Costco Wholesale - Case Study Example

Normally, it is the last stage of the distribution process. Understanding customer perceptions will help retailers to know about the nuances of marketing. Every retailer has to primarily identify his target market and the needs and expectations of that market and subsequently try to meet those expectations with efficient service. This is what exactly Costco is doing. Promotional strategies that are adopted by a retailer include different forms of communication to attract customers to the retail outlet.

For example, in the case of Costco, the 'buy-in' strategy that the company adopted is a promotional strategy. The company bought as much inventory as possible after Procter and Gamble announced a price hike of 6%. This would help the company to hold stock for the future when other players would buy the same stock at a higher price. The face of the retailing industry has undergone significant global changes over the past two decades. Retailing has always focused on offering the best quality products to customers.

Every retailer wants to offer the customers the right products at the right time at the right place and at the right price. Pricing the products and services might be a routine job for most producers and retailers, but it involves a thorough and deep understanding of the principles and practices governing the business environment. Adopting the right pricing strategy helps a company achieve its objective. To sustain and achieve its objectives in the competitive market, a company should adopt the most effective pricing mechanism.

Thus, pricing is very important to a marketer. Before adopting a pricing strategy, certain factors like the demand for the product or service in the market, customers' perception, the sustainable margin, the image of the company in the market, etc. Pricing is a very important aspect of the firms' existence and hence, firms must develop proper pricing strategies and convert them into effective competitive advantages. Pricing is the biggest challenge that marketers face, and quite often, they may feel that they have not set the right price.

This may be due to several reasons. One of the most important is that prices are dependent on market factors. The sales of a product have an impact on the pricing mechanism. However, the sales of a product can increase because it has been priced too low and not because it has been priced right. Setting the right price can have a substantial impact on the profits of the firm. Costco is using the market penetration pricing strategy to attract customers. It is only a few products that can be called truly innovative products.

Such products come into the market infrequently. Most of the times products introduced are copies of existing products with slight modifications. /firms try new approaches to attract customers who have many similar products to choose from. They employ sales promotions, membership cards, sponsorships, etc. to attract customers. Costco admits that more than half of its revenue is from membership fees. Firms resort to price cuts, and offer products below their competitors' prices to take away a large number of customers form their competitors.

This is the strategy that Costco has adopted. The expectation in offering products at low prices is that one customer uses the product, they will develop an interest in the product.