Discount Club Tactics

Goals

To understand the tactics used by discount clubs companies in the US, like Costco, BJs, and AAA, to gain loyalty from their members to create a better understanding of how discount clubs retain members.

Early Findings

Costco Memberships

  • Costco offers a personal and business membership. Both have a standard and an executive membership level. The personal and business standard membership is $60, while the personal and business executive membership is $120.
  • The difference between the four membership types relates to the additional services offered. All memberships receive a free card that is valid at all Costco locations globally.
  • Features that are unique to both the personal and business executive membership are a 2% reward on annual Costco and Costco travel purchases and extra benefits on select Costco services.
  • The standard business and executive business memberships also include the ability to purchase for resale and the opportunity to add additional people to the membership for a fee of $60.
  • Costco also offers a student membership for $20. This opportunity is offered through UNiDAYS and requires membership to the UNiDAYS website to access. Upon signing up for the personal membership, students also receive a $20 Costco gift card and a Google Nest Mini.
  • A military membership that offers additional savings and free products to the value of $60 is also available to active duty, veteran, and retired military members. To sign up for this membership, a Costco Membership Activation Certificate is required. A military status needs to be obtained through ID.me to access this offer.

Costco Membership Numbers

  • Costco has experienced a steady annual increase in the number of members globally over the last five years. In 2018 Costco had 94.3 million members globally. This was up from 76.4 million in 2014.
  • Amazon Prime has recently surpassed Costco as the number one membership in the US. There are a number of households in the US that electing to buy a membership to only one of the discount clubs. Despite Costco having less expensive prices overall, Amazon Prime is starting to eat into Costco's membership numbers in the US.
  • Amazon Prime offers additional perks to its members, including free two-day shipping, a more extensive selection of brands and prices, and free access to books, television shows, and movies.
  • The percentage of houses that pay only for Amazon Prime membership was 16.2% in 2016, while the percentage that pays only for Costco membership was 9.8%.

Summary

  • Our first hour of research has found there is a significant amount of information available in respect of membership discount clubs, the best practices to adopt when setting up a discount membership club, and the motivations people have when joining them.
  • Sam's Club (Walmart) and Amazon Prime have been identified as two other discount membership clubs of significance in the US.

Proposed next steps:

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