Marketing plan

According to the quarterly update in Warehouse Clubs and Super Store industry by First Research: Costco’s main customers are generally small business’ and families with large households (five or more persons) that seek to purchase groceries and other products at lower prices, thus making Kirkland and other Costco owned brand names very appealing in the grocery market section. Costco brand names have demonstrated high levels of acceptance among its customers. Craig Jelinek, Costco president and chief executive officer, explains that “All Kirkland Signature products must be equal to or better than the national brands, and must offer a savings to our members," (Kirkland Official site).

Differently than other supermarkets and retailers, Costco carries a fewer selection of stock keeping units: around 3,500 and 8,000 which accounts to 25% of SKU’s normally found in supermarkets and retailing stores (First Research 4). Nevertheless, Costco has shown to be more efficient than its competitors rotating its products, to the point that they would sell all the merchandise before the payment to suppliers is normally required, putting Costco at a very advantages position to its competitors while creating confidence with its distributors that can rely on the fact that they will get their payment on time.

New Markets

As described in previous section the retailing industry for food has been experiencing changes in later years due to the grown of popularity of organic and natural products. The organic market in the United States has increased around 12% last year and it is only expected to increase even more this year (Source 1). Thus one of the main objectives for Costco should be to get a grid of the natural and organic food market.

However big, the organic market can be subdivided in thirteen categories such as: Fresh fruits, Fresh vegetables, Dry snacks and crackers, canned fruits and vegetables, Milk and dairy products among others of much lesser consumption. Each one of this products has its own share of the consumer’s demand and they all have advantages and disadvantages in the market. For instance, fresh fruits and vegetables have the largest demand, accounting for more than 11.6 billion dollars in sales in 2014, and has maintain up to 15% demand increase in later years. Nevertheless the biggest problem these products face is the premium price customers have to pay, this throw back is felt the most among the milk and dairy products due to the limited capacity of production which raises the price to a point that customers prefer regular brands.

As for now, the retailing of natural and organic products are mainly in specialty stores like Wholefoods and Trader Joe’s that rely on their top quality of selected products to attract customers that seek healthy and more nutritious products, these customers mainly represent people highly educated, with good income level that are willing to pay the premium prices for natural options. However recent studies by ( Source #3) demonstrate that around 60% of customers in retailing supermarkets would rather buy organic products if given the option and the right price.

Target Market

In order to remain competitive in the industry Costco needs to enter the natural and organic markets, however it would be preferable to aim to specific segments in the market while at the same time begin the operations in determined locations.

The principal markets segments that Costco should target are the millennial generation and parents of young children. Millennials represent the generation of Americans born after 1980, essentially people who reach adulthood after the year 2000. They are the fastest growing group in consumption and in next years they are expected to surpass baby boomers in consumption, normally they prefer cheaper food that is also convenient, however they are also willing to pay extra for specific attributes in their products such as organic, natural or specialty food, as they are concern about health and appreciate variety. The other important group are the parents of young children, generally speaking this market segment is more concerned about the health of their kids thus they have purchasing more natural grown products, free from pesticides and other GMO’s. In a recent survey conducted over 12000 families by the association “U.S Families” on Organic Attitudes & Beliefs results have shown that over 80% of these parents had purchased organic products in the past two years, also the main reason for these purchases has to do with the health benefits of these products for their children. Therefore Costco should aim to stablish new customers in these two segments, and later focus on the remaining consumers of the organic products.

The organic industry in the United States has develop the most in western states like California, Texas and Arizona thanks to be closer to production sites plus rapid awareness among customers, making this part of the country the national leader in organic consumption (Source 2). Therefore Costco should start introducing more organic merchandise in the warehouses located in western United States as first measure to try this market, after that it should slowly move to the rest of the warehouses in the country.

New Product

Costco will launch a new line of organic and natural products under their signature brand Kirkland in a new subdivision specialized in high quality food named “Kirkland Organic”. This line of products will be subdivided in three major categories:

· Fresh Fruits. Offering oranges, bananas, apples, pears, kiwis, strawberries and mangoes will be the first to be introduced under Kirkland Organic as they are more popular among consumers. Other seasonal fruits are also planned to be added to this category in the future.

· Fresh Vegetables. Offering romaine lettuce, tomatoes, avocado, onions, potatoes, green pepper, yellow, pepper, zucchini, English cucumber only as introductory items for the launch of the new line, nevertheless the vegetables category in Kirkland Organic is expected to be the one with the largest expansion in the future.

· Dry snacks and crackers. Which have been a staple in the Kirkland traditional line, but now are planned to be expand with the addition of natural and organic options in items such as almonds, walnut crumbs, pumpkin seeds, sunflowers seeds, crackers, sultan raisins, dry fruits and nuts mix.

The new line of organic products will emphasize in Costco target markets offering convenience and variety stating from its early stages as it is only expected to grow in the years to come, at the same time Costco will ensure that all products in this line count with the highest quality possible always regarding the customers as the most important stakeholders. Pricewise Costco will keep the premium prices in these products to a minimum to attract and ensure its customers.

Positioning

The new products will follow Costco’s promise to offer the best combination of quality and price to its members, so they will feel confident that they will never be overcharged for our the quality products in our stores, which will be just as good as others found in specialty supermarkets. Additionally Costco will enforce privilege display of the organic products so customers can have easy access to them. Furthermore Costco will inform of the benefits of consuming non GMO food plus the enhance taste of organic products and the support it brings to local farmers; with signs and flyers at the location.

Works Cited

Warehouse clubs & superstores - quarterly update 1/12/2015. (2015). (). Austin: Hoover's Inc. Retrieved from http://search.proquest.com/docview/1644753539?accountid=7285

Talley, K. (2013, Jan 17). Costco launches pharmacy-benefit manager program. Wall Street Journal (Online) Retrieved from http://search.proquest.com/docview/1270384454?accountid=7285

Mergent Online. (2015, January). Costco Wholesale Corp (NMS: COST). Retrieved from http://www.mergentonline.com.libproxy.csun.edu/companydetail.php?compnumber=16720

What's Fueling Costco Wholesale Corporation's Delightful Dividends? (COST). (n.d.). Retrieved from http://www.fool.com/investing/general/2015/02/17/whats-fueling-costco-wholesale-corporations-deligh.aspx

Why You Should Consider Booking a Trip Through BJ's, Costco or Sam's Club | U.S. News Travel. (n.d.). Retrieved from http://www.huffingtonpost.com/us-news-travel/why-you-should-consider-b_b_6707614.html

Appendix

Revenues

* * * * * * * * * * MARKET AND INDUSTRY * * * * * * * * * *

PRIMARY NAICS:

452910 - Warehouse Clubs and Supercenters

SECONDARY NAICS:

452990 - All Other General Merchandise Stores

PRIMARY SIC:

5411 - Grocery Stores

SECONDARY SIC:

5399 - Miscellaneous General Merchandise Stores

PRODUCTS:

KIRKLAND SIGNATURE - Private Label Products

SEATTLE MOUNTAIN - Bean & Ground Coffee

FUNHOUSE TREATS - Candy

COURT CLASSIC - Shoes

CHOCOLATES OF THE WORLD - Chocolate

CANINE CLUB - Dog Food

BALLANTRAE WINE MERCHANTS - Wine

EXECUTIVE MEMBER - Travel Agency

NO LINES ONLINE - Retail Store

COSTCO ONLINE - Online Store

COSTCO HOME - Furniture

COSTCO BUSINESS CENTER - Printing Services

COSTCO - Logo

PRICE CLUB - Club Industry