Costco: What is the value proposition of Costco to its customers, or why do people shop at Costco?
Costco’s value proposition is, at the core, to provide customers with the best possible value on a quality product that satisfies their needs, essentially acting as their customers’ agent to find the best deal on the best product or service possible. Costco’s commitment to this mission satisfies various needs for the customer – Generally a Costco customer seeks a low price they can easily compare (hence the stocking of national brands), good quality (again, national brands or Costco’s commitment to producing a quality store brand product), and a commitment to the relationship established by the membership fee. In addition, Costco focused on a specific market of customers who were interested in high-volume and bulk-packages, and who appreciated price and quality over other factors such as package sizes or a huge variety of offerings. Costco’s willingness to lose some sales in order to secure their targeted customers allowed them to hone and focus their value proposition to satisfy their customers. In deciding to offer services in addition to products, Costco worries that a customer’s bad experience with a service might reflect poorly on its brand and affect its value proposition to the customer.
BMW: What is the primary take away from this case?
Gerlinger performed a SWOT analysis of BMW when he arrived in 1989, and identified its strengths and weaknesses, as well as areas to target for growth and improvement. Based on that anlyasis, he developed a multi-pronged approach to re-position BMW in the U.S. market and thereby increase sales to the 100,000 units/year target. This approach included a focus on brand and product, franchise, and organization and people. Underlying this strategy was a focus on customer care. Gerlinger’s strategy included differentiating BMW with a focus on realigning the brand with value, while maintaining its luxury status; targeting a wider market by including a wider range of price segments; working with distributors to ensure brand consistency; and finally, demonstrating a commitment to its distributors to encourage their participation in the dealer operating system. These…