Costco is a multinational company that ope telegram database rates membership big-box retail stores. The company has grown to 152.7 billion dollars annually, and makes for a fantastic case study on customer loyalty.
As their management states in their latest 10-Q filing,
"We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket)."
“We believe the most important driver of our profitability is sales growth, particularly comparable warehouse sales growth.... Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket)” - Costco 10-Q, 2021
1. Cross subsidizing with a membership model
Costco's loyalty program begins with their membership business model.
Members pay an upfront cost to be able to enter the store and purchase goods. In return, Costco provides low, competitive prices, private label items, and other exclusive perks.
“Our membership format is an integral part of our business model and has a significant effect on our profitability. This format is designed to reinforce member loyalty and provide continuing fee revenue.” - Costco 10-Q, 2021
Part of Costco's loyalty strategy is to "provide members with quality goods and services at the most competitive prices." Instead of maximizing profits per transaction, they focus on maximizing each customer's lifetime value to the company.
This is exemplified most clearly in their gasoline service.
"We believe that our gasoline business draws members, but it generally has a significantly lower gross margin percentage relative to our non-gasoline business."
Costco takes measures to ensure members will always save on their gas bill. They are able to do this because of their membership business model, which doesn't rely on profits in gasoline to fuel the business.
3. Using unique, private label products to increase loyalty
Private label products increase customer loyalty in a number of ways.
First, it distinguishes Costco. Instead of competing in purely commoditized products, Costco can offer exclusive options for their members.
Further, as customers become habitualized to these products, it improves their membership retention rate. If customers want to enjoy these products, they must continue shopping at Costco.