If you own a home, drive a car, write checks,
invest in stocks, save money in a bank or go to the
theater, there is a Costco program that can save you
money. The same is true if you have a business and
use a Web site, toll-free numbers or conference
calls, overnight delivery service, merchant credit-card processing, payroll processing or small-business
That pretty much covers the broad range of service programs that are available to Costco members. (See a complete list on the page 24.) Exploring
the options should prove well worth the effort.
Not broke, don't fix it?
Sure, it might seem a hassle to switch from an
insurance agent or delivery service you’ve been
using for years, or to stop automatically ordering
checks through your regular bank, but not if you
were to see the savings of using Costco’s programs.
People often get resigned to just letting a service
program ride, not really wanting to take on the homework necessary to make a switch. The next thing you
know, 10 or 15 years have gone by without ever investigating alternatives. That mind-set is less likely in a
small business, where more often than not it’s all
about saving pennies or dollars anywhere you can
to sustain, grow or survive.
Costco has taken on the majority of the homework by thoroughly vetting each service provider
and saving you the time of personal due diligence.
Costco has also exerted the massive buying power
of its 47 million members in the U.S. to negotiate
rates and values that are unmatched elsewhere.
Getting here: The 10th anniversary
Having so many members using Costco’s services didn’t happen overnight. This month marks
the 10th anniversary of the regional introduction of
Costco’s Executive Membership, which was why
member services were established—as incentives for
the premium membership fee.
Five services were on board for that April 1997
Washington state launch, including mainstay NOVA
(still supplier of merchant credit-card processing)
and earlier iterations of auto buying, real estate and
small-business health insurance programs. National
rollout followed in September of that year.
Die-hard Costco fans jumped on the program
as early adopters, but numbers grew slowly for
Executive Membership until two significant innovations in 2000. First came the creation of the
annual 2% Reward based on most Costco purchases, which was extremely effective in establishing
clear value for Executive Membership. A family
spending $200 per month at Costco would easily
earn back the upgrade fee. Most Executive Members
spend more than that.
The other innovation was a
two-tier approach to the services.
Executive Members would realize
the maximum benefit on member
services, while Gold Star and
Business members could participate
in the programs with a lesser benefit.
That structural change to the services had two built-in benefits for
Costco. Since the two-tier change,
there’s been a demonstrative reason to
up-grade to Executive Membership
based on the visible rate difference within
the services. And, perhaps more important, national
brand-name service providers were quickly
attracted by a program open to the full Costco
membership rather than just the limited subset of
Executive Members. And for Costco, brand names
Service philosophy, the Costco way
Think about the merchandise selection at Costco:
reduced variety compared to the grocery and discount chains, but smartly culled to the essential
brands people want. Costco services are selected and
developed using similar criteria.
“Capital One, Lending Tree, ShareBuilder, Intuit,
Ameriprise, NOVA, Affinity, DHL, American Express
... an established brand is important, because a
company that has built a brand name is good at
what it does,” says Pat Callans, vice president of
When considering providers, in addition to
brand name Costco seeks value, simplicity and clarity to the point of no hidden fees.
“Trying to provide some transparency, even in
very complicated financial transactions, is critical,”
according to Pat. “If we’re going to promote a rate,
we’re going to be pretty sure that the majority of our
members will be able to qualify for that deal. No bait
and switch, no teasing—unlike the way banks might
advertise a rate that will only apply to a small percentage of their customers with the best credit scores.”
Member Mike Parsa’s
See the full list of
strict Costco ethic makes
it simple to earn the
Membership 2% Reward
each year. That's an
additional $500 back
in his pocket.
Costco services on
page 24—that’s 20
save money in your
business or home.
The core base of services grew to 20 in 2003,
and has sustained that level since then. Is 20 the
Pat isn’t sure. “That’s hard to determine. We’re
not trying to be everything to everybody, but we are
out to create value, save people money and provide
services we can be the best at—not to just have a
program but to excel with the program we offer.”
Just what goes into selecting a service provider
“We do have a formula, and it is a long-term
process,” says Pat. “Basically, we take our time, visit