You walk into McDonalds and order a Big Mac Meal for $4.59. Just when you begin to think you’re getting a bargain, think again.
Have you ever strolled by the checkout line at Costco and taken a whiff of their quarter-pound hot dogs and massive slices of cheese or pepperoni pizzas? Now when you hear that you can order a foot long hot dog with a 20-oz Coke (with refill) for a grand total of $1.50, you realize that the MacDonald’s bargain has just been trumped. The $1.50 meal price hasn’t changed since 1985. The question is, how can Costco make a profit selling food at such low prices?
When you realize that this warehouse retailer expects to “sell more than 300 million hot dogs, pizzas, and other items at its food courts this year,” suddenly it all makes sense. Let’s do the math; 300 million food court purchases at an average sale price of $3.34. This will generate revenue of just over $1 Billion in sales. Now, when you realize they have a 21% profit margin, that’s just over $210 million in profit. Not bad for a hot dog stand inside a big box store. You’re not going to walk down a red carpet to be greeted with your hot dog on a silver platter, but you’re guaranteed to get a satisfying meal at an inexpensive price.
There’s no question that Costco makes its profit margin by selling food items in bulk, to the tune of $89 Billion in revenue and $2.5 Billion in operating income.
Not to deter from talking about greasy fast food, but my intention in bringing up Costco’s marketing strategy lies in how it has positively impacted our companies sales from the email list cleaning and validation service that we provide. I’ll start with a brief explanation of what this service is as well as how it helps businesses streamline their email marketing routine.
Email list cleaning and validation services benefit those small businesses to enterprise-level corporations who rely on email marketing to maintain contact with their customers on a frequent basis. Acknowledging that 30% of email addresses are either abandoned or become inactive over a year’s time, these companies often have the need to clean and validate their existing customer database to improve their deliverability as well as the ROI from their mailings.
Many new clients who are doing their research of email list cleaning and verification companies come to me with this very question:
How can you offer your services at a far lower price than your competitors?
The answer to this question is always the same. We have adopted the “Costco mentality” so to speak, and have the server capacity to validate over 600 million email addresses per year. Our customers find this service so beneficial that they often come back with a desire to take advantage of some of the other online marketing services that we offer, or send referrals our way.
Costco’s marketing executives are aware that only on rare occasions do customers stop in for a slice of pepperoni pizza and hightail it out of there. More often than not, they are likely to browse the aisles in search of more good deals. While offering fast food at the checkout area might be considered an unorthodox idea, it lures people into the store to buy their products and come back for more.
We can all agree that the hardest part about making a sale is getting people in the door. Once they have chosen you over your competitors, it’s all about delivering a great service and retaining their loyalty for the long term.
This information is so vital in understanding how your customer’s view your company, we took the time to share our internal statistics into how our customers view our service. You can view this information and see what Email Answers customers think about us: Aggregate Reviews: Why Happy Customers are so Important
So, again, why is our list verification service so inexpensive?
The answer is simple; we would rather attract 1,000 new customer each year than 50. If 25% of these 1,000 customers refer a friend or another company to us to use our service, we now have an additional 250 potential customers. If 10% of our customers use another service that we provide, which could be our managed email marketing, our third party email marketing or our Enterprise ESP Platform, we have now increased our revenue, reach and base. Well, I guess you get the point. We would rather have a customer base of 5,000 happy customers at a 20% margin, then a customer base of 500 at a 100% profit margin.
It just makes good business sense.