Costco Signature Rewards Promotional Plan, Marketing Plan Example

Costco is largely a low-cost retailer with the aim of increasing sales and mitigating costs. The company has in the recent past engage in a number of discounting activities that have considerably led to its increasing success despite poor economic performance by competitors and the market in general. Costco effectively stay ahead of the competition through the application of different types of discounts on its goods.

Kirkland Signature

This is a home grown brand within Costco. This brand concentrates on providing in-house branded commodities from different suppliers globally. This brand focuses on providing the best possible quality at the lowest price available. A salient example is Kirkland wines that are sourced from different wine makers globally and packed under the Kirkland Brand.

Proposed Promotion

The proposed promotion for the company entails providing a 5% cash back discount over time an individual realizes $100 in Kirkland merchandise purchases. This kind of promotion is particularly suited for Costco owing to their sales and marketing strategy. Since the store’s clients are mainly members who pay a subscription fee, members have accounts that depict record of their purchases. The proposed 5% cash back discount would be applied upon a customer’s purchase that sums their total expenditure on Kirkland merchandise to $100.

Implications on Sales and Revenue

The proposed 5% discount would have a significant impact of the sales realized by the company, and as such affect revenue. Currently, Kirkland merchandise account for 25% of the company’s total sales (as of 31ts October 2014. The sales made on each Costco registered customer is expected to go up with the introduction of the 5% money back guarantee. Statistically, it is expected that that introducing the price discount would boost individual sales for members to 204% in the next 5 years as depicted in Table 1.  This would result in the distribution of the sales increase over the 5 years of 40.1% every year. Using results from FY2014, Costco has been realizing a steady increase in Sales on a yearly basis, the introduction of the new discount promotion is expected to drive Kirkland in the following way;

Applying the discount

According to the historical information, Costco currently realizes selling, general and administrative expenses at 9.8% of Net Sales on average. Assuming these costs remain the same, the company would realize the following Net Income.

Given the analysis above, income before taxes are calculated without taking into consideration the cost of goods sold and the income from membership fees. Income for the company is expected to rise at least 40% every year for the next 5 years, factoring in effects of the discount on sales and revenue. The breakdown of some of Kirkland’s fastest moving products are listed in table 4.

Works Cited

Costco Wholesale. Annual Report 2014. Annual Financial Report. Kirkland: Costco Wholesale, 2014. Electronic Source. 28 April 2015. <http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY0ODcxfENoaWxkSUQ9LTF8VHlwZT0z&t=1>.

—. Costco.com. 27 Arpil 2015. Internet Source. 28 April 2015.