When you think about Costco, do you see it as a B2B or B2C company?
I had never been in a Costco in earlier years when you had to work at a qualifying corporate business just to enter one. The customer makeup must have appeared much different then.
The brand now serves both the wholesale market for businesses who want to resell products, as well as the consumer market who want to pick up some staple and exclusive items for their family.
And they do it it droves. If you’ve ever seen an empty Costco parking lot, the store was probably closed.
What compels people to flock to Costco, even when it’s so crowded?
The Brand is About Removing Risk
Costco puts people in the mindset that they have nothing to lose by shopping there.
They’ve taken a virtual machete to any perceived risk. Slashed. Gone.
While looking at the product, they know they can return it if they change their mind. In the cart it goes.
Uh oh. Now they want to return whatever it was. But they lost the receipt.
The result at any other retailer? We can give you in-store credit, refund at the lowest sale price, or nothing. No happiness.
Be Helpful, not Adversarial.
At Costco? Don’t worry about it. I’ll look up your purchase with your membership card.
Here’s your refund. Have a great day!
The reason so many customers shop there becomes obvious.
There is no adversarial kung fu with their customers over a receipt, or winning the right to return a product after an intense interrogation.
In some countries, like Australia, I’ve heard people just don’t return things. It must be great for companies, but mind-boggling to think consumers would spend good money on something, yet won’t get their money back.
In some ways I get it, depending on the value of the product. It may just not be worth your time to stand in line to return some items. Keep, sell or re-gift the product. Gain productivity.
What does Costco know that most people don’t consider?
A 1-3% return rate. In general, when you give people a longer time frame to return a product, they will be less likely to return it. If they do return it, it’s generally such a low percentage of return in contrast to larger value of their purchases, that it’s a non-issue.
You won’t likely see many returns in the martech or other B2B spaces, but you can certainly remove risk and be helpful.
The Brand is Also about Quality
Is Costco the only brand that employs buyers to select the products to be sold in their stores? Of course not.
But Costco’s buyers have the sole job of buying quality products at an unbeatable price, that in most cases you can’t even find anywhere else. Exclusivity.
What Mistakes Can B2B Learn From Costco?
Speaking of adversarial above… No company is perfect. Let’s look at the mistakes Costco itself appears to have learned from.
If you’ve shopped at a Costco, you are probably familiar with needing to show your membership card to gain entry, like you are wielding Top Secret security clearance to access Area 51.
What thoughts bounce around your mind when you see this? For me, it’s “I’m already a customer. I have a membership. Let me in your store so we can do business.”
An accompanying thought: if someone comes in without a membership, they see what’s available and if the experience is compelling enough to them to want to make a purchase, they need to buy a membership at the checkout.
True story: Our friends, KA and NA, a couple, were hassled for their card at the entrance.
They said “Forget it. We’re done with Costco.” The saddest part was they had recently re-joined as members, after witnessing my wife and I give social proof .
The Score? My friends: 1. “We don’t need this hassle.” Costco: -$$$$$?CLV. “Oops, our customer lifetime value just became negative thousands of dollars!” There are countless similar stories online too.
Customer Experience fail.
How much Customer Lifetime Value do we lose from implementing redundant speed bumps?
Think about that. How much real money is lost when we make stupid decisions?
It seems Costco has learned from their mistake. The past few times I’ve gone to Costco, they didn’t hound me for my Costco identification.
It was as though “carding” had never been a business practice. I don’t know why they ever did it. Maybe they didn’t want people buying a loss-leader hotdog or ice cream cone, without already first spending money as a member.
The lesson for B2B in this case is how expensive the “this is the way we’ve always done things” attitude can be for a business.
Do you have any other takeaways? Feel free to comment below.