Costco Market Segmentation Overview Essay

1880 words - 8 pages

Costco-Market Segmentation
Overview:
Every company and/or organization starts and operates to achieve a single major goal, which is normally included in the company’s mission statement. Setting a goal, however, does not translate into success on its own; it is only the fist step. Understanding market segmentation is the second most important aspect of doing business. “Sellers and advertisers want to be able to determine what the potential market is for their product or service, as well as the best ways to reach potential consumers” (Terrell, 2013). Once a goal is set, an organization first must decide if it wants to operate locally, regionally, nationally, and/or internationally, as the size of the geographic coverage has a large influence on demographic coverage. It is crucial for a business to understand what it is meant by demographic coverage; it is to understand people’s age, gender, culture, social norms and beliefs, and income in a given geographical size (Grewal & Levy, 2010). Let’s take a high class and luxury bar as an example to explain the importance of these key factors. If the bar is located in an area where the average age is 60, it will be safe to assume that the business will have difficulties finding many customers. Similarly, the business will not be able to survive if it is located in an area that has a lot of Mormon or Muslim residents as drinking alcoholic beverages is prohibited by these religious practices. On the other hand, if the said bar is located in an area such as San Francisco where the average age is around 38 years old, the median income is ~$70,000, and the culture is a melting pot of many races with many beliefs and behaviors, it will most likely thrive to its full potential (city-data.com, 2013).
However, since no company can service the entire demographic map in any given geographic area, it must carefully choose one or two target group/s that will bring the most amounts of financial benefits to the organization. Costco Wholesales is no exception to this rule. Geographically, Costco Corporation has expanded its operation trans-continentally to eight countries (Costco.com, 2013). Therefore, understanding geographic and demographic characteristics of the areas its branches are located in becomes crucial to company’s survival. The products offered at each location are customized to that region’s geographic and demographic characteristics. For example, a Costco branch in southern California, will have many beach products for its customers, where as the one in Texas will barely ever offer these items throughout the year. Furthermore, since Costco faces great competitions from other mega retailers such as Target and Wall-Mart, it needs to further micro-analyze the market. The company must target specific groups of people/organizations that have previously not been targeted by other competitors. Once the target market and target audience have been determined, Costco must reposition its products and/or services in...

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