Costco customer service supplants traditional marketing

Co-founder considers advertising ‘evil’; company has no PR department

Ability to “spread the word on steroids” via technologically-fueled social media, online discussion forums and reviews, and in-the-moment media reporting is empowering companies to promote themselves effectively by offering consummate customer service to all stakeholders—including customers, employees, partners and vendors. Sometimes, this can be so powerful that companies thrive without spending oodles of marketing dollars—especially when it comes to advertising and PR.

Mark Lusky

Once again, here we are talking about Costco. No, I don’t have their stock (although I should). And, no, I don’t get compensated for endorsing them. It’s simply that Costco does it right. And by “it” I mean their entire approach to customer service, employee treatment and overall empowerment within the organization.

Clearly, Costco follows the credo of actor and commentator Will Rogers, who said: “If advertisers spent the same amount of money on improving their products as they do on advertising then they wouldn’t have to advertise them.”

Costco is an exceptionally compelling case where taking care of people actually has eliminated the need to advertise and seek out favorable editorial coverage.

That case is summed up in a recent thisisinsider.com report: “…the retailer manages to get incredible press without a public relations team and spends no money on advertising…Costco reallocates these funds towards keeping prices super low and paying workers more — making people trust the brand even more.”

The article continues, “‘We consider (advertising) evil,’ Costco cofounder Jim Sinegal told The Motley Fool in 2013. ‘Because it costs money; anything that is going to raise our price on merchandise is bad.’…This strategy has allowed Costco to keep prices extremely low, often undercutting the competition… Despite refusing to pay for advertising, Costco isn’t stingy in other areas. The company is known for paying workers more than rival retailers, recently raising its minimum wages from $14 and $14.50 up to $15 and $15.50. The company regularly tops lists of the best workplaces in America.”

What are the practical takeaways from all this?

• Treat your customers, employees and other stakeholders well to generate enthusiastic word-of-mouth buzz and top-notch reviews. This all-encompassing “customer service” becomes the foundation of subsequent formal marketing efforts. Make performance match promises as Costco does. Whenever possible, avoid doing business with companies whose promises far exceed actual performance.
• Make marketing programs an extension of this exemplary customer service performance. In this vein, marketing messaging reinforces the company’s consistent commitment to treat ALL its people with caring, understanding and respect. In some cases, positive press and other marketing objectives can be obtained via the Costco route. In most cases, however, there is need for proactive marketing that builds upon existing knowledge and kudos to help “spread the word on steroids.”
• Companies conducting loud, disingenuous marketing campaigns ultimately do much harm to their reputations because of customer disconnects. When I see mega-corporation commercials touting their customer commitment matched up with dismal performance in this area, I feel lied to and totally untrusting. Instincts say to run away as fast as possible.

All this harkens back to timeless principles of business excellence: Do what’s right by your people, tell the truth and let word of mouth become your stage.

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Mark Lusky is a veteran writer, storyteller and author, with 40+ years of public relations, advertising, marketing and journalism experience.

Author of A Wandering Wondering Jew… and co-author of Don’t Get Mad, Get Leverage,  Mark (aka The Happy Curmudgeon) is the owner of a Denver-based marketing communications firm.