Why is Costco doing so well?
Profits in Australia are up nearly 40%, sales by a billion.
That's what I was interviewed this week on 3AW radio's top rating Drive program.
While cost of living is often cited, I think there are three key psychological principles driving the move towards Costco.
I explain them in a short clip here:
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1. Identity
People like being seen as savvy, so Costco gives them status. They can share their “wins” with friends, which creates FOMO and encourages more people to join.
2. Adventure
Like Aldi’s special buys, Costco has turned a chore into joy. From new car tyres to an iPad to shampoo, you never know what you’re going to find.
3. Sunk cost
Like a buffet breakfast, once you’ve paid you want to get value. When people pay their Costco membership they don’t want to waste it.
And with 90% member retention, people clearly believe they are getting value.
For your business
- How can you make colleagues or customers feel smarter when they interact with you? What can they brag to friends about?
- How can you turn a chore into a joy? How can you add the element of surprise and delight?
- How can you get them to invest a little money or effort so they'll be loathe to walk away?
P.S. If you're a Just Do This member, remember our Open Office Hour is this Thursday, 15th Jan, 11.30-12.30pm Melbourne time. As always, you'll find the Zoom link in New This Month.
P.P.S. I'm still on "hybrid holiday" - working reduced hours while getting my thoughts together so I can share more great content with you in 2026. Normal newsletter service will resume soon.
🌟 If you found this interesting, let me know! Buy me a virtual coffee ☕ or forward this email ↗️ to someone who also might like it. Your occasional support means I can keep sharing ideas about behavioural science for free.
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