Group- 5
Group- 5
Mast
Mastahat
ahat Ahmed
Ahmed
11164011
11164011
Arif
Arif Md.
Md. Salehin
Salehin
11164012
11164012
Md.
Md. Nur
Nur Rahman
Rahman Abdullah
Abdullah
11164020
11164020
Md.
Md. Salim
Salim Sark
Sarker
er
11164021
11164021
Md.
Md. Jahidur
Jahidur Rahim
Rahim
11164035
11164035
T
Tabrez
abrez Nazir
Nazir
1116402
11164022
2
Case Analysis on Costco Companies Inc.
Case Analysis on Costco Companies Inc.
Case Introduction
Case Introduction
•
•
On July 21, 1998, Pat Turpin, Vice president of
On July 21, 1998, Pat Turpin, Vice president of
Executive member services for Costco
Executive member services for Costco
Companies Inc had to recommend how to
Companies Inc had to recommend how to
market a new service program
market a new service program
•
•
Costco dev
Costco developed a portfolio of
eloped a portfolio of services
services
••
Services would be available with a annual
Services would be available with a annual
membership fee of $ 100
membership fee of $ 100
•
Case
Case Intr
Introduction
oduction
••
Never really had to market before
Never really had to market before
••
Through services they wanted to offer good
Through services they wanted to offer good
value to customers
value to customers
•
•
Turpin felt, marketing a new service related
Turpin felt, marketing a new service related
program is a big challenge
program is a big challenge
•
•
Selling insurance is very
Selling insurance is very differ
different from selling
ent from selling
products
products
Background of the company
Background of the company
•
• Costco Companies Inc.-fCostco Companies Inc.-founded in tounded in the north west of Unitedhe north west of United
States in 1983 States in 1983
•
• Costco fCostco followed the business format of price ollowed the business format of price clubclub
•
• Costco also expanded internationally and in other parts of USCostco also expanded internationally and in other parts of US
•
• In July In July 1998, Costco operated in 24 states1998, Costco operated in 24 states – – UK, Canada,UK, Canada,
Mexico and Asia with 278 outlets Mexico and Asia with 278 outlets
•
• WarWarehouses- designed ehouses- designed to operate efficientlyto operate efficiently
Costco had two types of members Costco had two types of members
Background of the company
Background of the company
•
• They had 25 million card holdersThey had 25 million card holders
•
• In 1997 through membership fees they earned $400In 1997 through membership fees they earned $400
million million •
• In FY 1997- earned $312 million on saleIn FY 1997- earned $312 million on sales of $21.5 billions of $21.5 billion
•
• Costco provides- good brands, large size at good valueCostco provides- good brands, large size at good value
•
• Through high volume purchase and close relationshipThrough high volume purchase and close relationship – – low price
low price advantadvantageage •
Identifica
Identification of i
tion of issues
ssues
Major Issue
Major Issue “Marketing a new service program”“Marketing a new service program”
Significant Challenges
Significant Challenges
•
•
Method for marketing the service
Method for marketing the service
related program
related program
•
•
Selecting the target customer
Selecting the target customer
•
•
Pricing the service is difficult
Pricing the service is difficult
“It is more than just a ma
“It is more than just a marketing
rketing
question”
Identification
Identification of
of issues
issues (Contd
(Contd.)
.)
Other related issuesOther related issues •
• Not trying Not trying to improve/sto improve/stopping tendencytopping tendency
•
• Limited SKULimited SKU
•
• Iron clad rule and price Iron clad rule and price lowering trendlowering trend
•
• Focused on large purchaserFocused on large purchaser
•
• Management capabilityManagement capability
•
• Brand imageBrand image
•
Analysis of issues
Analysis of issues
•
• Costco is new in service Costco is new in service offofferingserings
•
• Selecting target customSelecting target customer is a er is a BIG challengeBIG challenge
•
• Product offProduct offerings vs. erings vs. Service Service offofferingserings
•
• Previous record of stopping many offerings like- paperPrevious record of stopping many offerings like- paper towel, orange juice
towel, orange juice •
• Less variety in Less variety in offofferings may create an erings may create an impressionimpression
among the consumers th
among the consumers that “at “This service is not for me”This service is not for me”
•
• Price lowering trend may create suspect in Price lowering trend may create suspect in consumerconsumer mind
Analysis of issues
Analysis of issues (Cont
(Contd.)
d.)
•
• Focusing only on the Large purchaser may not be a wiseFocusing only on the Large purchaser may not be a wise decision in servi
decision in service offce offeringserings •
• PercentPercentage of members who might use the age of members who might use the services variedservices varied - Long distance telephone service
- Long distance telephone service (All Members)(All Members)
- Credit card processing (20% of business members) - Credit card processing (20% of business members)
- Home owners tended to refinance or move only once in - Home owners tended to refinance or move only once in seven years
seven years
- Health insurance carries some restrictions - Health insurance carries some restrictions - For auto
Analysis of issues
Analysis of issues (Cont
(Contd.)
d.)
•
• Employees-not much capable to deal with serviceEmployees-not much capable to deal with service offerings
offerings - New
- New services require PERSONAL SELLING TOUCHservices require PERSONAL SELLING TOUCH - Employees encouraged the shoppers to sign up - Employees encouraged the shoppers to sign up - Unable to explain the benefits
- Unable to explain the benefits •
• Working as ADC may destroy the brand image of CostcoWorking as ADC may destroy the brand image of Costco - Memory of bad
- Memory of bad service stay longer than the memory of service stay longer than the memory of good service in the
good service in the consumer mindconsumer mind
- To reduce cost Costco was trying to deal with newer - To reduce cost Costco was trying to deal with newer organizations
Analysis of issues
Analysis of issues (Cont
(Contd.)
d.)
Low response rate of direct mailLow response rate of direct mail
- Washington business members generated 1% response - Washington business members generated 1% response (for Health insurance)
(for Health insurance) -
- Full package in Full package in four four states states generated generated 4% r4% responsesponsee •
• Generic mail to all Generic mail to all the membersthe members
•
• Members were not aware about the programMembers were not aware about the program
•
• Difficulty in comparing pricesDifficulty in comparing prices
•
• Difficulty in switching servicesDifficulty in switching services
•
Recommendations
Recommendations
•
• They should not try to do a lot of things at the sameThey should not try to do a lot of things at the same time
time •
• They should increase variety in They should increase variety in their offeringstheir offerings
•
• Iron clad rule Iron clad rule for making profit should be for making profit should be relaxrelaxeded
•
• They should be consistent in bringing change or qualityThey should be consistent in bringing change or quality improvement
improvement •
• They should offer the service of They should offer the service of established branestablished brandsds
•
• Employee capabilities should also be increasedEmployee capabilities should also be increased
•
• They can also offer services iThey can also offer services in international marketn international market
•
Thinking out of the BOX
Thinking out of the BOX
Changing the Old School Ideas
Changing the Old School Ideas
•
•
Teaser mails: doing it in 1998
Teaser mails: doing it in 1998
••
Unusual Shaped Leaflets and
Unusual Shaped Leaflets and Flyer
Flyerss
••
Printed Materials- used in daily life
Printed Materials- used in daily life
•Thinking out of the BOX
Thinking out of the BOX
•
•
They should not only consider the bulk purchaser of
They should not only consider the bulk purchaser of
services
services
•
•
Considering only the price;
Considering only the price; focus more on cust
focus more on customer
omer
service for offerings
service for offerings
Conclusion
Conclusion
•
•