Costco has targeted the upper-middle-class society through the membership fee. Most of their customers are Americans who can afford such exorbitant amounts to experience the pleasure of shopping in the establishment. Wal-Mart, on the other hand, does not have a membership feeand is hence accessible to the less endowed members of the society. The target marketing strategy implemented by Costco has enabled it to record staggeringly high sales revenues since their customers have unlimited disposal income. The strategy is particularly helpful in the periods after recessions, where Costco bounces back at a faster rate than Wal-Mart. It is because the dollar sale per square foot is more. They also offer exciting quantity discounts for its customers, which when embraced increases sales volumes two-fold. The customers’ subsistent and impulse -buying behavior works best to maximize turnover in a shorter spell than its competitors.
Wal-Mart has positioned itself as a store for the people. It caters to a broad range of the population but commonly caters to the cash-strapped consumer. These people mostly live from paycheck to paycheck, hence, do not offer significant sales volumes per customer. The advantage of this market is the enormous density of population wherever they are. It leads to a greater number of individual clients, with different tastes, preference and style. It forces Wal-Mart to stock a wide array of complementary products for different customers. A large number of individual consumers have necessitated many advertisement efforts as sales-promotion tenets. The firm heavily pushes the market to buy complementary items, which guarantee stratospheric turnovers. Their advertising costs compared are surprising: Wal-Mart has the lion’s share in advertising costs, since Costco spends insignificant amount of dollars to this endeavor. It is sensible why there is discrepancy in these two cost behaviors. Costco’s main selling point is the provision of inebriant low prices, which is the best way to attract customers who look to save shopping costs, especially on a subsistence scale.
High wage strategy
Costco is renowned for offering higher wages to its staff, especially when compared to Wal-Mart. It makes much sense to award high-quality personnel with enough motivation to conduct the sales activity. A better-paid employee normally performs better. Therefore, it enables elevated customer satisfaction, giving a high chance of repeated selling to such a customer. When a customer receives exemplary service at the establishment, he will recommend the establishment to his peers, who are most likely affluent. This high-cost strategy has improved foot traffic thereby maintaining consistent profit margins, even during hard economic times.
Wal-Mart perceives itself as a low-cost cost payer to limit its variable costs. The firm displays paramount keenness to increase their profit margins at the expense of their workers. It has helped it enjoy higher operating margins than Costco, making it a viable marketing strategy. However, the consumers’ perception of the firm takes a hit, making chances of their loyalty slim.