#327: Costco Wholesale - Secrets of Success from this Multi-Billion-Dollar Retailer

Costco is one of the world’s largest retailers, featuring warehouses and club memberships in eleven countries around the world.

It is famous as a true pricing leader while delivering exceptional quality for its members, as well as “endless aisles” of both commodity products and unexpected “treasures” for members in their stores.

Listen to hear the story of this incredibly successful business, as shared by Robin Ross, the Assistant Vice President of Corporate Marketing & Membership at Costco Wholesale in the United States.

Robin shares Costco’s approach to driving customer loyalty as a mindset, and how mutually beneficial relationships have also been essential to consistently achieving such a profitable business for over 40 years.

Hosted by Paula Thomas.

Show Notes:

1) Robin Ross, the Assistant Vice President of Corporate Marketing & Membership at Costco Wholesale

2) Costco

3) Feedback Link

Audio Transcript

Welcome to Let’s Talk Loyalty, an Industry podcast for loyalty marketing professionals. I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas from loyalty specialists around the world.

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Hello and welcome to today’s episode of Lets Talk Loyalty featuring Costco Wholesale. The multi-billion dollar retailer with warehouses and club memberships operating in 11 countries around the world. As one of the world’s largest retailers, Costco is famous as a true pricing authority, delivering exceptional quality for its members, as well as “endless aisles” of both commodity products and unexpected treasures for members in their store.

Joining me today to share the story of this incredible business is Robin Ross, the Assistant Vice President of Corporate Marketing and Membership at Costco Wholesale in the United States. In today’s conversation, Robin shares Costco’s approach to driving customer loyalty as a mindset, driving mutually business relationships, which have been essential to consistently achieving such a business over the last 40 years.

Robin also shares some of their key areas of focus in order to drive the advocacy they rely on from their. I really hope you enjoy my conversation with Robin Ross from Costco Wholesale.

Paula: So Robin Ross, welcome to Lets Talk Loyalty.

Robin: Hey Paul. Nice to be here.

Paula: Great, great. And thank you for staying up, working late. I know we’ve, uh, a big 12 hour time difference between us today. ,

Robin: Not a problem. Still, still early enough that I’m not in my pajamas yet. Yeah. ,

Paula: I’m very glad cuz we do have video. Yep. Super stuff Robin.

So as you know, I am really fascinated about Costco and how you create customer loyalty in general, not necessarily within a structured loyalty program. So before we get into talking about everything that you do within the Costco, As you know, I always love to start by asking your favorite loyalty program as an industry professional.

So please do tell

  1. I, I knew the question was coming and, and, and I’m just thinking of where my loyalty really exists. And the, and the thing that really came up to me, uh, recently is, is my loyalty with Alaska Airlines. That that is a, a, uh, uh, they, they, they fly all over, uh, the us. Uh, but they’re, they’re a.

uh, they have a great product. They, they give you great, uh, really rewards in terms of, of being a member of their program and mm-hmm. , I think they, they do a really good job of recognizing you as a member. And I think that’s, when I, when I look at good structured loyalty programs, that’s something that, that you, you wanna be acknowledged and you wanna kinda see your value and I think they do a good job.

wonderful. But value is certainly course the Costco brand. So that’s obviously something that resonates with you. But I think the other point I like about that actually, Robin, is I guess the moment of truth because I think there’s an awful lot of loyalty programs that start off, you know, with a lot of investment, a lot of great ideas.

And then don’t always happen when you’re either, you know, on the airline at the check-in desk mm-hmm. or even in a retail store. So, sounds like Alaska Airlines is doing an amazing job for you.

Robin: I, I, I really see that they, uh, They, they try to rise to the occasion every, every time that they, they get there.

Do they get it right Every single time? No. But on, and, and I don’t think anybody does, but when they do get it wrong and you bring it to their attention, I think, uh, another good mark of a good company is they, they work to get it right. So,

Paula: Got it. Got it. Wonderful. So we’re here to talk about Costco. Um, first and foremost, you have been an incredibly loyal employee for 21 years now, Robin.

So tell us first and foremost your, I suppose, your career trajectory in the business. Um, I think it’s pretty much your whole career. And why have you stayed loyal to, to the Costco business? It’s quite amazing. The

Robin: story that I tell at my, my LinkedIn is, isn’t completely, uh, updated on here, but I’ve been with the company 29 years.

Oh my God. I just, God just, yeah. I just had my 29th year, November 1st. Wow. But I had lived overseas, uh Okay. In Japan. And, and when I came home near the airport where I lived in Canada, there was a sign that said Future Home of Costco. And, and it looked like a big place. Mm-hmm. . And I was a person not. Uh, employed at the time, and I figured I will work there until I find a real job.

And yeah, 29 years later, that has not seemed to have transpired yet. so ,

Paula: but I’m guessing it, it became a real job. Huh?

Robin: It, it did. I, I think, and I’m, I’m not a unique story with the company, which is, uh, probably one of the, the really cool things about Costco is that most of the leadership with the company started in, in the stores working at the, at, at the level.

I started as a person who was going business to business, talking about what a Costco membership was and why you should become a Costco member, and that was. Old school door to door, having a conversation. And, and that’s kind of brought me to today where I’ve got responsibility for really, uh, uh, carving out the strategy for those programs throughout, uh, the us.

Right. So it’s just, it, it’s been a transition of working in the stores. Mm-hmm. moving into regional management changing countries. I, I came from the Canadian side of the business to the US side of the business in 2007. Mm. And, and just taking on additional responsibilities and, and elevated roles. Uh, there, but 29 years later, I’m now working for the corporate office.

Yeah. Uh, we’re, we’re kind of scattered throughout the world and I’ve had some amazing experiences and not. only supporting kind of the growth of Costco of the US but supporting it internationally as well.

Paula: For sure. And I think the fact that you lived overseas, Robin, first of all, is super exciting to hear.

I did see your name on LinkedIn, of course, in Japanese as well as in English. So just yes, briefly tell us why did you go to Japan? What? What was that?

Robin: I, I’ve, uh, had the opportunity to study karate for nearly 40 years. So my teacher, uh, who is from Okinawa, his, his school, I had the chance to go to Japan with him in 1990.

And, and then in 1993, I decided I wanna come back. And so I went for the sheer purpose. of, of studying karate. Wow. So they, they have something in, uh, in Japanese they call it shi, which means a live-in student. So it was a friend and I, we, we had just kind of been in a place in our life where we’re kind of say, if we don’t go now, we’ll never go.

Yeah. . So we went and lived and breath karate for, for the next six months. And I’ve been back to Japan. In OK. Now, probably a dozen times since then, just from different training, but that, that kind of started my journey Wow. Over there and kind of gave me a new, uh, a, a whole new kind of lens. Just it, just having that experience in a foreign country just gives you a new perspective on things.

Paula: that’s exactly what I was thinking. As you said, Robin, it totally gives you the international perspective. So, I mean, I come from a country which, um, is the opposite in many ways to the US in that we are tiny, so we all leave at some point, whether it’s mm-hmm. , you know, permanently or on holidays, but, In the us.

I mean, it’s such a huge country that I know an awful lot of people spent all of their lives within the borders of the United States. So I love to hear that you got the chance to go abroad and take that perspective. So super exciting. I was very curious about that in, uh, in your LinkedIn profile. So let’s get into the Costco story, Robin.

Um, again, I suppose coming from Ireland, I am one of the, the countries. Wouldn’t have been as aware of the full value proposition. Mm-hmm. in terms of the business model. And I said to you before we started recording that, to me this show is about talking about customer loyalty, even if there is no structured loyalty program in place.

Now, I know you do have a structured loyalty program, but actually Costco, fundamentally your business model relies on customer loyalty because it is a subscription model, so, mm-hmm. , tell us a bit about the business and maybe its history and the scale of its operations right now. Yeah,

Robin: so if you go back to Costco’s original Roots, it started in 1976 when there was a company called Price Club.

Price Club was started by the founder, Saul Price. Mm-hmm. , uh, and it was really a warehouse club model. At that time, honestly, based on, uh, getting different groups of people qualified for membership, to build a base of people to establish buying power that allowed you to then work with different, uh, non-foods and foods manufacturers to, to really, uh, buy, buy volume and pass on those savings to your member.

that was kind of the original intention of how this started, and that was like government groups and, and, and really you, you had to qualify to, to be a Costco member, so it was a very unique kind of game in town. Our founder, c e o worked for Saul Price and, and ended up leaving and founding Costco in 1980.

Okay, so he, he went to, uh, Costco or Price Club originally started in San Diego. Mm-hmm. , Jim Senegal, our founder, came to Seattle in 19, uh, what, what was established in Seattle, and then started Costco with Jeff Brotman in 1983. Mm-hmm. and, and originally started that we will probably be a Northwest operator.

Will, will probably have upwards of a dozen to 20 location. Mm. Uh, uh, and we will be non-foods, but the same, uh, essentially model in terms we will be a membership club. Mm-hmm. , uh, our whole intent is, is really to go represent our members, uh, source the right items, uh, to bring them. And our operating philosophy is pretty, pretty unique in terms of, if you think of a typical grocery store or a.

Uh, like a big box store, they, the, the number of SKUs that they would carry would be a hundred to 150,000. Where you look at a Costco, we are very deliberate that we, uh, we carry upwards of only 3,800 different SKUs. So we wanna be best in category of the, of the, uh, the, the specific merchandising categories that we wanna participate in.

Yeah. And that being, that, that will allow us to establish the. and volume that we need to really be a differentiator in terms of the volume that we can buy and then in turn in the, to the savings that we can pass on to our members. So the big core pieces of the business model was, was around, uh, a membership base, limited skew set.

Uh, but every operating principle we have is how do we pass value onto the. So it’s not about how much we can make off an item. It’s honestly how, how low can we sell an item is almost an, uh, an internal operating philosophy. And I think that’s really what people sensed when they really looked at how Costco operated that.

there was a, uh, we, uh, we, it was termed, it wasn’t our term, but certainly the market says Costco has a pricing authority, right? Like they, they are really nice, sensitive to their pricing and, and, uh, uh, that that authority really when, when somebody’s a member of Costco and they know we carry an item, They, they, we’ve built a trust with them that they know we’ve done the work in terms of establishing the quality.

We’ve done the work in terms of establishing what that pricing is. And then the other piece that we’ve added, Is, is our refund policy guarantee is that there, there is no risk, uh, to, to buying a product from Costcos that if if you’re unhappy with it, you just bring it back, right? So that, that has evolved over the years in terms of some electronics.

But, but essentially, uh, we, we want you to be happy with the items that you buy and, and some people think we’re a little bit crazy. in terms of our, our return policy is, uh, is liberal, but honestly, it’s, it’s a business decision, right? Mm-hmm. , because we know that, that, uh, really establishes a relationship with a trust with our members, and that that is the most important thing to us.

yeah. That if we have the trust of our members, they’re, they’re gonna make some purchasing decisions with us because they, they know, uh, they know, they know what to expect. And I, I think that’s a, a big piece of how we wanna protect the brand long term because it’s, it’s where you’ve seen companies that’s lo have lost their way in the past, or they don’t respect that relationship with the.

Yeah. And, and when you kind of talk about those moments of truth, that’s the moment of truth when somebody’s coming to return an item. Yeah. And, and we wanna make it as easy as possible, right? Yeah. If this is not working for you, let’s figure out, uh, how to make you happy. Because if, if you had a bad experience Yeah.

Or it was not a great item, let, let’s fix it. Yeah. Let, let’s get you set up and.

Paula: And I saw the same, I suppose integrity is the word I love to use. Robin. I saw that even on the actual membership application because obviously I was on the Costco website today. Mm-hmm. , looking at the, the two tiers that you do offer, first of all, I love the simplicity, the fact that it’s $60 or $120, amazing.

Mm-hmm. , but both with that same, uh, commitment guarantee of satisfaction. Mm-hmm. and I’ve often thought. . You know, we, we talk about subscription loyalty a lot, Robin in, in our industry, I guess, and you guys obviously embody that. And I often feel that something a lot of businesses miss about how subscription works is the importance of being easy to cancel.

Mm-hmm. , to your point about easy to return, easy to refund. Mm-hmm. and I. It’s, it’s slightly counterintuitive, I think, to a business if they’re not operating from that place of integrity, that they’re nervous that they’ll make it too easy to cancel. But I think with you guys, it’s super is so why? Why would anybody not do it?

Cuz they know they can undo it if they need to.

Robin: We think so, and that, that, that all goes back to the founders philosophy, Jim Senegal. And, and even so price is that it’s, it needs to work out for you. This, this should not be a gotcha kind of relationship that you’re in. Yeah. And, and that, that’s not gonna work out for a year.

But the, the, the whole idea that the membership is a hundred percent refundable at any time Yeah. Really speaks to how we need to operate the. Because you’re gonna, if you can get out of that so easy, you need other reasons to stay, right? Yeah. So if we’re not doing our job Yeah. In terms of being a good operator, uh, sourcing good items, and, and then creating a really good experience for you when you come in.

Yeah. To our warehouses or to our stores. Uh, then, then, then we miss out. I’m, I’m a believer in, in the whole idea of good profits, bad profits. Okay. So when, when you’ve kind of got businesses that trap you and it make it difficult to get out Yeah. Uh, that Yeah. Th that’s you, that’s not loyalty, right. That that is not loyalty, that’s entrapment.

Right. Totally. You, that person is stuck. Yeah. And, and the, the whole idea and. Uh, j just of the NPSs score. Right. And the, are you willing Yeah. To kind of, uh, uh, Advocate, I guess, to recommend this. Yeah. Right. To, to somebody else. That, that’s a true measure of your business. Because if you, if there’s no vested interest other than this is, this is good for you, for you mm-hmm.

For me, and I think it’ll be good for you. Mm-hmm. And, and you share that with people, that, that is how Costco grew it’s business really early days. There we’re a company that prides itself and, and I’m a person that works in, in, in marketing, but we’re a company that prides itself in not doing marketing.

So it’s very difficult to hold that title and then maintaining Got it. And maintain that, that that standard. Yeah. There. But, but really it’s, our members do most of our work for us in terms of sharing it. What we need to do is be a good operator every day. Yeah. So they’ve got stories to. .

Paula: Wow. God, I love the clarity of thinking, Robin.

Um, and you know, super impressed to hear that you do think about net promoter score because you know, as a business model, of course you have the ultimate measure of, you know, loyalty in terms of behavior. Mm-hmm. , and I know you do publish that, uh, subscription renewal rate, which is incredibly impressive.

Do you want to share that with our audience, Robin? I think it’s amazing. Yeah,

Robin: we’ve certainly, our report card is our members renewing, right? At the end of the day, if we did our job, that the member makes a decision, do, do I stay a Costco member or do I not stay a Costco member? And we’re, we’re happy to stay in, in the US we’re, we’re renewing 92%.

Of our membership base and internationally, uh, we we’re now at a 90% renewal rate. Wow. So what, what we see, and it, it’s, it’s a massively important number that our senior leadership is very tied into. Uh, certainly Wall Street is, is kind, kind of tied into it in, in terms of what’s going on there. But we, we wait to, to kind of make sure that nothing’s impacting that number.

Yeah. Because really it’s all the other pieces that come into play. Yeah. Uh, when that, when that’s working right, then, then that renewal should be an easy decision. Yeah. And when it’s not, that, that’s something we, we need to, to be watching. Right. And do, do we have people that, that, uh, and attrition and are we trying to learn.

Absolutely. All the time. We’re trying to, to kind of figure out what didn’t, uh, didn’t necessarily make sense for you to be a Costco member and, and what, why is it that you’re churning and most, most of the people that we lose, We, we kinda look at it, it is kind of, in the first year is probably where most of our attrition, because I, I’m not sure if you had the opportunity to be into a Costco before.

But it is a different shopping experience. Right. So, uh, b beforehand we’re, we’re the limited amount of SKUs. Yeah. Uh, we’re, we’re we, we consider ourselves what’s called a low cost operator. So you will walk in, there is not piped in music. There is not, uh, the, the floors are concrete, that is steel, everything is on a pallet because we’re looking for the efficiencies in terms of making sure our costs are low. So that’s making sure things are packaged on a pallet. Very easy to stock, very easy to merchandise, which allows us to control our labor costs. Yeah. Uh, in there, but, but also being a, a good employer in terms of wage rates, in terms of retail.

Right. So it’s not that we want to build a business on the backs of the employees. That, that I, I think another measure of, of something that we’re good at. It’s just our employee loyalty. Right. So just the, the, the, the tenure I, I, I gave you the story. I’ve been around for 29. Yeah, with Costco, but a lot of our employees are very tenured as well too.

And I think we have a unique experience compared to, to other retail is that when you come into our stores or to, to our warehouses, you build a relationship with those employees. That is, uh, a term we use internally to. Where’s your Costco? We’ve got people that wait in specific lines for certain cashiers.

They, they’ve seen their kids grow up. They, wow. They, it, it is, it is. I, I don’t, I don’t know of another retailer that has been able to build that, that kind of relationship with their, with their member base. Yeah. They’re customer bits. Yeah.

Paula: Yeah. Even though I don’t live in a, in a Costco country, let’s call it, um, I, I will absolutely make it my, my business to come and take a membership and go and have the experience in a store.

Robin, whenever I’m in, I.

Robin: I’ll meet you in the UK and we can, we can walk through some of the Yeah. The, the warehouses there. But, uh, I, I really, it’s, it’s a, a very energizing experience when people shop in our stores.

Paula: Yes, yes. And clearly a key point of pride. So congratulations on the renewal rate, Robin, because that’s where, as we say, the old cliche, the rubber meets the road.

Mm-hmm. , the fact that you do, obviously internally, of course. The number one K p i I can imagine for the board, but also to report that externally is very impressive as well. So, mm-hmm. really good learnings for us to understand, you know, what are people deciding to do. And just as a matter of curiosity, you know, you, you’ve given us the insight that, you know, if you do lose people, it’s often in the first year and maybe they, who knows, you know, doesn’t suit their lifestyle, that there’s all sorts of reasons.

Do you spend, I suppose, time or. Or, or invest in, in research, or how do you, how do you go about learning from the people who don’t renew? Is there, um, I’m sure there’s a structured methodology there to, to get the best insights in terms of obviously evolving to keep driving that number up.

Robin: Cer certainly there, what we’ve done surveys in the past, we wanna make sure we have a good understanding that, that it was not a service issue.

Right. And, and that typically we, we’ll kind of find it, it’s based on proximity to a location. It’s based on changes in, in, in life. Uh, and sometimes it’s just such a learned shopping experience that they just didn’t, didn’t get. Right. And what, what’s kinda interesting, you may have started Yeah. Uh, as, as a Costco member, let that lapse.

But what they find us when, when the need meets them. Right. And yeah, we’re not necessarily the, the, the, uh, Uh, we don’t have the youngest members coming in, and I think there’s a certain, based on what our pack sizes are, based on what our merchandising selection is, there’s a certain kind of spot in your life that is, is where you have, uh, a level of discretionary income.

Mm-hmm. , a, a, a kind of, kind of a need in terms of building a family, uh, new job, those kind of things. Were, were your, uh, attachment to savings? , uh, it starts to change, right? Mm-hmm. and that you kinda see, well, how do I make my, my, uh, my budget stretch? Yeah, but how do I not sacrifice quality to do that? But how do I get access to some really cool items?

Cuz I, I, I think of anything that we do that’s very, very unique. We wanna surprise you every time you come in. So it’s not just running in to the grocery store and seeing there, there’s our merchandisers do a fantastic job when you come in. Some items just fall on your cart, right? , it’s just like you can’t go home.

Yes, you can’t go home without that because they’ve done their homework in terms of sourcing the right items, getting the great price, and it may not be a planned purchase, uh, when you’re coming in to, to pick up diapers, but there’s, uh, you, we, we wanna surprise you each and every time you come.

Paula: Yeah. And what it sounds like is that when your customers members do come in store, as you said, it’s not to grab a pint of milk, it’s, it’s a very intentional shop by the sounds of it.

Mm-hmm. . So there is, you know, time and space to go mm-hmm. and explore. It sounds like the, the stores are, are quite huge if they’re, if they’re essentially warehouses. So yes. Would that be fair to say in terms of the mindset?

Robin: Yeah. So what, what’s interesting, our, our average, uh, store size is probably 155 to 160,000 square feet.

Wow. So, and, and most of that is not storage space, right? Yeah. What, what is kind of unique about Costco as well is our storage is essentially, on the floor. So we have the product underneath, and you will see steel lining up to the ceiling, uh, three or four layers where, where we’re putting the, the additional product in there.

So it is, it is pretty bare bones, but, but there’s an elegance and, and a cleanliness, yeah. And an order about the, the stores that we take a lot of pride in. Yeah. When, when we see that. But when we. Really tried to, to, to kind of set up in terms of being ready for, for members and, and for their shopping.

It’s, it’s, it’s kind of set out in, in a, in a way that that really kind of, uh, sets them up to explore as well too. I think that is what we hear from, from members and, and I, I don’t think it’s, it’s a, it’s a term that, that we coin, but there’s a treasure hunt that goes on when you shop at. Okay. Yeah. You go, you go, you go to buy a couple things, but you’re, you’re, you’re gonna run across some things that, that really surprise you.

And, and like I say, it, it may fall in your cart. Yeah,

Paula: totally. Totally. And I think when you’ve already established the trust in advance, so therefore people are predisposed to thinking, okay, if I see a good deal here in Costco, it’s not gonna get any better than that. So yes, I can see how things would fall in my carts.

Super easy.

Robin: What, what’s kind of funny about some of, because we have such a limited skew set too, right? Yeah. So we’re down to about 3,800 items. Yeah. Our, we have a mix of merchandise that is changing Okay. Quite rapidly. So our seasonal merchandise is, is gonna be different. Some of our, we, we’ll always have some standard items, but some of those unique things, if you, if you see it, you better.

Yeah. Just because we, we got it at the right price. Who knows what quantity Yeah. We got of it. But the, the, the, the, the, the thing that I probably hear most often when, when people here at work from Costco is, what, are you gonna get this back in? Or I should have bought that when I saw it. Right. Just got it.

They missed the opportunity. Yeah. So that, as, that, as a, as a member, you don’t wanna make that mistake. It’s a learned experience. If you see it. Because you can take it back if you don’t like it. Yeah,

Paula: for sure, for sure. But I love, I suppose when I connect, you know, what you’re telling us about Robin, to, I suppose, the principles of loyalty.

You know, I do always think it’s a really important to get the basics right. Of course. Like to, mm-hmm. . To set an expectation that people can trust, to use your words. Mm-hmm. , uh, that they know it’s worth going in store. But also this idea of surprise and delight I hadn’t realized was a core part of the Costco promise.

Um, but I do think, certainly for me, like my background in loyalty is much more utilities, for example, it’s, you know, sometimes, you know, grudge purchases, you know, so loyalty would be. Really focused on the surprise and delight, but it’s almost like you guys don’t have to do the surprise and delight because you’ve got so good on those basics, but you’re layering that in on top as well, just to, I suppose, drive that overall experience in store.

Robin: I and, and again, the, our, our, our founder, hi. His vision is, is. When he first originally started the company, what was our, our mission statement is Quality goods and services at the lowest possible prices. That that may not be the most exciting statement in the world, , but it’s an operating principle. Yes.

That we go by that, that make sure that we, anytime that we’re spending money, Uh, as, as a company, that means that’s on the back of the member somewhere. So we, we have that give and take in terms of how we, we stage our, our pricing membership. Yeah. Really when you kinda look at a company, uh, as Costco, that that is the primary piece of our profitability, which kind of gives us.

A unique opportunity to really, uh, sell goods at, at, at a a, a lower cost to our members. So I, and yeah, when, but so that, that’s kind of the core piece in terms of how we buy, but then the what we buy, right? Mm-hmm. stretches along with that. So when we kind of talk about surprise and delight, . Peanut butter’s.

Peanut butter tied is tied. Like there, there’s some commodity pieces and, and really, Costco originally started as brand names, right? So it was, it’s gonna be brands, you know, at prices you love, right? Wow. When you kinda think about it Yeah. In, in that kind of a setup. But then it’s, if you’re gonna come for the brand that you know, you’re gonna see something that you didn’t expect, right?

Mm-hmm. . And I think that that is, probably the, the art and the science of where I think we’re, we’ve done a better job of differentiating ourselves as a business because when when you do come in, mm, it, you may have come in on a commodity shop, but you’re, you’re really, uh, you, you, you’re enjoying the experience.

I, I think that’s a, that’s a unique, a unique thing for us. . Yeah.

Paula: And, and as you were talking about that as well, Robin, I was thinking about businesses that have seen the success of Costco and of course within your own industry there are, there are brands that I can c you know, very readily mm-hmm. Think of that are, are copying your model mm-hmm.

Um, but it also struck me that, uh, the likes of Groupon, for example, probably, you know, for, for a short period of time, and I know it’s probably not the most usual comparison, but. I remember how blown away, uh, most of us were in the world for a few years with this idea that Groupon had, which is based on the Costco insight of we’ll get the critical mass, we’ll go to market and we’ll source exceptional deals.

Uh, and unfortunately, uh, Groupon couldn’t sustain it. Whereas obviously Costco is continuing year after year to build a business. And I saw some of your numbers, and again, just for anyone like me who wasn’t aware of the, the global scale, 11 countries and 119 million members. It’s incredible. No, it’s,

Robin: it’s, uh, yeah, it’s, it’s, it’s been very interesting to watch over the last 29 years.

Paula: Yes. Yeah. You used a word as well, Robin, which I’m interested to, to discuss with you. And it said this idea about learning to use the program, um, because I think it’s actually one of the biggest. For loyalty professionals. Mm-hmm. , certainly for me, when I go back to my own loyalty career, I always felt I was competing, of course, um, you know, both internally and externally for the attention of my members.

Mm-hmm. , and for them to understand the loyalty proposition that I had crafted so carefully mm-hmm. , and to help them. Standard. I really felt that that was something that we never certainly cracked in, in the roles that I was doing. So tell us a bit about how Costco was doing in terms of helping your members understand your value proposition.

Robin: Well, well, I, I would also say we haven’t cracked it, but we, we are continuing to, to really see, I, I think we do a great job of identifying values to members for, for members and I, I think we, we do a great job of building programs that, that are very valuable to members. But I think when, when we’ve been a company that has, has really not done a lot of marketing, it, it, those members have to discover.

Right. So when they do discover it, they become a very loyal fan of those, uh, of those components. But there’s, there’s a lot of very interesting businesses that we’re in that our members are still learning about sometimes, right? Like, uh, we have a Costco travel. Program that that’s in place. So those are vacation packages that, that are phenomenal savings.

Yeah. Uh, uh, that, that not necessarily all of our members know. And because when we’re not, uh, uh, if you don’t always see, if it’s just a, a kiosk within a warehouse, that may not be the, the way that you learn about it or Yeah. Or maybe you see it on an email, those kind of things. Yeah. But if you’re not creating some awareness, and I think that’s what, what we’re our challenge, our biggest challenge.

How do we help members really, uh, maximize the value of their membership as well? I think they’re, they’re gonna save it easy in terms of if they’re an executive member, they’re getting 2% back or ju just their savings, uh, in, in terms of their shop. Like the, there’s, there’s an easy calculation that you can do, was the worth, uh, $60 or 120?

Yeah. But how you take that to the next level mm-hmm. is when you look at, because we know everybody travels. Yeah. We know everybody needs, even things like optical pharmacy, like the, these are significant businesses that we’re in where we’ve taken that same operating philosophy of kind of low cost. Yeah.

And, and that applied it to these areas, but if not compromised, not. Right. Yeah. So I think sometimes it’s just, uh, being able to, to expose those to members as well. Mm-hmm. just so they can see it. Because ho honestly, once you take a, a Costco trip or you even rent a car through Costco travel and you see the savings, that that is a massive trigger.

Yeah. In terms of, I, I never knew, right? Mm-hmm. . And so it’s really this. Uh, constant kind of opportunity to keep, keep our members informed because we’re, we’re ever-evolving in terms of always trying to find additional values and savings for them. And I think it’s just how do we, how do we better use. Uh, costco.com or better use our, our, our magazine or better use all the vehicles that, that we have available to us to, to just keep our members informed mm-hmm.

of how they can maximize the value. Uh, and, and, and so that, that’s something like I say, yeah, even though we’re at a 92% renewal rate that I, I still think we’ve got. of those loyal members that could even be, be saving more, right. Because we, we know there, there could, could we And, and then I think that just increases the loyalty quotient at some time, right?

So I think we’re doing the right things. I think we’ve done a great job. Yeah. In terms of landing those values for our members. We, we just, we just need to figure out how to, to kind of make, uh, create some more awareness around that. Right. And, and not do it in, in a way that is. obtrusive to the member.

Right. So I, I think we really like the idea that a member can discover that. Yeah. But sometimes it, it would be funny that people go, I never knew you had travel. Right. , or, I never knew you guys sold tires or Yeah. You guys have an optical department. Yeah. And it, it’s just, and as an employee sometimes we take it for granted.

Yeah. Uh, or, or, but, but I think there’s really interesting things that we’re doing too, that we just gotta figure out how to better. Yeah. Like, just, just in terms of, uh, uh, our lo our, uh, our sustainability work. Right. So we wanna do it Okay. Really for the right reasons. Yeah. But anytime I have a conversation with a member about it, they are fascinated.

Right? Yeah. And, and it’s just, again, another story that I think that we can share with them because it, when, when it matches the values of a, of a member, that’s also a measure of loyalty for them. That’s the company I want to align myself with. Yeah. Because, They look after me, but they also do good. Right.

I totally, I think that’s, that’s, that’s the company that we

Paula: wanna be. Yeah. And, and I’m loving hearing that coming through Rob, this, um, commitment to helping them continually discover more value. Mm-hmm. , because I think it could be very easy to say, look, you got your $60 worth, you know, job done. We’re just gonna go and whatever, focus on our, our other businesses, for example.

But you know, that as an intention, again, comes back to the piece around integrity. And I love that you’ve very humbly admitted that there is still work, I guess, to be done, to continually educate, continually share. And I think that is just a universal principle, um, of particularly, I guess, industries like ours when it’s so broad.

and so vast, and I certainly didn’t know about Costco Travel, so I’ll be excited to go and have a look at that. The other one I noticed actually as well, Robin, today on your website is Costco Next, which I thought was a fascinating concept. So you might just explain that because again, we have a global audience, Robin, they’re all over the world.

They might not be familiar with the evolved business model of Costco next. So would you explain that just for us as well?

Robin: Yeah. Costco next is, is been around, I, I believe we’re in our second, our second year of that. Uh, venture, but, but it’s essentially, it allows us to, uh, build a, a marketplace of non costcos.com items and its relationships we, we have with our vendors.

Mm. That, that we’ve really used the, the relationship of Costco and those vendors to, to make sure that our members have access to better. So it’s because they’re a Costco member that they can go through Costco next, which you can access that through costco.com, but you can, you’re able to access speci.

The, the one I’m thinking of is on Anchor is, is is a vendor that, that’s on there right now. So they typically, they have chargers or iPhone chargers or CA cables and those kind of things. Mm-hmm. . But our buyers have worked to negotiate a Costco. On, on those type of items mm-hmm. That, that are available essentially in a marketplace that’s on top of, uh, already what costco.com is.

Mm-hmm. So it just allows us to have an extension of some additional or additional items that are available. , but really we we’re putting our integrity of our brand on those that they’re good products. They, they’re our members are gonna get access to good pricing through there. And, and it’s in a different environment that allows, uh, some additional.

Uh, uh, additional suppliers and sometimes it’s, it’s items that are maybe not available. It’s, and usually there’s non, non-compete items that we, we try to be there, but make just an, an extension. So, uh, uh, a thing that we talk about is the endless aisle. Sometime. Right. Nice. So you may be, you may be in a Costco mm-hmm.

and, uh, but what, what is online and how can we kind of think about what, what else do I need? And we really grew this business preneur, right? Yeah. So it, it started very, , uh, let, lets, we’re in the non-foods business. We moved to the fresh foods business and, and there’s been a lot of entrepreneurial ventures.

And, and then costco.com became one of those ventures. And then yeah. Costco next is, is kind of the next thing. So we’re, we’re, we’re trying not to, to certainly rest on our laurels. Yeah. But as a company and, and to, in, in the spirit of, of continuing to find more value for our members, that that’s kind of the primary focus Yeah.

Of what we’re trying to. Without compromising the model Yeah, uh, uh, of what was originally done. .

Paula: Wonderful. I guess my only final question then, Robin, is, um, I suppose quite simply the, the two tiers that you offer in terms of your membership mm-hmm. , um, I just think it’s important as well to understand, you know, is the executive tier for example, is that a recent addition to the program?

Um, and the thinking behind it, and maybe just to, to explain the difference in those two propositions, if you don’t mind. No. Yeah,

Robin: so originally when Costco started, we had something called a gold star membership or a group membership, which was, and then a business membership. So if you owned or and or operated a business, you qualified for a business membership, or if you were part.

Of one of the qualified groups, you could get a group membership that’s evolved into something we call a Gold Star membership. Mm. And then we’re, we’re upwards of 20, it’s more than 20 years ago now, we added a layer called executive membership. Right. Okay. And what executive membership did is you could, you could essentially, it’s always been, uh, a in a, uh, like a, a, a second membership that was in place, but you could earn.

Uh, 2% back on most of your purchases as well. So you just needed to kind of do that calculation. Do I shop enough that I’m gonna earn back my me my membership? And then that, that membership tier also expanded. What other. Offers can we make available to, to these members as well too? So the example we talked about with Costco travel.

Mm. What’s really interesting is that if you, if you book, uh, a, a trip to Hawaii, part of, as an executive member, you’re going to get additional value out of that trip to Hawaii that our travel buyers have also negotiated. Right? Okay. So there’s, we’re always just trying to find you additional value. Yeah, that, that is going to exceed this, this $60 in additional that, that you’re putting into the membership.

So it’s an easy calculation for, for you to really kind of make, to just kind of say, yeah, that was worth it, right? Yeah. Like one, one trip through, through Costco Travel and I got a $60 resort credit, or I got a hundred dollars resort credit back. So we’re, we’re looking for ways to, to do that. That’s also part of the, we, we’ve got something called the Costco Auto.

Oh, so what, what the Costco Auto Program is, is we, we work with, with dealers as well as some specific, uh, manufacturers in negotiating specific pricing on, on vehicles for Costco members. So, okay. Imagine the idea of going to shop for, for a car and, and not having to go through that negotiation process, right?

Oh, yeah. And, and so our, our. Buyers essentially have, have worked with these dealers in terms of what that Costco pricing’s gonna be. Yeah. And so that, that again, is just another reason. And that that could be, uh, my, my personal experience is over thousands of dollars in terms I’ve been able to save through, through the purchases of, of, of vehicles through costco.com.

Okay. So again, if I’m, that, that’s multiple years of. Of course. Goodness. So if you, if you’ve ever bought a, a, a car through our Costco auto program, those mm tho those are kind of members for life that we’re making. Right. And, and again, it’s increasing the awareness that, that those programs are also available for our members.

Yeah. Because. , most of our members have a car. Most of our members bought that car somewhere. Right. So it’s, it’s just kind of saying, and we’re, and all we’re asking you to, to do, and I think our strategy is to figure out is just check us first. Right. Make, make sure. Yes. Cause if we’re in the business, our buyers have done a pretty good job.

And if, if there’s a, a cheaper price out there. Then, then, then we, we wanna know about it, right? Because, uh, we, we, our objective is to, to be best in market and to do a good job to make sure we’re not compromising our quality mm-hmm. Without losing money on the prospect. Right. Just because if there, there’s these games that can be played in the market, uh, yeah.

In terms of lost leaders in those kind of things. And that’s not a sustainable business model. Yeah. Kinda long term. We, we wanna be your best bet long. We’re not interested, uh, uh, in, in, in a one-time shop. We, we wanna create relationships Yeah. With our members. And I think what’s really interesting about us is now, uh, the company being, uh, over 40, 40 some years in operation, that, that there’s generations, right, that have grown up shopping through Costco that they grew up.

Now their kids are members. and, and some of the neat things that we’ve been, uh, seeing on social media, which is one of the teams I oversee that’s, They, they, it’s almost a rite of passage when, when you’ve moved out and you’re old enough to have a Costco membership on your own. We see kids Oh, , yeah. Yeah.

That are putting it up. Hashtag adulting. Right? Oh, I’m a real adult now because I have a Costco membership.

Paula: Yeah. Oh, that’s hilarious. Yes. Yes. My God. Uh, adulting, I mean, yeah. . Very exciting times. Well, well, listen, I, I really liked that the best bet long term and the focus on the relationship. Robin, I think is, uh, coming through loud and.

So super impressed to hear how you’re creating customer loyalty, as I said, as a business model, as well as of course, through your executive program as well. So I don’t have any other questions from my side. Is there any other points that you wanted to mention before we wrap up?

Robin: I, I think we, we covered a lot, Paula, so I’m not too sure what, uh, what else I would add.

So I think I, I think we, we’ve said it all.

Paula: We sure have. Absolutely. Well, listen, Robin, it’s been absolutely fascinating. I really hope we can stay in touch and, uh, make sure that we keep our, our listeners updated on the Costco success story. So, Robin Ross. Assistant Vice President of Corporate Membership and Marketing at Costco.

Thank you so much from Leston Loyalty.

Robin: Thanks, Paula. Really great to be here.

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