We had out-of-town guests over the weekend, and one recurring topic of conversation was how much we all like shopping at Costco.
For instance, when they mentioned they needed new luggage for an upcoming cruise, I suggested looking at Costco, because that’s where we’ve been buying luggage for years — great quality at half the price or less. They quickly agreed to check it out.
While I wasn’t getting a commission (and am not for anything I write here today), that was a classic example of word-of-mouth advertising. And it didn’t cost Costco a cent.
Then today I came upon this fascinating piece in The Huffington Post about “Ten Cult Brands So Popular They Don’t Need to Advertise.”
One of them is Costco.
According to Jillian Berman, who wrote the piece, Costco does use social media to reach out to potential customers, and they do send out direct mail circulars highlighting various bargains and coupons of the month. (They also often give out some free samples of foods they’d like you to buy when you’re in the store.)
But you won’t ever see a Costco ad on TV, in magazines or newspapers or on billboards.
Yet Costco profits “soared” in the previous quarter of this year, the article notes, jumping nearly 20 percent to $459 million — all the while paying good wages to its employees.
It’s no secret why Costco doesn’t need to advertise. The big box stores offer incredible bargains on bulk supplies of staples like paper products and foodstuffs (fresh, frozen, canned, boxed — what have you), as well as electronics, furniture, clothing, dishware, tires, gourmet items, wine (in some states)…you never know what you might find.
But even better, the quality is usually excellent. And did I mention they have a reputation for treating their employees fairly? We can shop at Costco without guilt, and I can’t say that for certain other discount chains.
Costco’s ties to the travel business are more extensive than you might realize at first. Not only do they sell gear and equipment that travelers can use (from luggage to clothing and shoes, from sporting goods to snack foods), but they have a travel division that offers vacation packages to Costco members.
What can other travel-related businesses learn from Costco’s example? Businesses that aren’t able to sell bulk supplies of garbage bags, batteries and paper towels to keep baby boomer travelers and other customers coming back?
It’s fairly simple:
Offer quality products at great value (whether or not they’re expensive or inexpensive).
Engage in good customer service (facilitated by keeping your own employees happy). Offer money-back guarantees, when appropriate, if customers aren’t satisfied.
Don’t oversell (I’ve never been pressured to buy anything at Costco).
Retain customer loyalty by keeping your brand synonymous with honesty and integrity.
And, I would suggest, add an element of exclusivity. Even though Costco has 50 million members, you still have to join and pay between $55 and $110 a year to shop there. (Costco reportedly makes much of its profits from these fees.)
The psychology of belonging to an exclusive (if you can call 50-million members “exclusive”) club can’t be overstated. Witness: American Express and its “memberships;” a lot of folks feel a little superior when they can pull out an American Express card rather than a Visa or Mastercard.
You don’t have to offer club memberships to add some exclusivity: catering to a niche — say, baby boomer travelers, for one — could have the same effect. (See my previous posts on Walking the World — adventure tours — and HomeExchange50plus.com — home exchanges — both limited to ages 50 and up.)
Am I advocating foregoing paid types of advertising to rely on word-of-mouth?
Definitely not — very few brands have the kind of customer base and loyalty that Costco does (or Krispy Kreme donuts, or Rolls-Royce, or some of the other brands on the “no-paid-advertising” list in the HuffPost piece) .
But good word-of-mouth advertising can become a highly desirable, cost-effective part of a successful business strategy– providing you earn it.
Be sure to download my free report, “How to Ride the Coming Wave of Boomers,” available here. It’s all about the best ways to market travel to baby boomers — the biggest-spending group of travelers the world has ever seen.
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