Thread by @jeremykuoo

Costco spends $0 on advertising.

But it’s a $200 billion empire with a $4 billion food court and 128 million paying members.

Here’s how a $1.50 hot dog and a no-frills strategy built one of the most trusted brands in the world:

1. The Membership Model

Costco’s foundation rests on its membership program.

Members pay $60 per year (or $120 for Executive Membership) just to shop at Costco.

While it may sound counterintuitive to charge people for access, this strategy creates a powerful psychological effect:

• Loyalty Through Investment: Once someone pays a membership fee, they feel obligated to use it, ensuring frequent visits.

• Steady Revenue Stream: Membership fees generate $4 billion annually, covering Costco’s operating costs and allowing it to sell products at razor-thin margins.

• Renewal Rates: Costco boasts a 92% membership renewal rate, a testament to the value members perceive.

2. The $1.50 Hot Dog: A Symbol of Value

Costco’s food court is legendary, and its $1.50 hot dog combo is a cornerstone of its marketing strategy.

The price hasn’t changed since 1985—a deliberate move to reinforce the brand’s commitment to value.

When a Costco executive suggested raising the price, former CEO Jim Sinegal famously said, “If you raise the price, I will kill you.”

The hot dog combo isn’t just food—it’s a promise to customers that Costco will always offer unbeatable value.

3. No Advertising? No Problem.

Unlike competitors like Walmart or Amazon, Costco spends almost nothing on advertising.

Instead, it relies on word-of-mouth and the loyalty of its members.

The strategy works because:

1. The membership model creates a sense of belonging, turning customers into brand ambassadors.

2. Costco’s “treasure hunt” layout encourages customers to explore, creating excitement and repeat visits.

This no-advertising approach allows Costco to reinvest savings into lower prices for its customers.

4. The Treasure Hunt Effect

Costco’s unique product strategy is part of its magic.

Unlike traditional retailers with endless options,

Costco stocks around 4,000 items—a fraction of the 140,000 items in a typical Walmart.

This limited selection creates:

1. Scarcity: Items rotate frequently, creating a sense of urgency. Customers often buy more, fearing the product won’t be there on their next visit.

2. Surprises: Exclusive and seasonal items keep shopping exciting.

3. Efficiency: Fewer items mean lower overhead costs, allowing Costco to negotiate better deals and pass the savings to customers.

5. Kirkland Signature: The Billion-Dollar Private Label

Costco’s private label brand, Kirkland Signature, is a marketing powerhouse.

Introduced in 1995, it now accounts for nearly 30% of Costco’s total sales.

Kirkland products are often made by the same manufacturers as premium brands but sold at a lower price.

For example, Kirkland vodka is rumored to be sourced from the same distillery as Grey Goose.

Kirkland Signature alone generates over $50 billion annually—more revenue than some Fortune 500 companies.

6. The Simplicity of Costco’s Marketing

Costco’s marketing strategy is about creating value and trust, not hype. Here’s what sets it apart:

• Customer-First Pricing: Costco operates on a maximum 14% markup, compared to traditional retailers, which often mark up products by 25-50%.

• No-Frills Stores: Costco’s warehouses are plain and efficient, minimizing overhead costs.

• Experience Over Ads: Instead of spending on commercials, Costco invests in exclusive products, member perks, and the in-store experience.

Costco offers valuable insights for businesses on how to build a great business with customer loyalty and trust.

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