Free Essay: The Product Strategy for Costco

Published: 2023-08-03
Free Essay: The Product Strategy for Costco
Type of paper:  Essay
Categories:  Company Strategic marketing SWOT analysis
Pages: 8
Wordcount: 1961 words
17 min read

The product strategy for Costco is aimed at providing the market with products that are unique to their stores only, and this is achieved through delivering a marketing mix that is specified by the customers. Therefore, there is little specialization in the products that the store provides so that the consumers can access a wide variety of goods under one roof (Greenhouse, 2005). The store seeks to sell their products at wholesale prices, and therefore since they purchase their wares on a large scale, they also benefit from the economies of scale.

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The pricing strategy of Costco is set to provide the consumers for value for their money by offering the products on sale at wholesale prices. This is achieved through the store's ability to buy their supplies in large scale, hence enjoying the economies of scale associated with buying in bulk. Pricing is among the marketing strategy that the store seeks to take advantage of, by offering low prices for bulk purchases, as well as goods that are limited editions (Berman, 2010). Also, customers who sign up to become members of the store are given special discounts and offers.

The worldwide headquarters for Costco is in Washington. Over the years, the store has been able to set up over 700 warehouses worldwide, with the majority of those located in the US and the others in Canada. The store’s business presence is felt across the globe, and the globalization of business in the world has helped in creating the needed motivation for the stores to set up in all the locations that they can. The strategy of an excellent location for the business has led to more sales and a wide customer base.

Costco’s promotion and advertisement strategy are mainly reliant on ambush marketing strategies and discount promotion, seeking to persuade the thrifty customers to shop into any of the store’s branches closest to them (Shi, Yu & Jen, 2015). Additionally, the store is also famous for their treasure hunts, which give the customers a chance to buy luxury products at low prices, and this has been an essential move in marketing the store, its costs and bringing in and maintaining a strong customer base. The major selling point for the store is their low prices for bulk purchases and the ability to provide a wide range of goods under one roof.

My Opinion on Costco’s 4 Ps

I like the pricing strategy of the store since it provides the market with the essential goods that they need at affordable prices. In a way, it can be said that they are playing a part in improving the quality of life in the locations that they are located in. Additionally, the pricing strategy is an eye-opener to other companies, since it goes to show that an establishment can still prosper even when they do not excessively charge their customers for the prices that they are provided with. Therefore, the pricing strategy is vital in creating room for improvement for the competing firms in the market, as well as providing a learning opportunity for upcoming businesses, since they can adopt the strategies employed by Costco to provide the needed goods at prices that are attractive to the market, while also giving room for making profits.

Additionally, there is convenience whenever one shops at Costco since the store offers a wide variety of goods under one roof. This saves the consumers’ time since they are not required to move to different stores looking for the products that they need. Costco’s ability to supply food, farm tools, medication, furniture, electronics, among other goods is a convenient move for customers. It is also commendable that the store has put in efforts to locate their stores in convenient locations where people from different parts can access it, and they are provided with parking spaces despite the large number of customers who flock the areas. I also like that Costco is family-friendly, with their pricing strategy of reducing prices when buys in large volumes, as well as their activities which provide room for families to bond and strengthen their relationship with each other.

However, despite the positive aspects of the store, there are some areas of improvement. For example, due to their comparatively low prices, the store draws in large crowds, and the current number of staff is unable to serve them effectively. Therefore, long queues are witnessed in the stores, and they in turn work against the store, since the customers may tend to avoid them due to the delays in service. Additionally, despite their efforts to provide enough parking for their customers, there are still customers who do not access parking spaces. Therefore the future establishment of stores should put the issue of parking into consideration. Also, the lack of specialization in the products supplied by the store may prove detrimental to the consumers, due to the store's lack of specialization may lead to contamination of the food items by the non-food items in the store.

I would also suggest for the store to invest more robustly in online shopping and delivery services to ensure that they reduce the crowding incidences in their establishments. Due to their preference for customers physically picking the goods they purchase, the stores are crowded most of the time. Still, if they invested more in online services and delivery services, they would reduce the crowds, while also increasing their sales volumes since online shopping is accessible by people who are unable to access the stores due to their locations or other factors. Additionally, I would suggest that they increase their number of employees so that even if they do not immediately pick up the idea of deliveries and online shopping, then they would be able to serve their customers more effectively. This way, the store's reputation for slow service would be changed, and in its place, they would be preferred for the effectively timely services that they offer their customers.

SWOT Analysis of Costco


First, the store has managed to maintain a strong brand presence due to the goods that it provides to the market as well as the competitive prices that they offer to the market. Therefore, despite the existence of intense competition in the market, Costco's strong branding strategy has enabled them to remain strong due to the strength that comes with being an established brand in the market. Established brands instil a feeling of trust from the consumers, and when consumers trust a brand's products, customer loyalty is built (Dalavagas, 2015). Secondly, the store's vast chain of warehouses in and out of the US has offered the store the advantage of having an impact on a significant market share as compared to the stores that have single branches. With a strong brand presence and having branches in many locations, the company has been able to create brand loyalty and customer loyalty, which helps them to attract and maintain customers. The company’s excellent financial performance has also played a role in establishing the store as a strong player in the convenience stores categories. The increased number of members is directly linked to an increase in revenues that the store receives, thus strengthening the store’s position in the market.

Competitive prices are another business strategy that has enabled the store to stay ahead of their competition (Baek & Wang, 2018). When thrifty shop at the stores, they shop in bulk, since they seek to get the discounts given for large-scale purchases. This helps them to save money, and therefore creating a selling point for the stores, as well as establishing a strong customer base. The discounts offered to large-scale purchases are also aimed at allowing the customers to buy more products, enabling the company to make more profits. The store's merchandise range is another strong selling point since there is no specialization on the goods that the store offers to the market. Therefore, the store provides the consumers with a wide variety of products, at reduced prices, and this gives the consumers the incentive they need to flock the facilities. Additionally, the store enjoys a vast customer base, mainly because of the prices that it offers to the consumers and the convenience that comes with the availability of an array of goods under one roof.


First, the company’s overdependence on the American and Canadian markets is a weakness to them, since should any negative eventuality befall the markets in either of the two countries, then the company would experience losses or closure. Therefore, the store must diversify its market reach so that their risks are spread across the board. Additionally, the store does not invest as heavily in marketing as its competitors, and this is a worrying trend (Dalavagas, 2015). Although the store boasts of a big market base due to the policies that it has on pricing and the possibility of shopping under one roof, there is still need for the corporation to undertake rigorous marketing drives that would ensure that they access an even more significant share of the market than the one that they have currently. Their dependence on their prices to act as their marketing strategy may prove useless and work against them in case of changes in pricing, and therefore they need a backup plan to help them maintain their hold of the market they control now.


The store can invest in more technology to help them to improve the services that they offer to their customers. Therefore, Costco can use technology such as artificial intelligence to improve the speed in which they provide services to their customers. The use of technology will also help them to access a more significant market share through online marketing and shopping, which is a contributing factor to the growth and success of the business. Additionally, due to their little efforts towards marketing, the company can take advantage of digital marketing channels as a way to popularize the brand and the products that they offer (Dalavagas, 2015). Digital marketing is cheaper than other marketing strategies. Despite their lower expenses, they reach out to a large number of potential consumers who may not be aware of the goods and services that the store offers for its customers. Emerging markets are also an opportunity for the brand since they can use the trust that they have built in the markets that they are currently located in to establish branches in other market locations, hence helping them to make more profits. There is also an opportunity in expanding further the category of goods offered by Costco, which will help them to get more customers coming into their facilities. When compared to its competitors like Walmart, it is possible to see the difference in the success of the two companies based on Walmart's ability to provide more varieties of goods and services.


Barriers to membership of the corporation have been widely mentioned as a reason for the reduced growth in the company. While customers may want to become members of the store, they may be unable to get the membership fee that is required of them, thus reducing the possibility of customers visiting the facilities, as well as reducing the number of loyal customers due to registration fees. Secondly, the existence of equally expansive and thriving competitions in the industry brings about a change in the dynamics that the company operates in since they have to be careful on how they treat their customers and the prices that they offer them, to a point where they may start offering prices that are so low that they experience losses, in a bid to appease their customers. There are also increased overhead costs associated with the store, with the wage bills being the most outstanding issue of the market (Dalavagas, 2015).

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