Think Like Costco

Many companies fail to see the value in what they already have. Costco realized their employees were their first followers; they’re the best way to shape the customer experience.
Emily Lonetto
Emily Lonetto
September 28, 2017
Think Like Costco

Startup Lessons from a Big Box Retailer

Hungry businesses are the best kind. Being hungry means you’re still figuring things out, you’re unsure of what your next step is - but more importantly, you’re growing. Being hungry doesn’t necessarily mean you’re weaker, less equipped, or undervalued - instead, it indicates you’re fighting for something you love.

Many startups, SMBs, and growing companies often think of themselves as a ‘big idea.’ They may not have a team of 10,000 people driving sales and expanding globally, but they have a big mission and even greater hurdles to overcome. But some things can be learned from big corporations that startups or smaller companies tend to ignore.

To grow your business and build a strong culture - you need to be like Costco.

Before I dive in, let's first talk about Costco. Costco is a major bulk reseller of consumer goods. Whether you’re looking for fifty rolls of toilet paper, three huge bags of almonds, or a pack of five loaves of bread - Costco has it. Moreover, Costco has it at a lower price without any additional frills. Costco’s business model is simple. Open big box warehouse stores surrounding major cities with big suburban populations. Hire hundreds or thousands of people to maintain their properties, and find the most efficient way to sell the maximum amount of goods at the lowest wholesale prices possible - people love them for this.

People from all over flock to Costco. Some may argue it’s because of their lower prices or that they cater to large families that often get stuck making multiple grocery runs in a week. Some may even say it’s because of their variety or the fact you can drive to them versus walking to smaller stores in the city. So, what makes Costco so successful? Is it just their prices and variety or is it something else? Better yet - why should you want to ‘become like Costco’? After all, you're probably not trying to be the next big box retailer.

That’s a good question — let’s dive a little deeper. So more likely than not, you’re not a major reseller, or you’re not interested in becoming the next bulkier Walmart. So who are you? What is your business like? Maybe you’re an eCommerce store, a single product company, SaaS model, Subscription, etc. Maybe you can’t afford thousands of employees, massive warehouses, store overheard or to compete with major competitors like Sam’s Club or Walmart. But — you can still learn from Costco.

You see — Costco’s real business genius stems from their internal strategy. It’s not about the number of products displayed in a given store; it’s how they treat their first followers. In this case, it’s how they build relationships with their employees. More often than not, you’ll hear businesses spewing things like, “the customer is always right,” or “do whatever to make them happy.” In Costco’s case, they realized by treating their employees right — they were improving the overall community and culture of Costco as a whole. Moreover, they were improving the customers’ first point of contact, the employees.

It’s simple really: Happy, motivated employees → lead to happy, loyal customers → which lead to increased sales, revenue, and shareholder value … more importantly, it leads to growth.

Costco put their employees first. While this may sound backward or even a bit selfish — Costco’s plan to please their employees did more than attract hundreds of thousands of employees; it helped them find hundreds of thousands of evangelists.

When you walk into a Costco as a customer, it isn’t about the frills — it never was. It’s about the experience. The emotional ease of finding all of your bargains in one place, with employees that love their job, know their store and want to help you. Costco isn’t plagued by commission, aggressive management styles, or high turnover and you can tell. Their empathetic and emotionally driven strategy has become one of their strongest retention plays. You see, while it’s easy to say you choose the stores you do because they’re ‘the best’ or because ‘you have to get something done,’ — many of our real decisions are made well before logic kicks in.

Costco understood their place in the market. They knew they weren’t that much ‘different’ from Sam’s Club or Walmart. They knew that they weren’t offering anything unmistakenly new. What they chose to focus on, however, set them apart. By focusing on why someone would want to work for them or why they loved working for them, Costco was able to build an employee experience that attracted passionate and kind people. This experience founded how they hired and therefore, how they grew.

The Online Dilemma

Today, many startups and big businesses have moved online. People aren’t interacting with salespeople or clerks as often. This switch in consumer behavior has caused many companies to shift away from focusing on the holistic experience and more toward customer service and support. Naturally, this change makes a little bit of sense. Think about it — when you go to your favorite eCommerce store, and little message popup comes up saying ‘Welcome!’, does that have the same appeal as someone greeting you at the door? Now, think about when something goes wrong, or when you’re lost in an online store. What do you do? That same message box has now become your way to vent and talk with a customer service rep.

Although customer service and support are great ways to rekindle or fix a customer experience, most interactions with service reps aren’t for ‘pleasant conversation’ — they’re reactionary. You may be wondering, why does this matter? Or, how can we even try to fix this?

This is when you need to think like Costco.

The point of this article isn’t to get you to rethink your entire business and become a large reseller. The point is, to get you to understand how to influence your customer experience on an emotional level — before it gets to the support hand.

Customers love Costco because it’s pleasant and they know they’ll find what they want. They could go to a Walmart or a K-mart, or a Target (whatever you can name) — but they don’t. They walk into a Costco because they feel a sense of belonging, it feels natural. This feeling, however, wouldn’t be possible if Costco didn’t hire the people they did or treat them the way they did. Little things, like knowing someone’s name, guessing what they’re looking for, and picking up on small nuances are possible for companies of any size, even online ones.

Challenge yourself to think, how can you shape your customer experience without the use of an in-store greeter. You know a pop-up message isn’t going to do it — so what will?

For many online retailers and businesses, the salesperson has slowly split into two groups: formal hires (actual employees) and evangelists (customers that are loyal to your product and genuinely love their experience). One of these two groups is extremely common and easier to find through a job posting, a formalized recruiter, referrals, etc. Evangelists, however, live within your customer base.

Many companies fail to see the value in what they already have. Costco realized their employees were their first followers; they’re strongest believers; they’re the best way to shape the customer experience. For online companies, it’s all about how you tap into your customers and better understand how to turn them into advocates.

You see — customers are inherently transactional. They’re often categorized, placed into buckets, transcribed into quantitative sales but never actually engaged with. It is possible to connect with them even if they’re not directly in front of you.

Get Personal

Some companies resort to personalization: (i.e., putting personalized text, like their name, into outreach or communication funnels; putting photos of people they know in content; or surprising them with deals on items they’re interested in).

Some companies rely on rewards: (i.e., giving them points, recognition, or exclusive content).

Others do what Costco did — figure out what matters most to them, connect with them on an emotional level, and develop a relationship.

This how business grows. This is how you take a customer and turn them into an evangelist. This is how modern marketing, old school sales, and online business has evolved. So, are you ready to think like Costco?

Emily Lonetto

Emily Lonetto

Head of Growth at GrowSumo

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