Costco Wholesale’s Marketing Mix (4Ps) Analysis

Costco Wholesale Corporation marketing mix, 4Ps, product, place, promotion, price, marketing strategies, case study and analysis
The food court of a Costco in Overland Park, Kansas. Costco Wholesale Corporation’s marketing mix (4Ps) successfully supports the business even without advertising. (Photo: Public Domain)

Costco Wholesale Corporation is the second biggest retailer in the world, behind Walmart. Costco’s marketing mix (4Ps) is one of the factors behind its success. The marketing mix is the set of strategies and tactics that a firm uses to implement its marketing plan. In Costco’s case, the business has a marketing mix that is relatively uncommon in the retail industry, especially in terms of the promotion element. Even though the company directly competes against other giants like Walmart, Costco maintains a marketing mix that capitalizes on pricing and the value of its products.

Costco Wholesale Corporation’s marketing mix (4Ps) effectively supports the company’s endeavors to maintain one of the top positions in the global retail market.

Costco Wholesale’s Products (Product Mix)

As a large retailer, Costco Wholesale offers a wide variety of products. This element of the marketing mix identifies the firm’s outputs. Compared to Walmart, Costco has a limited product mix, but has expanded its product offerings through time, to include the following main product categories:

  1. Appliances
  2. Auto & Tires
  3. Baby, Kids & Toys
  4. Clothing & Handbags
  5. Computers & Printers
  6. Electronics
  7. Furniture
  8. Grocery, Floral & Pets
  9. Holiday, Gifts & Tickets
  10. Home Improvement
  11. Health & Beauty
  12. Home, Kitchen, Bed & Bath
  13. Jewelry & Watches
  14. Office Products
  15. Patio & Outdoor
  16. Sports & Fitness
  17. Travel & Luggage
  18. Photo Center services
  19. Optical services
  20. Hearing Aid Center services
  21. Gasoline
  22. Business Services
  23. Home Services
  24. Life Services

In addition to the typical basic goods found in its warehouses/stores, Costco offers services, such as photo printing services, life insurance (under Life Services), and payroll services (under Business Services). This element of the marketing mix shows that Costco Wholesale Corporation has expanded its product mix to a considerable degree of diversification.

Place/Distribution in Costco’s Marketing Mix

Warehouse-style stores are the main places where Costco sells its products. This element of the marketing mix refers to the venues through which the firm distributes or sells its products to customers. Costco’s main places for product distribution are as follows:

  1. Warehouse-style stores
  2. The Costco online store
  3. The Costco mobile app

All of the company’s goods and services are typically available in its warehouse-style stores. However, consumers can also purchase products through Costco Wholesale’s e-commerce website. Mobile users may use the Costco mobile app to access information about products and to make a purchase. Customers may opt to have their online or mobile purchases delivered to their doorstep. In this element of the marketing mix, Costco Wholesale Corporation harnesses information technology for a broad market reach.

Costco Wholesale’s Promotion (Promotional Mix)

Costco Wholesale promotes its products through four main marketing communications tactics. This element of the marketing mix presents how the firm communicates with its target customers. Costco’s main promotion tactics are as follows, arranged according to significance in the company:

  1. Sales promotion
  2. Direct marketing
  3. Personal selling
  4. Public relations

Costco uses bulk/wholesale discounts as a form of sales promotions to lure consumers to its warehouses/stores. Members are guaranteed low prices for products sold per pack or in wholesale amounts. In addition, Costco uses direct marketing through emails to members, as well as The Costco Connection, which is a monthly publication that promotes products available at Costco warehouses/stores. On the other hand, personal selling happens when sales personnel persuade customers to purchase certain products at the warehouses. Costco applies public relations to boost its corporate and brand image. For example, the company has sustainability programs for its supply chain, and gives donations to support programs for children, education, and health and human services. The lack of advertising is a major factor that separates Costco’s marketing mix from those of other retailers like Walmart. Costco does not advertise, and relies more on its low prices and product value to attract consumers. Thus, this element of the marketing mix shows that Costco Wholesale Corporation effectively promotes its business and products even without advertising.

Costco’s Prices and Pricing Strategy

Costco Wholesale uses the market-oriented pricing strategy. This pricing strategy uses market conditions as basis for setting prices. In general, the company aims to offer the lowest possible prices for bulk/wholesale purchases, relative to the prices of other firms in the retail market. In a way, Costco’s pricing strategy is also a modified version of the high-low pricing strategy, which involves giving discounts to help customers save money. In Costco’s case, the discounts are achieved through bulk or wholesale purchases.

References
  • Constantinides, E. (2006). The marketing mix revisited: towards the 21st century marketing. Journal of Marketing Management22(3-4), 407-438.
  • Costco Online Store.
  • Costco Services.
  • Naik, P. A., Raman, K., & Winer, R. S. (2005). Planning marketing mix strategies in the presence of interaction effects. Marketing Science24(1), 25-34.
  • Rahmani, K., Emamisaleh, K., & Yadegari, R. (2015). Quality Function Deployment and New Product Development with a focus on Marketing Mix 4P model. Asian Journal of Research in Marketing4(2), 98-108.
  • The Costco Mobile App.
  • Van Waterschoot, W., & Van den Bulte, C. (1992). The 4P classification of the marketing mix revisited. The Journal of Marketing, 83-93.
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