Costco's three-layer cognitive game: paid members cut leeks → sell cheap goods → super member economy.
Worldwide, Costco has more than 106 million members — 58.1 million of which are paying members.
Interestingly, Costco's membership is varied. For example, a fan has visited a local Costco every time on more than 70 trips in the past.
In November 2018, a couple got married at telemarketing list Costco in San Diego. The two sides said that after meeting through a dating app, the two met for the first time at Costco, and then the two chose to meet at Costco on the 3rd anniversary of their acquaintance. Costco married.
Understanding Costco: How do traditional brick-and-mortar stores make members "cult-like" loyal?
▲Members who got married at Costco in San Diego
As a traditional retailer whose business model is so boring that there is nothing new, Costco obviously has a "cult-like" magic power. Behind all this, Costco has long used various psychological methods to trick its members.
1. "Unique Experience" for Members
In order to become a Costco member, the first experience for consumers is to pay first. There are two annual fee options of $60 and $120 in the United States (in China, it is currently 299 yuan/year), otherwise you don’t want to think about it. Checkout.
Undoubtedly, this annual membership fee creates a feeling of "I want to enter the store on the premise that I want to be a part of the store".
From a psychological point of view, this membership fee has become a "sunk cost". If a consumer chooses to pay, then out of the principle of "consistency", he will find a reason for the payment and find a reason for becoming a member. Excuse.
Understanding Costco: How do traditional brick-and-mortar stores make members "cult-like" loyal?
What is the reason? A lot of stuff and cheap! Okay, then I'll have to buy a little more and earn that membership fee back, and one oversized package means I don't have to drive over as often to buy things.
However, in 2018, KL Ailawadi et al from Dartmouth University's Tuck School of Business published an article in the Journal of Marketing Research.
Their study found that shoppers who frequented the club store spent 5% more per person, spent 15% more time in the store, and consumed less calories than a club store. Store consumers are 8% higher.
Although not everyone can accept this logic of paying for membership first and then consuming, this membership card can be refunded at any time, and things purchased by consumers can also be refunded.
And Costco's refund policy is outrageously generous: in one extreme case, a consumer bought a pine tree during the Christmas season, and in January of the following year, the reason was "the tree died" and got a refund directly.
Understanding Costco: How do traditional brick-and-mortar stores make members "cult-like" loyal?
▲The member asked for a refund for "the pine tree is dead"
According to Costco's financial report, in fiscal year 2020 (its annual report ends from the end of August to the beginning of September each year), the renewal rate of its stores in the United States and Canada reached 90%, and the number of paid members worldwide reached 58.1 million (after members pay, they can get free family card to family and friends).
It can be said that Costco does have a very scary loyal user, and it is the kind that pays to become a member.
2. Costco's price game: Who doesn't like to scour wool?
Which consumer doesn't like to take advantage? Costco designed its entire strategy around taking advantage, and according to Costco's mission statement, it is to "provide members with the best products and services at the lowest possible price."