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Publish date: Dec 8, 2010By: Mike VaughanJust before Thanksgiving I was in my local Costco store, gathering up supplies for our holiday supper. As I neared the checkout line, I saw a flash of a familiar iridescent green, highlighted with black. Could it be?” Sure enough there in front of a teaming crowd of Costco shoppers was a brand new Kawasaki motocross bike locked in a display, pulling a wheelie. A number of people were gathered around it and dipping into the supply of promotional fliers.If you’ve been reading Dealernews for a few years, you’ll know that I’ve been an advocate for some OEM, any OEM, jumping into a sales program proposed by massive warehouse chain and giving it a try. The folks who manage the Costco Auto Program, Affinity Development, have been working on getting the motorcycle industry involved since 2006 and have presented their program to all the Japanese OEMs as well as a number of the European brands, but until recently, no takers. That is, until now.Kawasaki Motors Corp., is the first OEM to sign on with Costco Wholesale for a pilot program in Southern California’s Los Angeles, Orange and San Diego counties.
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The trial effort involves a select number of dealerships that are served by 15 Costco warehouse stores, each of which have a display consisting of a motorcycle on a stand and promotional fliers. The program kicked off with KX motocross bikes, but will be expanded to include more models as it progresses.Here’s how the program works. An interested Costco member contacts the store either by phone or online, registers with Costco and is referred to the nearest participating Kawasaki dealer to his home, or place of business. The member goes to the dealership, presents his membership card, is provided with a copy of the member-only price sheet, and selects his motorcycle.
Costco serves only as a referral point. All transactions take place at the participating Kawasaki dealership.The prices have already been negotiated between Costco and the dealer, so it’s a fair price and there’s no customer haggling. The member then simply needs to complete a redemption form and return it to Costco along with his purchase agreement.
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He then completes a customer satisfaction survey and receives a $250 Costco Cash card. As an added incentive, anyone with a Costco membership card can receive a 20 percent discount on parts, accessories and apparel at a participating dealer simply by showing their membership card. Items already on sale are excluded from this offer.According to an Affinity Development representative, one of the concerns expressed by OEMs was the devaluation of carry-over product.
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Kawasaki resolved this problem by limiting the promotion to 2011 product and possibly not having much carryover product in the field.Dave Lautner, Kawasaki’s manager of dealer performance and communications, was very clear that the program is a trial and would have to demonstrate its success before Kawasaki would be willing to roll it out to other dealers throughout the nation. A recap is scheduled for sometime in January and at that time a determination will be made to roll it out nationwide or discontinue the program. Lautner is confident that the program will be a success, and would be happy with only a marginal sales increase, but is taking a “wait and see” attitude about it.Jeff Skeen, CEO of Affinity Development, anticipates that the pilot program will be a success and will be rolled out to the entire Costco network over the course of this winter and spring. At this point, according to Skeen, they’re planning displays of cruiser motorcycles for the spring, and Jet-Ski’s in the summer.The program went into effect shortly before Thanksgiving, and a call to a couple of participating dealers indicated that they were delighted with the promotion.
David Nadler, general manager at Del Amo Motorsports in Redondo Beach, Calif., indicated he’d sold two motorcycles since the program began. Nadler agreed that the KX models weren’t exactly the right bike for this audience, but felt when motorcycles with a broader appeal were available things should take off.When I spoke with Skeen at the beginning of December, the program had been in place for only a few weeks and the website wasn’t yet operational. Typically they receive over 10 times the number of inquiries via the internet than they do via phone, but even at that they still had received 124 calls.BUYING POWERMost of you are familiar with Costco but may not be aware of its amazing membership demographics.
Costco’s retailing philosophy is to provide its membership with high-quality products and services at a good value and a fair price and then to back it up with superior service. As an example, returns don’t require a receipt. There are no questions nor is there the typical 30-day time frame for returns with the exception of computers.As unlikely as it may seem, the chain is the largest seller of fine wines in the world, and the largest seller of large flat-screen televisions and at least one person has dropped $102,000 sometime in the past on a diamond ring.
Its membership is decidedly upscale — 22.1 million households have a Costco membership (representing 41 million members), that’s almost 20 percent of all the households in the United States. The median annual income for these members is $107,800, versus $50,221 according to the most recent government statistics. Costco currently has 415 warehouses in 40 states and Puerto Rico.The Costco Auto program has been hugely successful, and while sales of automobiles in the U.S. Declined 18 percent from 2007 to 2008, Costco Auto’s sales increased by about the same percentage. Volvo in particular has been successful in promoting the sales of its cars through Costco Auto and the results are impressive.
The Costco Auto Program accounts for 40 percent of the sales of Volvo’s specific model being promoted during a Costco promotion period.At this point you might be saying to yourself, “Well that’s a no brainer, everyone needs a car.” True enough, but not everyone needs a boat. For the past year Costco has had program in place with Sea Ray boats which functions the same as the auto program. The results so far? Sales of 1,075 boats with a gross value of $120,000,000. What’s even more astounding is the fact that roughly 50 percent of the buyers who used the Costco program were not in the market for a boat, to say nothing of the other 22.5 percent who were considering buy another brand’s boats, but switched to Sea Ray.So if it works for boats and cars, why not motorcycles?To me this program seems to be a win-win opportunity.
In all probability a dealership is going to increase its motorcycle sales by some margin, even one-percent of 22.1 million households is a lot of people. Perhaps even more importantly a dealer is going to expose his products to hundreds of thousands of people who’ve never been in a motorcycle store, but might if they’re motivated by seeing a bike they might like in a familiar, comforting setting.A promotion even under the best of conditions and aimed at a carefully selected, demographically perfect target, will evoke a response from only a small portion of the people who are exposed to it. However, if the target’s large enough, the cost of the ad or promotion reasonable enough, and the offer attractive enough, a portion of an undifferentiated target will end up responding to your ad or promotion. Depending on the size of that undifferentiated target — which in Costco’s case is 41-million members — even a small portion can be a significant number, and in today’s market any increase at all, no matter how small, provided the price is right, is welcomed.In this day and age most dealers tend to put a large amount of their marketing dollars into their website and store-based promotions, but let’s face it, we’re mostly preaching to the choir. A person seldom goes to a motorcycle-oriented website unless they already have a motorcycle and few people come to your weekly or monthly promotion just to see the motorcycles.But put a motorcycle, car, boat, you name it, in an environment where you don’t expect it, and like a wart on Julia Robert’s nose, it gets noticed. Now I’ll grant you that most of the folks scurrying about the concrete floors of your local Costco aren’t interested in motorcycles, but some are. Some already own motorcycles.
Some have wanted one, but for some reason, haven’t made the move to get one. Still others may never have given motorcycle ownership a thought, but seeing one there creates a little bump to the cerebral cortex that says, “Hey, that looks like fun. Maybe I’ll check it out.”The people running the show at Affinity are almost to a man ex long-term employees of Kawasaki, Triumph and Honda, and are off-road and street enthusiasts. Affinity COO Gary Drean you may remember from the ‘80s when he placed fourth overall in the Baja 1000. These are people who have experience and know what kinds of things turn people on to motorcycles in addition to the difficulties dealers have to overcome every day.We’ll be bringing you updates on the success of the program in the future. Here’s how the program works.
An interested Costco member contacts the store either by phone or online, registers with Costco and is referred to the nearest participating Kawasaki dealer to his home, or place of business. The member goes to the dealership, presents his membership card, is provided with a copy of the member-only price sheet, and selects his motorcycle.
Costco serves only as a referral point. All transactions take place at the participating Kawasaki dealership./qutoe Los elefantes cancion infantil. Costco is just displaying the bike as advertising and working with the manufacturer and dealer to find a price point that the three can agree on. Costco gets a commission, dealer gets the sale, and manufacturer moves a unit.The question that this raises for me is how many more people are going to go out and buy (finance) a bike on impulse because they saw it in Costco, and leave the dealership without any education about technique or gear, and go out and severely hurt themselves and further tarnish the reputation of our beloved sport. Costco is just displaying the bike as advertising and working with the manufacturer and dealer to find a price point that the three can agree on. Costco gets a commission, dealer gets the sale, and manufacturer moves a unit.The question that this raises for me is how many more people are going to go out and buy (finance) a bike on impulse because they saw it in Costco, and leave the dealership without any education about technique or gear, and go out and severely hurt themselves and further tarnish the reputation of our beloved sport.
Director of MarketingFacilitate change by driving a renewed brand strategy throughout the organization including; sales, marketing, purchasing, human resources, manufacturing, styling/design, engineering, finance and product development. Marketing Program Responsibilities: Includes developing a fully integrated marketing approach to national advertising, retail promotions, product collateral, public relations, social media, experiential marketing, web site management, as well as dealer channel promotions and training.