Costco’s Secret for Generating Word of Mouth

Posted on 04. Oct, 2012 by in Word of Mouth

Confirmed Costco shoppers appear to enjoy their shopping experiences at the big-box retailer.  Despite the less than luxurious facilities, larger than desirable multi-packs, membership fee, and frustratingly long checkout lines, Costco rises to the top in just about every national Net Promoter Score listing or customer satisfaction ranking.  At first glance it may seem strange that Costco ranks right up there with the likes of Nordstrom and Trader Joes, but when all of the components of the total customer experience are considered, it really can make sense.

Word of Mouth Just Happens, Right?

But the apparent contradictions don’t stop at NPS and C-Sat.  Costco claims to also enjoy strong, positive word of mouth!  Actual, in-market dialogue about a company often doesn’t track well with these more traditional measures.  So, it’s worth taking a look at how Costco manages to turn purchases of 6-month supplies of olive oil or ‘convenient’ twenty-four packs of D-batteries into a shopping experience that customers actually talk about.

Of course numerous possible explanations come to mind.  It could be that shoppers like to brag about how much money they save, like the convenience of ‘one-stop shopping’, etc.  But according to Robin Ross, Senior Director of Corporate Marketing, Costco’s ability to generate word of mouth also has to do with offering unexpected surprises and instilling the sense of a ‘treasure hunt’ into every shopping visit. Costco understands that providing good bargains and a satisfactory shopping experience may keep customers coming back (until a new competitor comes to town with even lower prices), but these more mundane issues are not likely to stimulate conversations with friends, neighbors, relatives and co-workers.  And, it’s this positive word of mouth that communicates and perpetuates the memorable customer experience which, in turn, helps keep customers returning and attracts new customers as well.

Advertising Isn’t Involved!

Stimulating and maintaining dialogues about itself with little or no advertising demanded what Ross describes as a “better idea”.  Costco elected a unique strategy.  They added “conversation products” into their product mix; a $3,000 toilet, a $2+ million dollar ring, and computer-measured, custom-tailored men’s suits.  These items are both unconventional and unexpected offerings in a discounter-setting.  Certainly not impulse purchases; Costco didn’t expect to sell many of these items.  But along with other, more affordable ‘treasures’, they provide customers stories to tell.  And, this unusual merchandise provides customers a reason to talk about their trips to Costco.  Embedded in the resulting word of mouth may be mentions of other, more traditional purchases; the wild salmon they bought or the rewarding savings they received at the in-store pharmacy.  The next time a friend mentions Costco pay attention, you may be a recipient of just such a report.

Strategies for increasing the volume and positive tonality of word of mouth aren’t unique to Costco; but clearly Ross and his colleagues have recognized the opportunities still apparently unrecognized by others.  Satisfied customers who are given: 1) Motivation, 2) Content: stories to tell, and 3) Opportunity: chances to relate their content, will indeed communicate with their social sphere about a brand.  Depending upon the category it might happen through public social media (Facebook, Twitter, YouTube, etc.) or private social media (email, phone call, text message, or even a face-to-face conversation), but surely it will happen.

The ultimate message; word of mouth can be easily generated and can be strategically managed.  Conventional wisdom about the uncontrollability of word of mouth no longer holds – and perhaps never did.

Tags: , ,

Leave a Reply