paying for membership to buy things in bulk a huge joke. There doesn't seem to many people in-between. But how does Costco build such brand loyalty? How do they manage to make people who high incomes loyal and devoted? It's a very strange phenomena, and we're only a young married couple without kids and we're already brainwashed into thinking it's a great deal...

I've come to a few conclusions, Costco forces companies to give them a cut rate deal on the items for sale. They only choose items that the consumer wants and tailors each store to the desires of the community it's in. However Costco keep the exact same layout for each store, so if you happen to wander into another store, you still feel at home. This is true whether your on the East or West Coast, or Canada. To give an example, in Canada they sell fries with curd and gravy, but in the states they sell hot dogs and chicken bakes. Absolutely brilliant. How many stores do you know cater to their neighborhood? Most big box stores just do the same thing everywhere and figure that everyone pretty much wants the same. Not true, it really draws you in when they tailor the products to thing you like

Second, the gas deals. That's what really got us hooked on Costco, was in San Diego the gas was 10-15 cents cheaper per gallon than anywhere else. So we we made our weekly trip to costco to fill up, and stopped in the store just to shop. Sure there is the $45/fee, which seems to deter a few people, but if you calculate you drive 10 gallons/week or 520 gallons a year, and you save 10 cents a gallon, then you've saved $52/year in gas alone. So there's your membership fee, everything else is gravy. By the way, I'm cheap enough that when we drove anywhere, we I would look up the possible Costco locations along the way with gas stations and fill up there to save even more. I typically drove 20-30 gallons a week between LA and SD for a few years and I know I saved a lot on gas, way more than the membership. Even then I split the membership with my mom.

But the argument is you spend more in bulk buying and you waste a lot. Not if you don't buy stuff that doesn't perish. Though I love their food deals, the better deals to be had have been on non-food stuff. If you buy their toilet paper, paper towels, paper plates, dishwashing detergent, laundry detergent, you get a better deal on average than regular store shopping. It doesn't beat coupon cutting, BUT that could also be argued because you don't have to waste time couponing. Another place for sure you save is something like Dove bodywash, a bottle is $5 at the store, at costco I've bought a two pack for $6 (with their coupon). Or shampoo. Also both our cars have tires from Costco, I looked online, but with a coupon from Costco it was cheaper than ordering it and putting it on. Plus they have a lifetime warranty where they give you back money depending on the wear. This happened to me and it was awesome. Also if you move, it doesn't matter, they'll honor it at your new Costco.

Another reason for such customer loyalty is Costco's phenomenal return policy. Our tv from last summer broke in May, we went back to Costco, they took it back no questions asked. Then we turned around a bought another tv. It probably got jarred in the move, but they were great. Their customer service is outstanding.

Another money savings is their clothes department. Last summer when DH started his job he had no clothes. So off to Costco we went and pretty much outfitted him for very little money. We got DKNY, Liz Clairborne, Tommy shirts on sale for about $10 each. And we got a few dockers khakis for $20. The one huge downside is you have to be a pretty standard size to fit, good thing DH's a M, 30/32. He's highly amused because he can identify people wearing Costco clothes now (since he owns so many). And we haven't shopped for him since.

Finally it's fun. Strangely enough our best networking has been done at Costco. We see people there from work, or people we see at work but know at Costco. We chat and find common ground in our "thiftness" and love of a deal. Maybe it won't translate into a promotion, but oddly enough it did help DH network to find place to apply for job...and his application was seen.

How does Costco breed such loyalty? Undercutting prices, tailoring the store to the customer base, superior customer service, fantastic deals for people who hate cutting coupons, and making the shopping experience fun.

But does Costco save you money? I guess the answer is up to you...I've been a loyal customer for almost 7 years now, but the bulk of my savings came in the form of gas. Worth it? Yes, I drove close to 2k miles/month and the gas savings of 10 cents/gallon made a huge difference. I'm branded for life a Costco member.

Although I have been considering checking out Sam's Club. But from what I've seen and heard they just don't have the same brazing loyalty or branding...

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