3.) Promotion:
a. Advertising: Costco limits its advertisement to direct mail to potential new customers. Forming and maintaining good customers relations is a key part of Costco’s business, most advertising is done through word-of-mouth after a membership base has been established (Annual Report 2006). Word-of-mouth is where Costco obtains most of their customers.
b. Public Relations: Costco allows their customers to sample many of their products as they walk through their warehouse. It gives customers the ability to try a product risk-fee. Wall Street analysts have criticized Costco for many years for treating employees too well and offering generous benefits at the expense of their investors (Harris, 2007). In March of 2007, the lowest wage will increase 10 percent to $10.50 an hour and the top scale will rise 4.3 percent to $20. On the other hand, many customers continue to shop at Costco because of how well they treat their employees. Costco provides their customers with a 100% satisfaction guarantee on memberships and merchandise. They will provide a complete refund at the purchase price if the customer is not completely satisfied, with the exception of electronics after 90 days, diamonds 1.10ct or larger, and cigarettes (Costco.com).
c. Personal Selling: When a Costco warehouse opens in a given location, marketers contact businesses around the area to see if they would be interested in becoming a member (Annual Report 2006). When it comes to Costco employees selling goods and services at their warehouses, they are generally informative, cheerful, and are known for their experience because of Costco’s low turnover rate. The difficult part is that they are very thin on the floor and it may be difficult to locate an available employee.
d. Sales Promotion: Costco limits its marketing and promotional activities to new warehouse openings (Annual Report 2006). They do use direct marketing to existing customers to promote merchandise. The Executive Membership program offers additional benefits to customers. They receive an annual 2% Reward on most Costco purchases, and extra benefits on member services (Costco.com). Costco and American Express have come together to offer even more benefits to small business owners that have a membership with Costco. They are providing businesses the ability to purchase a TrueEarnings(SM) Business Card. The card offers businesses 5% annual rebate for gasoline purchases, 3% cash back for eating out, even takeout or delivery, 2% cash back for traveling on airlines, for hotel stays, car rentals and cruises, including booking through a travel agency; and 1% cash back virtually everywhere else, inside or outside of Costco warehouses. Costco does not accept MasterCard or Visa credit cards, so the TrueEarnings(SM) Business Card tends to be a popular option to Costco members.