Marketing: Costco Company - Term Paper Example

? MARKETING Introduction Based on stiff competition in the business atmosphere at the local and international levels, various companies have come up with various marketing strategies in their efforts to keep at bay their competitors. For example, based on the technological advancement, majority of companies have emulated e-marketing as a way of expanding their marketing share thus increasing their total sales and revenue. Similarly, firms have adopted extensive advertisement and promotion of their brands through social sites such as face book and twitter in order to attract young consumers who are regular visitors of the social sites. One of the notable companies that have put in place effective marketing strategies is Costco Company. Being the second largest distributor and seller merchandise among other products in US, Costco Company operates in more than 8 countries. The company has more than 200 brands that are produced to meet the large customer base that the company is enjoying. Major products that are produced by the company include sea food, home electronics, solar panels, photo processors, baked goods, hot tubs, and meat among others. This paper discusses key marketing activities that are undertaken by Costco Company thus becoming a successful firm in the wholesale sector. Marketing strategies One of the major strategies that Costco Company uses to attract and retain its customers is by use of technology. For example, the company has initiated varieties of adverts that are undertaken though television channels as well as YouTube. As a result, the company has increased its number of customers in US as well as in foreign countries. Based on the increased need to maintain productive employees, Costco Company has undertaken various corporate social responsibilities. For example, the company provides quality health care to all its employees an aspect that has resulted to attainment of employees as well as corporate objectives. Costco Company also focuses at using hospitality industry to improve its image on the eyes of the public. For example, the company has established children hospitals that are operated using the company financial resources. In 2012, the company spent 1% of its pre-tax earning to finance the children hospitals. As compared to its competitors, Costco Company has a wide product portfolio (Gupta, 2006). In this way, the company is in a position to meet the needs of large number of customers. In the same way, the company brands target wide market including young people, old consumers, executives, sportsmen among others. Consequently, the company has created a strong positive customer product relationship. One of the notable marketing strategies that Costco emulates is to offer low prices and to sell large number of products (Fredrix, 2009). By providing variety of brands, the company focuses at big and small businesses as well as large families. Ethics and corporate social responsibility Many marketers today are faced with ethical conflicts in regard to Corporate Social Responsibility (CSR). Costco Company corporate responsibility is regulated by a corporate reputation body which is a group of senior managers derived from the company. The CSR body strategizes methods of dealing with problems identified as risks and hindrances confronting the targeted community as well as its business advancement (Weeden, 1998). The company’s corporate governance guideline clearly outlines the approach to Corporate Social Responsibility and these approaches are systematically reviewed to ensure they meet international best practices. As mentioned earlier, Costco Company has embarked on is the sponsorship of humanitarian activities including children hospital, protection of animals as well as environmental conservation. Costco Company is a global company that is focused at initiating international brands in various marketing segments. Through its cutting edge online advertisement, Costco Company emulates global marketing that has not only made the company to be positioned as a leader in the warehousing industry but also it has resulted to increased revenue. The first aspect that has made Costco to effectively control global market is innovation. Based on the need to provide quality brands that caters for the needs of its customers, the company has highly invested in innovation in the form of expanded product portfolio as well as production facilities. Innovation is taken by Costco as one of the major strategies of attaining its 2013 business objectives. Secondly, the company adopts high level of creativity. As a result, the company has established well designed adverts that are easily noticed by its consumers. Based on its increased level of creativity, the company has established well designed warehouses in countries such as Taiwan, Mexico, Japan, Canada and Australia among others. Thirdly, the company is focused at creating a strong impact on its consumers. This is depicted by the company efforts to come up with large number of brand ideas, advertisement messages as well as strong engagement with its local and foreign customers. Approach to consumers and businesses Costco Company approaches it customers by use of effective market segmentation. Costco Company has fully understood the needs of its different consumers in the international market. Based on the diversified need of its consumers in various regions, the company emulates demographic, geographic, behavioral and psychographic market segmentation. This way the company is in a position to effectively face off its key rival that includes Sam's Club and BJ's Wholesale Club among others. Demographic segmentation In order to effectively deal with the challenges in the local and international markets Costco Company has segmented it market based on customer age, gender, nationality, family size among other criteria. Based on the fact that Costco maintains wide range of brands it makes it possible to attract all customers regardless of their age. Geographic segmentation To cater for the needs of its customers from different regions of the world, Costco Company brands come with different tastes, color and packaging. One of the major strategies that the company has adopted to ensure that it meets the needs of its customers in different locations is by undertaking market research. In this way, the company is in a position to produce brands of different taste, designs and volume as required by its consumers. Behavioral segmentation Costco Company also has segmented its customers in terms of their behaviors. Depending on their surroundings, consumers behave in a different way. To curb such opportunities, Costco provides brands that fit their consumers in various occasions. For example, during occasions such as Christmas among others, Costco Company launches promotional strategies such competition that results to increased purchasing of its brands Psychographic segmentations Costco Company emulates psychographic segmentation. This entails identifying the habits and lifestyle of the consumers and providing appropriate brand that meet the needs of their consumers. For instance, in Europe and other western countries many customers have the habit of purchasing modern technology including home electronics and computers during end of months. To cater for the increased demand from customers during this time, the company has established more than 650 outlets thus ensuring that consumers easily access their favorite products. Development and management of products Having been in the wholesaling industry for over 20years, Costco Company prides itself with a strong brand portfolio. The company continues to explore new lines of modern electronics and at the same time extending lines of existing products. It is essentially very feasible to conduct a market research based on a market focused approach in product development. The company undertakes market research aimed at a customer based approach rather than product based. Since Costco Company operates in various segments it engages in market research of perceptions of existing range of products both company owned and from its rivals, capitalizing on customer driven opportunities to extend its range of products. Being headquartered in Issaquah, Washington, Costco seeks to implement a multi-segmentation of strategies in its major markets aiming at individual market clusters alienated by consumption events, competitive level and socioeconomic factors. Distribution Costco has distribution network in over 8 countries and a large number of ventures in foreign countries. It has engaged in a well-structured product, packaging of ready to use products. By implementing its segmentation strategy and through classification of its markets, the company has developed targeted efforts aimed at a particular segment and distribution channel. It’s most viable avenues of distribution are wholesale outlets as well as other businesses selling to the consumers. These include restaurants and cafe, canteens, supermarkets and other bottom of the chain distributors. The company continuously evaluates it distribution channels in order to come up with effective distribution models that can fit to the changing market place dynamics based on geographic conditions and customer profiling. To meet this urge, Costco started a pre-sale system that separates sales and delivery functions whereby delivery trucks are loaded with a mixture of products previously ordered by retailers and thus an increment in sales and range of distribution. The company also uses telemarketing system which is complemented by pre-sales visits. A major acquisition by Costco Company for the last five years has been a contributory factor that has led to its fast growth. Costco has also made other major acquisitions which include Costco Travel among others. All this has added significantly to distribution networks the company boasts around the world. Marketing, communications, advertising and promotions Marketing, been considered as one of the most significant aspects to practice for a business to thrive in today’s intensely competitive global industries, its importance is greatly increasing. Many business authorities are agreeing to the fact that marketing today is a wider function of business comprising many elements. And these elements are inclusive of communications, advertising and promotions all of which need to be perfected for a company to have a sustainable long term prospect. Costco has employed various media formats in order to promote its products. Media is described as an institution facilitating where appropriate messaging of functional constraints of space, and it is the most effective way of communication, advertising and doing promotions. The media has not been rivaled when it comes to reaching out to the populace since its distribution and coverage is very wide. Media is branched into two categories namely visual/aural media which include television, cinemas, radio and billboards. On the other hand, published media newspapers, magazines and internet. Costco for the last 20 years has been using media advertising and continues to use various types of media to promote and communicate with its customers and potential consumers. Newspapers are the major media the company widely uses. In the same way, Costco products are been advertised in magazines widely at a global level due to easier accessibility of magazines by the customer segment targeted by the company. Another media format used by Costco to place advertisements and communicate with the world is the internet. Named brand online advertisement, the company undertakes widespread use of banners, on-site sponsorships and pop-up ads and other sorts of online advertisements available in thousands of websites. Television is very popular way of communicating with people regardless of information been passed, and Costco has used a substantial amount of its financial resources to advertise through television in many countries. Costco TV ads are well customized to align with different characteristics of targeted local culture so as to avoid conflict with cultural values observed in particular segment of clientele. Radio adverts done by Costco media advertisement usually lasts only for few seconds, but repeated numerous times in between programs through out the day is a most efficient way of increasing brand awareness level and customer loyalty. Costco billboards are extensively placed in most city centers around the world and they can be seen along most major high ways as well as in social and entertainment places. Whereas posters are generally displayed at the public places like in the transport sector and on walls of some of the shops and restaurants. Pricing process Costco Company uses different prices depending on the size of its products. Being one of the aspects of marketing mix adopted by Costco, prices are used to depict the value that the company has placed on its customers. In this regard, the company culture is to offer low prices for its brands making them to be affordable by all customers regardless of their income. Prices in vending machines and other outlets such as gas stations are usually fixed while those in retail outlets are varied depending on the costs of transportation incurred by the distributors. Technology and marketing Costco Company has instituted ways of accelerating its operations by use of technological innovations in marketing and sales. The company is now using technology to cultivate a direct contact with customers and to come up with a supply chain based on demand. Costco has spent hundreds of millions yearly on digital marketing and on social media marketing. To achieve its marketing goals, Costco recruited talented IT people and hired experienced personnel in the digital field and interactive marketing. It has also placed an enterprise architect along with his team in the Silicon Valley to access solution faster. A major breakthrough is the Costco freestyle, a revolutionary fountain dispenser which is an effective and a complex sensitive technology based on a computer that is embedded in the fountain machine. It precisely calculates with surgical clarity the components of over a 100 various beverage brands. In this way consumers can experiment with a little of several brands until get one that suits their taste. This leads to increased sales since most of this customers come back again to the fountains to get the particular drink they had earlier. Recently, the company created Costco Cash Cards that allow its consumers to make non-cash purchases any time they wish. Other mode of payments adopted by the company includes debit cards and American Express (Webster, 2009). Costco position in a competitive industry There is an interesting shift in the marketing of consumer packaged goods and for a company to survive and wear of the stiff competition and retain its relevance, it has to stay close to the changing trends and Costco has formulated ways of staying above its worthy rivals by investing heavily in marketing through advertising and engaging in corporate social responsibilities. According to Webster (2009), Costco has an edge over its rivals when it comes to financial stability and easily wipes out competition posed by small upcoming wholesale enterprises. The longevity of Costco in this industry has accumulated a huge experience which is effectively utilized when venturing into new products. With over 650 warehouses placed across the globe, and with its numerous ranges of brands that are widely known, complemented by the Kirkland Signature brand which is a house hold name, the company can enjoy sustained competitiveness even with pressure coming from its competition in this industry. As compared to other companies in the industry, Costco Company is more competitive. One of the major brands that have made the company to retain its customers and attract new clients is Kirkland Signature. The company has effectively positioned the Kirkland Signature brand thus making it create a good image on the eyes of its consumers. It is worth to note that rival companies do not have major brand that depicts their position in the market. According to majority of consumers, Kirkland Signature is the only brand of bottled water that can meet their needs. Through extensive advertisement of the Kirkland Signature and the use of young and old people in its adverts, the company has strongly placed Kirkland Signature in the minds of the consumers thus enhancing the purchasing power of the consumers (Webster, 2009). The use of simple brand names is another major tactics that the company has adopted. This has made its customers to remember their favorite brands without much assistance from the sales executives. It is imperative to note that advertisement is a major aspect that attracts the attention of majority of consumers. Through the use of modern avenues of advertisement including facebook, twitter, electronic billboards among others, Costco Company has effectively communicated with its customers. Additionally, Kirkland Signature brand is regularly marketed during sporting activities such as football and athletics. In this way, the brand has been recognized as a key contributor in the company corporate social responsibilities. In an industry that is characterized with stiff competition, Costco Company sees itself as a competitive company. Even though the company has quite a number of strengths and opportunities that make it have a significant control of the soft drink industry. Strengths One of the major strength that makes Costco Company a market leader in the warehousing industry is its strong brand. Costco Company has more than 200 types of products that are produced to meet the needs of the consumers. Based on the increased revenue, Costco Company has highly invested in promotions and advertisement of its brands in the recent years. Effective distribution channels have also assisted in transportation of the company brands from bottlers who are located in various locations to the outlets. Costco Company has strength of fast growth in revenue in various markets including Asia, Asia pacific and Latin America. Consequently, the company is generating high revenue that is used in its expansion strategies in the developing economies. Weakness Despite its efforts to meet the needs of its target customers, Costco Company has been faced with various critics. For example, the company was accused of buying pork that did not meet health standards. Based on this negative image, the company sales volumes reduced thus jeopardizing its operations (Allison, 2009). Another notable weakness affecting Costco Company is the declining cash from the operating activities. This was especially experienced during the recent global economy crisis that resulted to decline in cash inflow. Opportunities One of the major opportunities that have positive implication on the expansion of Costco Company is acquisition of other firms in the warehousing industry. As the world population of increases, the demand for Costco Company brands is deemed to increase. In the same way, due to the increase in economic power by the world population especially in the developing countries, their purchasing power has expanded thus improving Costco Company sales. Threats One of the major threats that interfere with the competitive position being enjoyed by Costco Company is stiff competition arising from other manufacturers and distributors of consumers and capital goods. Key competitors that are threatening Costco operations in the developing countries include Wal-Mart, Sam's Club and BJ's Wholesale Club's among others (Kotler and Armstrong, 2010). Even though the company is focused at expanding its product portfolio, slow rate of expansion in foreign countries is becoming a threat for the company. This has resulted to taking over of some Costco market share to its competitors. Costco Company fiscal viability and marketing expenditure Costco Company fiscal viability is appropriate. The company operates in more than 8 countries an aspect that has made it possible to enjoy wide customer base. Similarly, the increased investment in production facility that entails use of modern technology has made the company to effectively serve its market niche. One of the major regions that Costco has effectively penetrated is United Kingdom. With an investment of more than US$2 billion, the company has significantly expanded its production capacity to meet the increased demand of its products. According to the company management, Costco is focused at investing $3.5 billion in the India market in the next 10 years. Other areas that the company is aiming to intensify operations are Africa and Middle East. This is based on the emergence of large number of private and public companies that are focused at putting at bay Costco Company. Based on the extensive investment in promotion and advertising of its products, Costco Company incurs high operations costs. The company hires the services of Costco Travel. Costco Travel is responsible for producing, distributing as well as marketing of Costco products in the local and international markets. With more than 290 workers, Costco Travel responsibilities are vital in ensuring that foreign branches are in line with the parent company based in US. Costco Company significantly relies on word of mouth marketing. In this regard, the company allocates little funds to cater for its marketing activities. Unlike its competitors who use a lot of funds, Costco spends approximately $100 million dollar on marketing. Conclusion The success of Costco Company is largely attributed to the extensive marketing strategies that the company has put in place. Despite stiff competition from the US based firms, the company has embarked on extensive investment in traditional advertising, promotion, market research and employees training. Being a company that is focused at creating a strong positive relationship with the society, Costco does not overlook corporate social responsibility. This is depicted by the sponsorship that the company has continued to undertake in the field of sports, education, environmental conservation and health. One of the major aspects that the company emulates in order to effectively approach its customer is market segmentation. In this way, the company is in a position to develop products that meets the needs of each of its customer segments. Through the use of franchisees and foreign wholesales, the company has effectively distributed its brands in the international market. Just like other global companies, Costco Company has extensively utilized technology to market its products in the international market. This is portrayed by extensive use of e-marketing and well designed adverts. In addition to offering affordable prices and quality products, the company provides conducive work environment that exposes its workers to personal development. Consequently, the company has acquired a remarkable position in the soft drink industry. Even though the company incurs high costs during its marketing campaign, the revenue generated thereof is adequate to offset the expenses thus resulting to a high level of profitability. References Allison, M. (2009).Costco bans treatment of veal calves that industry calls typical.. The Seattle Times. Retrieved 22April 2012. Fredrix, E. (2009). Costco nixes Coke products over pricing dispute. Associated Press. Retrieved 22April 2012. Gupta, S. (2006). Managing Customers as Investments: The Strategic Value of Customers in the Long Run. Upper Saddle River: Pearson Education publishers. Kotler, P & Armstrong, G. (2010). Marketing: An Introduction. London: Pearson. Webster, F. (2009). Industrial Marketing. London: John Wiley & Sons. Weeden, C.1998. Corporate Social Investing: New Strategies for Giving and Getting Corporate Contributions. San Francisco: Berett- Koehler Publishers, Inc. Read More