How can you tell when something is important to a brand? When it’s communicated in the brand’s name. Companies like Best Buy, Standard Oil, and Costco have made it a point to communicate their brand’s value, mission, and goal in their name.
Costco is widely known for its ability to make a ton of profit, not only from selling its goods but from selling customers an annual membership for shopping at their stores. In 2019, Costco generated a massive $3.35 billion from membership fees alone.
This strategy allows Costco to sell goods at lower prices than its competitors. Costco has become so good at engaging this business model that, just like Tesla, they don’t spend a dime on advertisements. And because Costco doesn’t advertise, they invest a lot into delivering exceptional services that inspire their customers to draw in more referrals to the company.
Costco’s Reliable Pricing Policy
If there’s anything Costco is known for, then it’s the company’s reliable pricing policy. Costco’s entire business model depends on the brand’s extreme care for its loyal customers, making sure these customers get the best luxury products for the lowest price possible.
Costco’s philosophy—their amazing pricing policy and the fact that the brand offers only 4,000 products at a time, unlike the millions of products offered by their competitors—has set them apart in their industry, transforming Costco into what it is today.
Like we mentioned earlier, the company operates the most profitable membership-driven warehouse chain, and the brand has gathered an enormous membership base that by the end of Covid-stricken 2020, it still had over 105 million paid members.
But we all know that that wasn’t the only thing that made Costco. Costco’s brand name was born because the company’s founders had been quick to identify the effects of a solid brand name on a business because what good is a business that offers products at the cheapest rate if no one knows it even exists?
So Why is Costco Called Costco?
Costco was founded in 1983 by Jim Sinegal and Jeffery H. Brotman. Their first warehouse opened in Seattle, and they built their business principles on the ideas of Sol Price, the founder of FedMart, who’d earlier started a similar warehouse retail business called Price Club.
It’s important to know that Jim Sinegal wasn’t just any employee at FedMart. Sol Price personally mentored Jim before the birth of the first warehouse in Seattle.
But why is this important? Sol Price, the father of retailing, was a force in the retail industry. His innovative retailing concepts inspired Sam Walton, Jim Sinegal, and lots of other entrepreneurs. And if there’s anything these entrepreneurs learned from Sol, then it’s an impeccable sense of social responsibility.
In 1993, two of his students, Walton and Sinegal, approached Sol Price for a merger. Price denied Walmart but reached a deal with Costco, birthing the PriceCostco warehouse corporation. But although both companies held onto the same philosophy—helping customers save more by keeping costs low—this match-made-in-heaven wouldn’t last very long.
In 1994 the Price family started a different warehouse club chain completely unrelated to PriceCostco, in Central America and the Caribbean.
Initially, both companies stuck together in the US because the new Price company didn’t interfere with their markets but even this too couldn’t survive for much longer because, in 1997, the brand officially dropped ‘Price’ from its brand name and reverted to Costco.
Costco’s reputation for building customer loyalty by offering great products at affordable prices would mean little if the brand had a weak name that didn’t communicate the brand values. Costco, as a brand, was built on helping customers manage their spending, hence the name Costco, or rather, ‘Cost Company’.
And it was Costco’s focus on decimating the cost of a product that made the company unique and elevated it to where it stands today.
Costco: A Unique Retailer
Besides the fact that Costco is a haven for customers seeking superior products at a great price, the company has been praised on several occasions for its worker-friendly policies. Costco is as loyal to their employees as they are to their staff, which explains why the company’s jobs are highly sought-after.
A company would struggle to satisfy its customers if it cannot satisfy its employees. And offering great wages, like Costco does, is one way brands can incentivize their workers.
Back in 2014, President Obama paid a visit to Costco and commended the company for taking quick steps in implementing a $22.65 per hour minimum wage, something that Amazon and Walmart—at the time—could not meet.