Kawasaki teams with Costco for trial sales program

Publish Date: 
Dec 8, 2010
By Mike Vaughan

BUYING POWER

Most of you are familiar with Costco but may not be aware of its amazing membership demographics. Costco’s retailing philosophy is to provide its membership with high-quality products and services at a good value and a fair price and then to back it up with superior service. As an example, returns don’t require a receipt. There are no questions nor is there the typical 30-day time frame for returns with the exception of computers.

As unlikely as it may seem, the chain is the largest seller of fine wines in the world, and the largest seller of large flat-screen televisions and at least one person has dropped $102,000 sometime in the past on a diamond ring. Its membership is decidedly upscale — 22.1 million households have a Costco membership (representing 41 million members), that’s almost 20 percent of all the households in the United States. The median annual income for these members is $107,800, versus $50,221 according to the most recent government statistics. Costco currently has 415 warehouses in 40 states and Puerto Rico.

The Costco Auto program has been hugely successful, and while sales of automobiles in the U.S. declined 18 percent from 2007 to 2008, Costco Auto’s sales increased by about the same percentage. Volvo in particular has been successful in promoting the sales of its cars through Costco Auto and the results are impressive. The Costco Auto Program accounts for 40 percent of the sales of Volvo’s specific model being promoted during a Costco promotion period.

At this point you might be saying to yourself, “Well that’s a no brainer, everyone needs a car.” True enough, but not everyone needs a boat. For the past year Costco has had program in place with Sea Ray boats which functions the same as the auto program. The results so far? Sales of 1,075 boats with a gross value of $120,000,000. What’s even more astounding is the fact that roughly 50 percent of the buyers who used the Costco program were not in the market for a boat, to say nothing of the other 22.5 percent who were considering buy another brand’s boats, but switched to Sea Ray.

So if it works for boats and cars, why not motorcycles?

To me this program seems to be a win-win opportunity. In all probability a dealership is going to increase its motorcycle sales by some margin, even one-percent of 22.1 million households is a lot of people. Perhaps even more importantly a dealer is going to expose his products to hundreds of thousands of people who’ve never been in a motorcycle store, but might if they’re motivated by seeing a bike they might like in a familiar, comforting setting.

A promotion even under the best of conditions and aimed at a carefully selected, demographically perfect target, will evoke a response from only a small portion of the people who are exposed to it. However, if the target’s large enough, the cost of the ad or promotion reasonable enough, and the offer attractive enough, a portion of an undifferentiated target will end up responding to your ad or promotion. Depending on the size of that undifferentiated target — which in Costco’s case is 41-million members — even a small portion can be a significant number, and in today’s market any increase at all, no matter how small, provided the price is right, is welcomed.

In this day and age most dealers tend to put a large amount of their marketing dollars into their website and store-based promotions, but let’s face it, we’re mostly preaching to the choir. A person seldom goes to a motorcycle-oriented website unless they already have a motorcycle and few people come to your weekly or monthly promotion just to see the motorcycles.

But put a motorcycle, car, boat, you name it, in an environment where you don’t expect it, and like a wart on Julia Robert’s nose, it gets noticed. Now I’ll grant you that most of the folks scurrying about the concrete floors of your local Costco aren’t interested in motorcycles, but some are. Some already own motorcycles. Some have wanted one, but for some reason, haven’t made the move to get one. Still others may never have given motorcycle ownership a thought, but seeing one there creates a little bump to the cerebral cortex that says, “Hey, that looks like fun. Maybe I’ll check it out.”

The people running the show at Affinity are almost to a man ex long-term employees of Kawasaki, Triumph and Honda, and are off-road and street enthusiasts. Affinity COO Gary Drean you may remember from the ‘80s when he placed fourth overall in the Baja 1000. These are people who have experience and know what kinds of things turn people on to motorcycles in addition to the difficulties dealers have to overcome every day.

We’ll be bringing you updates on the success of the program in the future.