Marketing Principles Report: Analyzing Costco's Marketing Strategies

This report provides a comprehensive analysis of Costco's marketing strategies, examining various elements within the marketing process. It delves into the benefits and costs of a marketing orientation, analyzing both the micro and macro environments through SWOT and PEST analyses. The report explores segmentation criteria, targeting strategies, and positioning options for Costco's products, considering how buyer behavior influences marketing activities. Furthermore, it discusses the development of products/services to sustain competitive advantages, distribution strategies for customer convenience, pricing strategies, and promotional activities. The report also includes an analysis of the marketing mix, planning marketing strategies for different segments, and a comparison between marketing to businesses versus customers, as well as a comparison between international and domestic marketing. The report aims to provide a holistic understanding of Costco's marketing practices and their effectiveness in the competitive retail landscape.

Marketing Principles
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TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Various elements in the marketing process (1.1).........................................................................3
The benefit and cost of marketing orientation (1.2)....................................................................4
Analyzing micro and macro environment (2.1)...........................................................................4
Segmentation criteria (2.2)...........................................................................................................6
Target strategy (2.3).....................................................................................................................6
Positioning options for the selected products (2.5)......................................................................7
Buyer behaviour affects marketing activities in different buying situation (2.4)........................7
Products/services should be developed to sustain competitive advantages (3.1)........................8
Distribution is arranged to provide customer convenience (3.2).................................................8
Pricing strategies as per marketing conditions (3.3)....................................................................9
Promotional activities to achieve marketing objectives (3.4)......................................................9
Additional elements of marketing mix (3.5)..............................................................................10
TASK- 2.........................................................................................................................................10
Planning and recommending marketing mix for the different segments (4.1)..........................10
Difference between marketing to business rather than customers (4.2)....................................11
Difference between international and domestic marketing (4.3)...............................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
In order to survive in this competitive market, it is essential for marketing managers to
focus on effectual marketing strategies that assist them in providing information and knowledge
regarding their products within the market (Lefebvre, 2011). Marketing is considered as the way
through which organization can interact with customers to promote their products within the
market as well as to meet the expectations of them. Therefore, it is considered as an integrated
plan that focuses on selling the products and services within the marketplace so that organization
may attain profit through enhancing the sales volume. The present report focuses on Costco
Wholesale Corporation that possess wide range of merchandise that are mainly marketed to the
other businesses and large families. However, this report will focus on understanding the concept
of marketing as well as their approaches related with the segmentation, targeting and positioning
of products.
TASK 1
Various elements in the marketing process (1.1)
Customers are considered as the key factor within the marketing process to whom
organization is rendering products and services (Lovelock, 2011). Therefore, for accomplishing
the vision and objectives of the company, marketing manager of Costco must focus on marketing
process to satisfy the customers by providing required products and services to them. Key
elements of marketing process are as follows-
 Situational analysis: One of the key elements in marketing process includes situational
analysis under which marketing manager of Costco determines the gaps that are present
in the market to satisfy the unrealized needs and wants of the customers. With this
element, marketing manager would also focus on identifying the needs of customers
related to the products that are offered by Costco. After identifying needs, company can
modify their products according to the customers (Element of marketing process, 2015).
 Marketing strategy: Another element in the process includes devising marketing strategy
set by the marketing manager of Costco so that it may gain opportunities present within
the market (Ghauri and Cateora, 2010). Marketing strategy involves different approaches
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related with the segmentation, targeting and overall positioning of the Costco in order to
launch products and services in the target market.
 Implementation and control: Last element within the marketing process of Costco
involves the implementation of marketing plan by introducing the required product
within the market. However, marketing manager of Costco should also monitor the
marketing strategy so that needs of customers may get satisfied (Tanner and Raymond,
2011).
The benefit and cost of marketing orientation (1.2)
Marketing orientation refers to the model that focuses on researching the target market
and provide merchandise according to the needs and requirements of customers. However, it also
includes the procedure of reacting on the needs and wants of customers by developing or
improving the products as per their needs (Lagarde, 2012). However, marketing manager of
Costco with proper marketing orientation would easily detect or discover the changing trend
among the customers and provide them required products faster than the other retail competitors.
The benefit of marketing orientation to the Costco warehouse include-
 Through marketing orientation, Costco will easily determine the changing requirement of
the customers that help marketing manager in introducing the products that result in
gaining competitive advantage against the rival company (Weinreich, 2010).
Although there are certain costs associated with the marketing orientation approach that
is related to investigate and research the overall market. Thus, it outcomes in significant use of
the resources including human resources, technological resources, financial resource etc.
Analyzing micro and macro environment (2.1)
When marketing manager of Costco takes the decisions for the company, than there are
certain micro and macro environmental factors that directly and indirectly affect the marketing
decisions. For analysing the micro environment of Costco, marketing manager must adopt
SWOT analysis that measures the internal strength and weaknesses of the organization as well as
threats and opportunities that exist in the external market (Lantos, 2011).
Strength-
 Strong position within the United States
 Powerful financial position as
Weaknesses-
 Stagnant performance as there is strong
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warehouse club
 High popularity that results in building
loyalty among the customers.
 Lower price products
 One of the major strengths is that
Costco has food court within the
premises
competition
 Limited arrangement of merchandise
within the store that influences
customers to go to another retail
merchant that is Walmart.
Threats-
 Increasing competition within the retail
market
 Hiking of wages and demand of labour
 Increasing e-commerce businesses also
act as a threat for Costco.
Opportunities-
 Expanding business activities in the
emerging countries.
 Acquiring small retail chain
 Increasing the range and display of
merchandise that results in attracting
customers to Costco stores
However, with the help of PEST analysis technique, marketing manager would easily
identify the macro or external environmental factor that affect the marketing decisions of
Costco (Weinstein, 2013). PEST analysis focuses on four main external factors that are-
1. Political: Political factor mainly affects the decisions of Costco regarding the marketing
of wide range of products in the nation and international market. For instance; changing
tax rate may directly affects the pricing policy of company. Increase in tax rate will
higher the prices of products offered by Costco.
2. Economical: Costco needs to focus on the different factors while marketing their products
in the different region. For instance; main area where Costco offers their products is
American market. With the slow growth of American market, marketing manager of
organization will reduce or lower the prices of products (Riefler, Diamantopoulos and
Siguaw, 2012).
3. Social: Now days, social factor influences Costco to understand the preferences of
customers by considering ths factors such as age, gender, social class and income level.
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With the increasing demand of corporate social responsibility, marketing manager is
focused on organizing social program to develop awareness in the the society as well as
to enhance the brand image of Costco (Salaimeh, 2008).
4. Technological: In the contemporary environment, technological factor acts as an
opportunity for the marketing manager of Costco. Now days, company is focused on
attracting and targeting customers through initiating e-commerce. Technological factor
also plays a vital role in influencing the marketing decisions of Costco.
Segmentation criteria (2.2)
Marketing manager of Costco divides the whole market within the targeted groups
according to the needs and requirement of customers so that company can easily sell their
products in the market (Singh, 2007). Segmentation criteria is mainly achieved by carrying out
the research in the market to determine the trends and preferences of customers. There are
different forms of segmentation such as geographical, demographics, behavioural or
psychographic etc. For instance; to segment market for clothing apparels, marketing manager of
Costco mainly focuses on demographic segmentation on the basis of customer income. However,
company mainly focuses on offering low price for their wholesale products to the customers.
However, for the higher income customers, company would offer high quality and branded
clothing apparels that would satisfy their needs and wants (Doole and Lowe, 2008).
Target strategy (2.3)
Targeting is defined as a procedure in which marketing manager of the organization
selects the expected or actual customers to whom they offer and sell the products in the market.
For increasing market share, it is essential for the business to target the correct market to meet
the expectations of customers. However, there are different targeting strategies that may be used
by Costco that are concentrated, undifferentiated and differentiated to target the market for
selling a range of apparels (Wymer, 2011).
The first targeting strategy includes differentiated targeting strategy. Under this strategy,
marketing manager of Costco may use designing assorted promotional and publicity messages
regarding their product to the different targeted audiences for satisfying their needs. Another
targeting strategy is outlined as undifferentiated strategy under which marketing manager of
Costco focuses on scheming single promotional strategy for every segments. For example,
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Costco is promoting its new range of clothing apparels for both men and women via newspaper.
Last targeting strategy is concentrated strategy in which marketing manager of Costco plans
impressive promotional strategy for rendering product information to the specific segment
(Gevlani and et. al., 2008).
Positioning options for the selected products (2.5)
Product aligning is also considered as an effective approach in marketing wherein
business has to encourage its different range of merchandise and products within the marketplace
through using satisfactory techniques (Ham, 2008). Costco marketing manager has been
accenting on devising or formulating attractive positioning plan of action so that sales volume
and revenue of the organization can be heighten.
Costco also supports the promotion of goods and services by using different marketing
strategies and that will help business to retain end users for the longer period. In many cases, it
has been seen that Costco adopts contrary positioning strategy as per the concept of products and
services. Hence in the present scenario, Costco can prospect clothing apparels as per the section
criteria. For instance- attractive product promotion strategy can be adopted for testing youngsters
and this can serve in word of mouth publicity (Heding and et. al., 2008). Furthermore numerous
schemes and discounts can draw to attract youngsters, thus Costco can offer other accessories
with the primary product. Thus both the positioning strategies can help Costco to increase
customer attention as well as profitability ratio.
Buyer behaviour affects marketing activities in different buying situation (2.4)
In the contemporary scenario, behaviour of customer is changing at the faster pace that
directly impacts the business decisions of Costco. For instance; with the increasing technology
and adoption of e-commerce businesses, customers prefer to purchase products through using
internet (Wymer, 2011). Therefore, this will affect the marketing activities of Costco.
Organization would adopt internet technology to provide product to the distant customers.
However, it will also result in modifying the supply chain management of the company.
However, it has been observed that young customers keep changes their taste and
preferences. Therefore, it will impact the sales and revenue of the firm (Environmental analysis,
2015). Through introducing a range of clothing apparels, company would mainly target the
young customers as they prefer to purchase new products at low cost. Therefore, it is essential
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for marketing manager of Costco to address the issues and problems of customers so that they
must eradicate problems within the organization.
Products/services should be developed to sustain competitive advantages (3.1)
Product is the key element that must be marketed by Costco in order to continue or
survive within the competitive environment against the different competitors. Products are the
key components that mainly focus on meeting the expectation of customers. Thus, manager
should amend and improve its range of merchandise so that large customers and businesses get
attracted towards them. In addition to this, it has been stated that warehouse corporation should
improve its range of products to attract the large market area (Kokemuller, 2012).
For instance; Costco is offering a range of clothing apparels for both men and women.
Hence, marketing manager would enable different packing of clothing apparels in order to attract
customers. However, for gaining competitive advantage, they must also modify clothing apparels
by selling clothes in different colour, different sizes, different material etc.
Distribution is arranged to provide customer convenience (3.2)
For distributing wide range of clothing apparels in the market, marketing manager of
Costco may arrange effective distribution strategy to provide convenience to their target
audiences (Positioning, 2010). However, effective distribution channel results in timely
delivering of the products and merchandise to the customers. Costco mainly distributes their
products from the authorized stores as it is convenient for the customers to purchase the
wholesale products at the lower prices. Now days, businesses have started online websites for
delivering wholesale products and merchandise. Thus, it assists in distributing products in a
suitable manner. It has also started delivering goods and services through online orders and thus
it helps in distributing goods in an adequate manner. In the contemporary environment,
customers do not opt to visit retail store because of their busy life, therefore customers prefer
to buy products through online services (Using the PESTLE analysis model, 2014). In
accordance to this, company should adopt online services for distributing clothing apparels to
young customers as they prefer to buy products through online.
Pricing strategies as per marketing conditions (3.3)
Pricing factor plays a vital role within the organization as it is set by the marketing
manager of Costco according to the market condition. Price is generally termed as the monetary
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value of the products that customers pay while purchasing the merchandise and products
(Lefebvre, 2011). Different pricing strategies that may be used by Costco include-
 Skimming prices- Under skimming prices, manager generally sets high monetary value of
the clothing apparels but after sometime they reduces the prices of products according to
the demand in the market. Basically, this strategy has been used by the warehouse
corporation to attain higher profit ratio.
 Penetration prices- Another pricing strategy that is used by Costco is penetration pricing
strategy. Under this, marketing manager generally sets low prices for their products to
target large set of customers. Now days, customers prefer to purchase quality product at
lower prices. Thus, Costco provides quality products at low prices by using this strategy
(Lovelock, 2011).
Promotional activities to achieve marketing objectives (3.4)
In order to accomplish marketing objective related to capture large market share as well
as building brand image in the market, marketing manager of Costco focuses on different
promotional activities to attract the target customers and influence them to purchase their
products (Ghauri and Cateora, 2010). Assorted promotional activities are-
 Advertisement- One of the effective mediums or promotional activities includes
advertisement through TV, social media sites, banner etc. All these activities will assist
Costco in accomplishing its marketing objectives. However, through proper
advertisement, Costco mainly attracts large number of customers residing in the distant
area. Advertisement through different channels also results in enhancing the brand
awareness in the national and internal market that will affect purchasing decisions of the
customers (Tanner and Raymond, 2011).
Additional elements of marketing mix (3.5)
Despite of four elements of the marketing mix that are price, place, promotion and
product, there are additional elements such as physical evidence, process and people that are
included in the marketing mix and support marketing manager in framing effective strategy for
the organization (Riefler, Diamantopoulos and Siguaw, 2012). The additional elements of
marketing mix are afollows-
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 Physical evidence: This element of marketing mix mainly focuses on developing the
physical evidence that is authorized store so that they can conveniently distribute
wholesale products and merchandise to the customers. Therefore, marketing manager is
focus on modifying the store layout on the regular basis in order to serve their customers
effectively.
 Process: Another additional element of marketing mix includes process that involves
various procedures related to production and distribution concept (Weinstein, 2013).
 People: The last element of marketing mix includes people. As per this element,
marketing manager of Costco must motivate their staff so that they may render proper
services within the organization.
TASK- 2
Planning and recommending marketing mix for the different segments (4.1)
Costco can design assorted marketing mix for various segments to meet the needs of
individuals in the best manner. This will assist organization in targeting contrasting market
segments with the various marketing techniques (Salaimeh, 2008).
Marketing Mix for Demographic Segment
Marketing executive of Costco can divide the prospective consumers as per the income,
age group and education level
 Product: Company is intended to launch clothing apparels of different brands according
to the demand and specifications of the target customers. However, company can target
two segments like, children up to 18 years age and youngsters above 18.
 Place: Target customers of this group comprises of individuals who prefer to visit
shopping malls with their parents (Singh, 2007). Therefore, to target such customers,
Costco can offer its products through their own brand stores in shopping complexes.
 Price: Prices of clothing product should be kept moderate so that children can even
afford to purchase from their pocket money. Therefore, company should ensure that they
keep competitive prices (Doole and Lowe, 2008). Promotion: To attract customers of age group above 18, company can use social media
advertising. Thereafter, to attract customers below 18 years, company can take the help of
advertisement methods such as television, kids magazines etc.
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Marketing Mix for Psychographic Segment
It further involves division of the entire market on the basis of attitude, interest,
knowledge and lifestyles of customers.
 Product: In order to sustain competition in the clothing segment, it is important for
company to offer products as per the latest fashion trends.
 Place: With the increasing use of internet among the diversified range of individuals as
well as mostly in children and youngsters, it is feasible for company to offer its products
through e-commerce websites (Wymer, 2011).
 Price: Prices can be kept slightly high as company is providing clothes as per latest
trends and high quality.
 Promotion: To attract customers to make purchase, company can use online marketing.
Difference between marketing to business rather than customers (4.2)
Marketing the clothing apparels to business is entirely a different approach than doing
same to the customers. However, marketing to business is a complex task and therefore involves
more sincere efforts.
Marketing to customers Marketing to business
Participation of too many intermediaries while
transferring the product from buyer to seller.
Very less participation of intermediaries at the
time of exchanging products.
Indirect channels of communication are
utilized to exchange information with the
target customers (Gevlani and et. al., 2008).
Mostly, direct channels of communication are
used by Costco for communicating with the
business customers.
Purpose of buying is associated with domestic
consumption.
Purpose of buying products from Costco by its
business clients is related to increase gain
profit through selling those products to the
others (Ham, 2008).
Difference between international and domestic marketing (4.3)
International marketing Domestic marketing
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It regards to the marketing activities done at
the global level.
It relates to marketing activities performed
within UK.
Involvement of large number of risk like,
credit, political changes etc.
Involvement of small amount of risk related to
changes in trend, customer taste etc.
Political elements plays an important role in
this marketing.
There is minimum part of political factors.
Product is offered after studying factors of the
foreign market (Heding and et. al., 2008).
Product is offered after analyzing the needs
and preferences of target customers.
CONCLUSION
Conclusively, it can be stated that marketing plays an essential role within the
organization that supports in communicating product’s information to the customers. However, it
is also concluded that segmenting, targeting and positioning of the products support marketing
manager in preparing effective strategies so that they can easily target their audiences and
provide them required product according to their requirement.
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