WEEKLY CASE ANALYSIS Loblaws, Target, or Canadian Tire-Costco does very little advertising and instead relies heavily on consumer word-of-mouth. Case Name: Sampling Costco When customers do visit a store, they tend to have only a general idea of what they will buy. Instead, they plan to look at what the store has Case to offer before finalizing their decisions. This creates a perfect Sampling Costco opportunity to use product samples to increase sales and enhance the shopping experience. Research indicates that three-quarters of people With annual sales of just over $100 billion, Costco is the second largest who are offered a free sample take one and that once people take a retailer in North America (behind Walmart) and the fourth largest in sample they are substantially more likely to buy the product. For the world. The company's Canadian same-store sales have been example, The Atlantic magazine reported on a study of yogurt and growing rapidly and it continues to open new stores across the found that almost 60% of samplers purchased the product, compared country. to only 15% of nonsamplers, For frozen pizza and bagels, more than Yet, Costco is a very unusual retailer. In contrast to conventional 20% of shoppers who sampled the items made a purchase, while those wisdom, which urges specialization, the company carries products in who did not sample the food did not purchase those products. In an incredibly diverse array of categories ranging from grocery to tires extreme cases, samples have been shown to boost sales by 2,000%! to jewellery. For example, to the surprise of many observers, Costco Overall, Costco's business model makes it different from other recently surpassed Whole Foods as North America's largest organic retailers, but those differences have created a loyal customer base that grocer with sales in that category of more than $3.6 billion! It could enjoys sampling the unique shopping environment. also be considered one of the largest fast food restaurants in North America, with in-store pizzerias and sales of almost 100 million hot Questions: dogs per year. Another unique aspect of the company's business model is its 1. How do utilitarian and hedonic values influence the choices that consumers make when membership fee. More than 10 million Canadians pay $55 or more per shopping at Costco? year for the privilege of shopping at Costco and more than 90% of 2. Would you consider a Costco shopper to be a habitual decision maker? Are Costco customers renew that membership every year. In fact, those shoppers likely to be loyal based on brand inertia? membership fees generate the majority of the company's pretax 3. How do Costco's samples influence consumers' learned responses to the environment? profits! 4. What consumer risks does Costco alleviate? Does it create risks that wouldn't exist in a As a retailer, the company focuses on getting products into stores and more traditional retail shopping environment? out to consumers at very low prices, often in large sizes for bulk 5. How does Costco influence consumer search and the creation of a consideration set? buying. This approach can mean that the products and brands that 6. What is the likely impact of in-store samples on search regret? Costco is selling one day will be unavailable a few weeks later. Many items are temporary and, the next time the customer visits Costco, they may well be out of stock. Yet, even with the sporadic nature of the company's large and diverse inventory, loyalty is not a problem for Costco. It might be an advantage as customers talk to each other and come to the store to see what deals they can get this week. Unlike traditional grocery or general merchandise chains-such as Walmart