How Costco uses $5 rotisserie chickens and free samples to turn customers into fanatics

Source : CNBC Read More

Around the world, there are 94 million people who have a Costco membership card. Celebrities have them: Chrissy Metz of NBC’s “This Is Us” is an executive member “because we buy a lot of toilet paper,” she says.

There are Instagram accounts devoted to Costco, such as @costcodeals, and websites, such as CostcoInsider.com.

Costco has even become a travel destination — one fan says she has been to 70 Costco stores during her travels. And at least one couple got married at Costco.

This level of enthusiasm for a grocery store may seem odd to some — unless you’re a Costco shopper.

“Some of their customer base is absolutely addicted to Costco — absolutely addicted to the experience and the brands and the thrill of going to Costco,” Patricia Hong, partner at the global management consulting firm A.T. Kearney, tells CNBC Make It.

And that is by design — inspiring obsession is all part of Costco’s playbook. Here’s how Costco gets you hooked.

Membership feels exclusive

To shop at Costco’s warehouse-like stores — which sell everything from food and toiletries in bulk to clothes, electronics and diamond rings — you have to buy an annual membership for either $60 (household or business) or $120 (executive).

That makes the store feel “a little exclusive,” says Paco Underhill, author of “Why We Buy: The Science of Shopping.” You have to be a part of the “club” to even enter.

But more than that, there’s a psychological aspect: Since membership fees are a “sunk cost,” consumers try to justify it mentally, which results in them shopping more frequently and buying more products each trip, according to Kusum Ailawadi, author of a 2017 study on club shopping. “You’ll say … I’m going to make sure I get my money’s worth by shopping in the club store every chance I get,” Ailawadi told KTLA. As Underhill says, the membership card “vibrates” (metaphorically) in your wallet.

“I have spoken to people that go and drop into a Costco three, four times a week,” Hong tells CNBC Make It.

Of course, not everyone believes the membership fee is exclusive, or even worth it, and it may not be if you don’t shop at Costco regularly, if you live alone, have little space to store bulk-sized items or are unable to resist impulse buys.

Still, the company says it has a 90% renewal rate in the U.S. and Canada and 51.6 million paying memberships (each of which can have multiple cardholders).

“They have a very loyal membership base,” Hong says.

Print Friendly, PDF & Email
Please follow and like us: