Everyone wants to know what is the secret to Costco’s $1.50 hot dog? Surely, much like their $5 rotisserie chicken, they must be losing money on this deal?
Yes, they do lose money from these deals that seem too good to be true, but there’s a reason behind it. This is simply Costco’s marketing strategy. Instead of paying for ads on TV, Costco chooses to invest their money in making a select few of their products cheaper. By walking through all the other aisles filled with products such as snack foods, clothing, and chapter books, it’s likely that a person would leave with more items than they originally intended to buy. Word of mouth is one of the best forms of marketing out there, and as customers inform their friends and family about this amazing deal they got, the news spreads, bringing in even more people and more people.
Additionally, Costco makes their own hot dogs and rotisserie chickens through their own brand, Kirkland Signature. This allows Costco to control the entire production and distribution process, making it ultimately cheaper for them, and assisting in keeping the pricing of these items low.
Sometimes, you have to lose something (the profit lost from the hot-dogs and rotisserie chicken), to gain something (the profit gained from every other product Costco sells).
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