Costco: A Masterclass in Trust, Brand Promises, and Lifetime Team and Member Value

Hello loves it's Nina Covener and welcome to the premiere episode of Building and Breaking How Brands Are Built and Trust Is Broken. In this first episode, we are going to talk about Costco. We're going to talk about how Costco has built and protected one of the most trusted brands in retail from refusing to raise the price of the beloved hot dog to prioritizing employee care and lifetime customer value. Costco, honestly, is a masterclass in playing the long game and a brand that I have been studying for, I would say a good couple decades and full transparency. I just became a member like I think it was three years ago and even more transparency. The reason I became a member is because I wanted pumpkin pie. So I spent I don't know 65 dollars or whatever on the basic membership for a I don't know $5 pumpkin pie around the Thanksgiving time in November. Anyways, since then, I have become quite the soundly shopper at Costco and actually since I moved to Utah, I shop at the largest Costco in the world. And you believe that one of the locations in Salt Lake City is the largest Costco in the world. So not only do I love that, I love that even more because as someone that lives with anxiety to be able to walk through the largest Costco in the world and walk out in one piece is a fucking miracle. So let's get into it. What building and breaking is all about is I'm going to be talking about brands that I have been studying for decades and brands that I have been studying for a few years. And if you reach out and say you want me to study a brand, it could be a brand I've never studied before. Now when I talk about studying and analyzing, I want to make something very clear from the beginning of my career, I have been leading, managing, reinventing and growing brands. My first job on the business side of the business, I was 21 years old and I was brought into at that time the largest professional beauty supply distributor to help them revive one of their top brands that they were struggling with. I was 21 years old. What the fuck did I know about brand management? I mean, honestly, nothing. But what I did understand is that I did have a gift and that gift is to see things that not everyone sees and that I was able to really peel back the onions, so to speak and look at what the problems were with the brands and come up with solutions that were relevant to the audience. Now, if you've been following my company passion squared for any amount of time, you know that I talk about brand fundamentals literally every day because that's what we do. I truly believe that if our industry embraced brand fundamentals, there would be so much less dysfunction in salons and beauty brands, by the way. So back in February, I did a little thing on Facebook and actually I did it on LinkedIn too. Facebook really responded. LinkedIn didn't say a word and I mean, I kind of understand why. But I want to share with you the post back in February and then we're going to get into some of the ways these learnings and these understandings around the brand applied to your business, whether you're a salon owner, a hairstylist, a statistician, a large artist, tattoo artist, creative, small business owner, or beauty brand. So this was my post. What we can learn from Costco, one of my favorite brands to study and buy, pumpkin pie from. Costco is that brand, the one that does not flinch under pressure, the one that plays the long game, the one that understands trust isn't built overnight, but it can be lost in a second. They protect their member relationship at all costs. I mean, because Costco is a membership model. It's not a discount card, but it's a commitment. It's a relationship between Costco and their customer. There's clear value and they earn trust through that. They don't touch their sacred cows. A sacred cow would be something that you don't want to mess with. And in this case, you could look at that as the Costco hot dog. You could look at that as what's called a loss leader, which is the rotisserie chicken, meaning they're not profiting off that item, but that item creates so much value for the brand. So at one point in an article, the CEO of Costco said, "If you raise the price of the hot dog, I will kill you, figure it out." In a meeting, it's a famous quote, because they understand brand value and trust. There's no, they're not in the hot dog business. So why would they mess with that? And they understand that because they understand their brand and they understand what their members value, which is so, so critical. That hot dog is part of their brand promise. It's part of the experience. Now I don't eat hot dogs personally, but if you ever heard about Costco or if you are a Costco member, you know, I mean, it's part of the experience. Some people like the pizza I've heard. I have not eaten that Costco like that at their concession stand, but it is iconic for Costco members. So the $1.50, the hot dog, $1.50, the Rosisserie chicken, $4.99, they are proofs that Costco values people over short-term profits, not profits because we got to have profits if we're in business to generate revenue to be able to create experiences to pay our workforce. You know, all of that. It's not bad, but when you put the profit ahead of the people, that's where sometimes brands get into trouble. They don't need the profit from that hot dog and that Rosisserie chicken. As I said, that creates so much more value than the few cents that they are, quote unquote, not profiting off those items. Another thing Costco does is they prioritize high lifetime client member value over short-term ones. So, lifetime customer value, which is known kind of in the business space, I call it lifetime client value, is the amount of revenue referrals. Happiness and joy. That client or customer brings you over the lifetime of their relationship. So we hear often in our industries talk about retention and retention if we really kind of break it down into why it matters and why it's important, is because the value of a client isn't always understood or seen. And you could have a client that has been coming to you for 10 years and has sent 400 other clients to your business. And they visit like religiously every six weeks, every eight weeks, every 12 weeks, whatever. And so they would have a high lifetime client value. And so when we look at Costco, they do understand their lifetime member value. They understand that they need to make decisions that are aligned with what their members value as opposed to spending all day, every day trying to acquire new members. So that would be new clients versus existing clients. They cost less money to retain than it does to capture new audiences. They invest in their team and their team invest in them. And in this series, in this podcast series, I want to be clear, this is a great place to say this. This is not about perfection because there's no brand that's perfect. There's no person that's perfect. This is about the lessons, the insights and the wisdom that brands, analyzing brands have and how that applies to your business. So it's no secret. They have low employee turnover and they always have. And typically when there is low employee turnover, that means that employees are happy. And I mean simple, simple, not easy, simple, not easy. But that speaks a lot to leadership. And again, that speaks a lot to brand promise. Because when we look at the brand story framework that I use, and I've actually used for decades, brand purpose, what problems are you solving, brand promise, how you solve those problems, brand people, who you solve problems for, and then brand products and services, the solutions that you provide help solve the problems of your people. So when you are a salon owner that has an employment based salon, you have a brand story for your clients, and you have a brand story for your team. If you're a lease based salon, you have a brand story for clients, brand story for tenants. If you're an independent, solo business, you have brand story for clients. If you get assistance, then you have brand story for assistance. Because different audiences, right? Different audiences, right? Different audiences, different problems you're solving, different solutions, different promises. And the thing that really, really speaks to Costco is they know who they are. And that goes back to clarity of brand story. They don't waiver. They don't waiver. They straight stay true to that compass, to that GPS. They're not chasing trends that don't align with their brand. They're not doing things that don't align with their core values. They're not looking for quick cash grabs. They are steady. They are consistent. And consistency builds trust. I mean, that's just a universal truth, consistency builds trust. Consistency doesn't mean boring. Consistency doesn't mean not innovating. Consistency means in the context of brand story, how brands are built and trust is broken, consistency in the eye of what the promise was, what the brand promise was. And Costco does that so incredibly well. So if we think about what that actually means for the brand, how has Costco remained so steady, so consistent, a few examples. You know, in the last several years, or last handful of years, it's no secret that food prices went up in the United States. I mean, we know that driven by inflation, some driven by price gouging, and profit taking and money grabs. But Costco stayed true. Costco stayed true. And that is part of their brand promise, right? That consistency. And so that built trust that certainly didn't broke it. They may have taken a hit. In fact, I'm sure they did take a little short-term profit hit, short-term profit hit. But going back to that lifetime member value, that lifetime customer value, it was worth it to them. And recently, it's no secret in the United States, there has been a lot of pushback on DEI. And we've seen that with Target, and Target is a brand I will be profiling in this podcast sooner than later. But Costco didn't cave. They're like, no, this is who we are. This is what we believe. And that's it. That's just period. Because again, they don't waver from their core values, from their brand promise. And it's the leadership that make sure that they don't waver. We've seen brands that have wavered and the backlash that comes with that. If it's a brand promise that really mattered to the customer, right? If it really mattered to the customer. So, I mean, we can all read the news. Target sales are down. Costco sales are up. Consistency wins. Trust wins. It just does. Keeping our promises, even when it's difficult, even when it's difficult. And that just drives revenue, right? They have a cult like customer following employees with low turnover. Over a 90% membership renewal rate. And these are all indicators that they are staying true to their brand promise. And so, as we go through these episodes, these are the type of analysis that I will be sharing with you because they are universal. Brand fundamentals are universal. They are not unique to the brand. They are not unique to Costco. They're not unique to Apple or Target or Starbucks or Elfcovice Medics or any brand. Orcelons, right? So, I have talked forever about consistency builds trust, right? So, one of the things that I see, again, it all comes back to lack of clarity of brand story. But one of the things I see that creatives do, this is not unique to the salon industry, this is in general. Creators are like, I just need to rebrand. We just need to like make things look prettier. Well, first of all, that's brand identity. That's not brand strategy or story. Brand identities that look and feel the logo's fonts colors, right? Esthetic photos Instagram. The look and feel of the Instagram. So, inconsistencies pop off very often in the salon industry, pricing inconsistencies, communication, inconsistencies, those types of things. So, when you look at your brand, again, it always starts with brand stories, that's the foundation of every decision you make. You want to look at, even though you're like, oh, well, I saw some Instagram that so and so said, I should do this. Well, not necessarily because it's always going to come back to your brand and every brand is different. So, I see a lot of inconsistency in experience, the actual client experience, inconsistency in menus, inconsistency in pricing, you know, all that type of stuff. So, consistency builds trust. It's not easy, but it's a lot easier and it's very, it's simpler when you have clarity of your brand story. Long term and short term, you know, we're talking about Costco playing the long game. Brands are built over time, right? Brands are built over time. And the long game means making difficult decisions in the short term for that, again, that lifetime, member value, lifetime, customer value, lifetime, client value. So, we're not chasing trends, we're not doing money grabs. We're not doing that. We're looking at short term versus long term. So, an example of that would be in your client agreements, client agreements have gotten so fucking out of control, particularly over the pandemic, because somebody confused healthy boundaries with walls and just being difficult to do business with, which I've done a million podcasts on that. We're not going to get into that. But this is a great example of short term versus long term. So, short term would be a client with a very high lifetime client value. They've been a client for four years. They've sent a hundred clients to you. And they missed their appointment by accident. And you blast them on the internet or charge them $500, $500, mis-appointment fee or whatever. It's like, really? Really? When we look at the long game, when we look at long term, we're like, "Yeah, shit, that sucks." They missed their appointment. That's not like them. It's very unusual. They are super valuable as a client. I love creating experiences for them. I'm just going to wave the mis-appointment fee. So, that's an example. So, when we talk about that consistency, when we talk about building trust, when we talk about that, we're talking about, we're talking about clear communication. We're talking about delivering consistent experiences. And not getting distracted by the shiny objects. Social media is awesome, and social media is awful. The awful part of social media is that people that don't have clarity of their brand story are literally jumping on all of these out of context, random recommendations, and trends that are not aligned with your business, not aligned with your brand. So, I really want you to think about that when you're looking at the overall client experience or you're looking at the overall team experience, you're looking at the overall tenant experience. Playing that long game, really doubling down on consistency, because that consistency builds trust. Now, if you're a professional beauty brand listening to this podcast, which only happens Honestly, I hope you do. One thing I can promise you on this podcast is I'm not, there's no T here. That's not who I am as a person. I'm not here to rip a brand apart. I'm here to simply talk about facts, which for public companies are available to everybody. But again, facts out, I've been setting these brands for decades and some highly educated experienced opinions. So mostly facts though. And a lot of truth. But really, we have seen, we have seen over, I mean, I've been in this industry for decades that we have seen over time where some brands forget who brought them to the party. And you know, I look at Costco, Costco never forgets who brought them, who got them to where they were. Their team and their members. And they stay true to serving both. And you know, I know that most professional salon brands are not really professional anymore. This is nothing new. E-commerce started a long, long, long time ago. And there are many brands that sell direct to consumer. And the question is, can you serve to different customers? I believe you can. It's harder. It's a lot harder. But it's possible. And the professional beauty brands that understand this are probably doing okay. The ones that don't are not. Because the consumers very different than the hairdresser. So we have to remember who we serve, how we serve, why we serve, what they value, what these people value. The other thing is, you know, I talk about Costco and that long game. They just don't waver because they have such clarity of their brand story. They have so much clarity of their brand story. They don't waver. And a lot of times, you know, I have seen this over my decades in the business side of the business. Brands, professional beauty brands, just start jumping on these like all these different trends and things that don't align with their brand. Lots of rebranding, AKA changing of the packaging when the problem is the last problem, the last of your problems is your bagging. So, you know, it's hard. This is hard, it's hard work. Look, I built global professional hair care brands. I reinvented struggling professional hair care brands. It's not easy, but it's certainly possible. So, really understanding what the root cause, if you are a professional beauty brand having problems, you have to get to the root cause of that. And nine times out of 10, I promise you, it's not another ad campaign, it's not hiring a celebrity spokesperson. It's none of that. It's something deeper, it's something deeper. And in my experience, it is not staying true to the salon and the hairdresser. And again, you can do both. We're doing contacts and nuance in this podcast. We're not doing black and white thinking, we're not doing absolute extreme thinking, but just something to think about. And again, that's true for all brands. That's true for all brands. So, Costco has proved that trust isn't just a strategy. Like, it's not a brand strategy, it's a business strategy. And it's possible for all of us to focus on the long game, to not waver from those core values, those brand promises. It's hard, it takes a lot of courage, it takes a lot of clarity, and it takes a lot of care. So, my question to you this week is, how are you playing the long game? What is consistency, look and feel like to you, and to those you serve, whether it's your clients, your teams, your tenants? How are you staying focused on those brand promises? How are you delivering those? Do you even know what your audience values? Those are just some reflections and things to think about as we go through these brands. (sighs) Thank you so much for listening to our first episode. If you have questions and I love questions, you can email [email protected]. Awesome @passionsquared.net. You can also DM me on the passion squared Instagram @passionsquared, or my personal Facebook page, Nina L. Covner. You know, I shared last week when I made the announcement that I was changing the podcast, that this is kind of a me, this is a project that I created for me. This is what I was sharing with our A School members last night. This is my selfish play and selfish not in a bad way. I do this all day. I, even though I left the executive world 15 years ago, my DNA, this is in my DNA, and so I do this all the time. I literally have conversations with myself. I am studying one, two, three, four brands a week. If you could see my notes at, this has been going on for the last 15 years. And I have worked tirelessly to bring brand fundamentals to the salon industry because it doesn't exist. And it is one of the major reasons that we have the systemic dysfunction that we have in our industry. I know it's not, it's not, it's simple, but it's not easy, but I'm not giving up. I am committed. I am committed for as long as I have breath to help you have more context, more confidence, more clarity, more courage, ultimately, to feel more joy in your journey. And so many of the problems in our industry are systemic and they have existed forever, long before the internet, long for TikTok, long for Instagram, long before any of it. And a big part of that is lack of understanding or brand story, brand strategy fundamentals. So thank you for listening to Building and Breaking with Nina Elkohner, how brands are built and trust is broken. It is my honor and privilege to have this platform and to be able to share with you something that I just fucking love. I hope you have a peaceful day. Remember to be where your feet are and I'll see you next week. Bye.