Costco Case (Chapter 15 Marketing Mangement 14e)

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Marketing management 14ed, Kotler & Keller Chapter 15: Costco case (p.444) What is unique about Costco’s channel management process? What components can other retailers borrow or implement? Costco, the largest warehouse club retailers in the United States, was, first, a unique concept. The main purpose of shopping at establishments like Costco is to get low prices. Costco arrived in the market with a specific channel management that includes: · Goals: offering a broad range of brand name and private label merchandise at extremely low prices. · Policies. Costco does not sell anything in its warehouse stores with a margin that is higher than 14%, except for its private label pro ducts, Kirkland Signature. Kirkland Signature products may have margins that reach 15%. Costco has maintained the same membership fees for most of its 600 locations for the past 5 years. With commodity prices rising, Costco could raise prices, but tries not to. When the cost of bananas increased in early 2011, Costco raised the per bunch price by 4 to 5 cents, but reduced the price once the cost of bananas fell. This frugality and cost saving mindset is engrained in the Costco culture. Most Costco executives answer their own phones. · Products. Costco carries approximately 4,000 SKUs— only the fastest-selling flavors, sizes, models, and colors from a single vendor in each category. This efficient product sourcing results in several outcomes: high volume of sales, rapid inventory turnover, extremely low prices, and better product manageability. · Sales/Marketing Programs. Costco spends little on marketing and promotions, except for the occasional direct mail to prospective new members and coupons to regular members. Costco is a one-level channel retailer; other retailers could save money buy implementing that. Retailers could also reduce the number of products that they

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