Costco - Marketing to New Segments - Research Paper Example

Costco Marketing to New Market Segments Introduction Costco is the largest warehouse club and second largest general retailer in the United States of America (USA) selling a variety of goods comprising of food and general merchandise. Over the years the company has been expanding in the US and international markets courtesy of its business strategy of providing items in bulk and at low prices especially in its retail segment. At the moment, the company is more concerned by changes in demand in its key markets (US and Canada), it’s over expansion and cannibalization of its existing stores forcing it to venture into international markets for growth.

This has seen it venture into new markets including baby and kids, seafood and coffins product lines among others. Internationally, it has recently expanded into Taiwan, Japan, Australia, and Mexico (Costco 2011). Some of the marketing strategies that the firm is employing in the new market segments are explained hereunder. New market segments As mentioned above, Costco employs the bulk purchase and low price marketing strategies which it has extended to its new market segments in the US and in the international markets.

This strategy could well be referred to as perceived value pricing where its customers get valuable goods at affordable prices (Jackson, 104). Costco has also used test marketing which involves introducing a product or a prototype to a targeted market segment as a form of primary research. This method was particularly used when it was introducing its new product line for coffins. This allows customers to critique the new product and pave way for improvements before mass production can begin. The method worked well among its customers who were already used to shopping at its warehouses and retail outlets (Dransfield and Needham, 47).

The company also applied merchandise mix strategy by stocking tailored product lines to suit the local tastes and blending them with local and American products. This has worked for them by ensuring that it doesn’t bring in radical changes to customer tastes and preferences. This has led to market diversification through new market segmentation strategy. For example, in Japan, the company offers quality seafood (Lowe and Doole, 152).Costco idea behind stocking fewer products lines than its competitors and regular valuation in the products it stocks (one fourth of the stock) based on emerging opportunities for purchases in the grey markets has allowed it to use niche marketing to its advantage selling at a premium (Jackson, 104).

This has made it expand in newer markets through this value addition and convenience concepts. The company also uses e-marketing strategy to reach out various target customers. Costco has an online shopping kiosk where its customers can order goods and obtain them at its nearest warehouse or retail outlet (Costco, 2011). Through e-marketing the company has tapped into new high-growth markets and gained competitive advantage (Doyle, 337). The company has also employed customer delight strategies by managing customer expectations and experiences.

This has helped them to improve on its product offerings and marketing services (Hartline and Ferell, 372-375) List of references Costco. While supplies last. Costco, (2011) www.costco.com. 5th December, 2011 Doyle, Peter. Value based marketing: Marketing strategies for corporate growth and shareholder value. West Sussex: John Wiley & Sons Ltd, 2008 Dranfield, Robert and Needham, Dave. GCE AS level double award for edexcel applied business. Oxford: Heinemann Educational Publishers, 2005 Hartline, Michael and Ferell, O.C. Marketing strategy, 5th ed.

Mason: South-Western Cengage Learning, 2008 Jackson, Bradley, J. Deja new marketing: Increase sales with social media, search marketing, e-marketing, blogs and more. Indianapolis, IN: Dog Ear Publishing, 2010 Lowe, Robin and Doole, Isobel. International marketing strategy: Analysis, development and implementation, 5th ed. Bath: South-western Cengage learning publishers, 2008