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Lesson #5: Marketing Does Not Need To Mean Spending Millions

Article Overview: Conventional wisdom says that no company can stay at the top by competing on price alone. But, Sinegal has managed to become the envy of entrepreneurs the world over. He has been able to create a billion dollar business without spending millions of dollars in marketing. How did he do it? How has Costco risen to become the retail giant that it is, without hundreds of radio, television and print ads telling us it is so?

Lesson #5: Marketing Does Not Need To Mean Spending Millions

Conventional wisdom says that no company can stay at the top by competing on price alone. But, Sinegal has managed to become the envy of entrepreneurs the world over. He has been able to create a billion dollar business without spending millions of dollars in marketing. How did he do it? How has Costco risen to become the retail giant that it is, without hundreds of radio, television and print ads telling us it is so?

With Costco, Sinegal took a deliberately low key approach to marketing. In fact, the company has never even had a public relations department, and spends zero percent of its budget on advertising. Instead, Sinegal has taken a two-prong approach to marketing: treating his employees well, and maintaining a close, personal relationship with small businesses. Though the direct benefits might not be as visible, Sinegal believes they have paid off, and will continue to do so in the long run.

The first part of Sinegal’s marketing strategy is to create a team of happy, motivated and loyal workers. He does that by offering one of the most generous pay packages and health benefits in the industry. He also promotes primarily from within, keeping those who start off with Costco as cashiers with him all the way through to managerial positions. But, Sinegal is not doing that just because he wants his company to have a nice family feel to it. No, Sinegal has implemented such a plan because it makes good business sense. “Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco,” he says. “It has to be a significant advantage for you.”

Sinegal’s marketing strategy does not stop with his staff of internal marketers, his employees. He also makes sure that Costco focuses its priority on the business customer. While Costco does service individuals and non-profit groups, 60 percent of its business is with business customers. “Our business was founded so that small businesses could come in and buy essentially everything they needed for their business under one roof,” says Sinegal. “Café owners could purchase all of their food and drink, cigarettes and candy, cleaning supplies, pots and pans, toilet paper and towels, pads and pencils, and so on.”

With business owners as its primary target, Costco has attached company representatives to each of its customers’ stores. Their main responsibility is to maintain the good relationship with these business owners and network with future ones. In each store, there are typically one or two Costco staff members who spend their days calling prospective business clients and setting up appointments. From one business, Costco staffers are often able to generate leads and network to others.

Sinegal likes to be cheap and he is not afraid to admit it. Why spend millions of dollars on marketing, when he can put that money into his labour costs and achieve even greater results? By focusing on creating employees that have only good things to say about Costco, to concentrating on maintaining strong relationships with business clients, Costco has managed to create a living, breathing marketing machine at little cost.

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Article Tags: ambassadors, business customer, business customers, business sense, cashiers, costco, dollar business, good business, health benefits, managerial positions, marketers, marketing strategy, nice family, personal relationship, print ads, profit groups, prong, radio television, retail giant, service individuals



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