There’s a lesson to be learned from Costco’s $1.50 hotdog that all business owners should take note of, one of building brand loyalty and trust. Costco has been selling their quarter pound all beef hot dog with a 20-ounce soda, refills included, since 1985. Not even a global pandemic could cause the powers that be at Costco to raise the price of this customer favorite. Why? Brand strategy.
When the Costco Wholesale Club was created in 1983 , the company began focusing on ways to build brand loyalty and trust. They focused on creating a one-stop-shop where Costco members and their guests could find all the products they need and love, and for a competitively low price. Today their 871 warehouses worldwide allow the company to move massive quantities of products then sell to Costco members at low margins year after year, yet it is the quality of products offered that has helped make Costco a global household name.
Costco’s Kirkland Signature brand was created in 1995 to provide members with quality products at an affordable price which allowed Kirkland’s to become larger than Hershey’s, Campbell’s Soup, and Kellogg, according to CNN. The irony is the products under the Kirkland Signature brand are created by Nationally known companies like Starbucks or Duracell. Costco simply negotiated a deal to ensure its members would have access to brands they know and love for a discounted price. There are quite a few articles written about the “hidden makers of Kirkland Signature products”, yet Costco isn’t hiding anything. If you shop at Costco, randomly look at a package of cookies or a pound of ground coffee and you will likely discover which company produced it.
The moral of the story is brand loyalty and trust can make or break any business. Not every business decision should be based on profit margins alone because fulfilling customer wants and needs is paramount to success. Costco sold nearly 200 million hotdog deals in 2023, taking a loss on every single one, yet their revenue in 2024 continues to increase.