Costco Garnering Competitive Advantage through Maximising Customer Life Time Value

Abstract

Costco Wholesale Corporation (Costco) is a membership warehouse club envisioned to bring to its members merchandise of assured quality and reputed brands at best possible prices. The market capitalisation of the company is reported to be US$ 215 Billion as per NASDAQ. The business model of Costco is unique and exclusive. The key components of its business model are twofold, viz.

(i) Membership based shopping and

(ii) Warehouse based wholesale prices.

A diligent perception puts it that ‘Customer lifetime value’ refers to the total worth of a customer to a business spanning the period of their relationship. The unique business model of Costco has been able to deliver the ‘differentiated value’ through membership based shopping; and ‘low prices’ by the medium of warehouse based wholesale prices; both together leading to a distinct competitive advantage. Thus, springs up the vital observation that Costco is garnering competitive advantage through maximising customer life time value.