Business CRM Directed Advertising

Costco Direct Mail Fail

I just received my membership renewal notice from Costco, and I was astounded by their blatant failure to apply one of the most basic rules of direct marketing:  give me a reason to buy!

There were at least 3 offers to upgrade my Gold Star (or Basic) Membership to an Executive Membership for an additional $50. The most prominent of these offers was a Yes! box on the reply “portion” (their lackluster word, not one my agency would ever use) of the renewal notice.

Since Gold Star Membership only costs $50, I was intrigued to know what extras I would get for double the price.

I looked on the front of the notice. Nothing. They spent a whole panel encouraging me to sign up for exclusive online offers and shop online, but not a single word about why I should upgrade my membership — at the exact moment in our relationship when I was about to take action to renew my membership!

I looked on the back of the notice, where they directed me to find instructions for upgrading to an Executive Membership. Sure enough, there were instructions… but no list of features and benefits or any kind of explanation of Executive Membership.

I looked at the inserts. There was one for Ameriprise Auto Insurance. Nothing there about Executive Membership.

There was an insert for the TrueEarnings Card from Costco and American Express Card. And miracle of miracles, it mentioned that with the TrueEarnings Card, you can earn 1% in addition to the 2% rewards “you’re already earning” with your Costco Executive Membership. But nothing else.

Just for fun, I went to the Costco website and looked up Executive Membership. Here’s what I found:

Executive Membership is our highest level of membership. Executive Members enjoy an annual 2% Reward on most Costco purchases, as well as additional values on member services, such as lower prices on check printing, auto loans and identity protection; larger Costco Cash card amounts for mortgage, real estate and home equity transactions; an account bonus for money market and online investing accounts; free roadside assistance for vehicles covered through the auto insurance program; and extra travel benefits.

That’s not a bad offer: Cash rewards, better benefits, extra features. At 2% cash back, I can even figure out my annual purchases and see that if I spend over $2,500 a year, the upgrade more than pays for itself. And that’s not even including the value of extras and account bonuses.

It’s a good story, one that might have convinced me to upgrade my membership, if it were anywhere at all on the Renewal Notice.

Direct mail isn’t rocket science. There’s a set of time-tested basic rules, a wider set of tested-into best practices, and some basic mindsets. A good direct marketing agency (like mine, Tanen Directed Advertising) knows how to apply these time after time to generate predictable, successful results.

But it doesn’t take a direct mail expert to know that if you want to upsell someone to a product or service that costs twice as much, you’ve got to give them a reason why.

Did they just forget? Were they trying to drive me to the website or the phone to get more info because they’ve tested into it and learned that they actually upgrade more memberships that way? Or did their lettershop screw up and fail to insert the buckslip extolling the features and benefits of upgrading to Executive Membership?

Since this blog is based on the premise that if we knew the reasons behind some seemingly incomprehensible choices those choices would make more sense, can someone please explain to me why Costco thought they could get me to fork over an extra $50 without telling me why? (And Costco, if there isn’t a good reason, give me a call. My agency can really improve your membership renewal mailings.)

By jlsimons

I’m a storyteller who has spent my life focused on the things people do for fun, from games and hobbies to comic books and podcasts. I love building and managing teams of incredible people and empowering them to do the best, most fun and fulfilling work of their careers. I am also a senior level marketing executive with a unique blend of over 34 years of podcast marketing, social media community building, promotional partnerships, advertising, interactive, branding, marketing, paid and organic search, direct response, analytics, and game design. Along the way, I've built a leading podcast brand and a million-plus-subscriber YouTube channel, created multinational promotions for global brands, and co-desiged critically acclaimed collectible card and role-playing games.
Oh yeah, and I write science fiction.

Specialties: Podcast marketing, social media community building, promotional partnerships, integrated marketing, social media, strategic marketing, alternate channels, direct response, corporate marketing, copywriting, advergaming, game design and development, financial advertising

5 replies on “Costco Direct Mail Fail”

Hi Doug. Well, I never heard from anyone who worked at Costco, or at their agency, so I would only be guessing. But if I had to guess, I’d chalk it up one of three reasons: 1) a last minute edit for space (like there was a callout box or burst that had the info, but got cut in a later version because someone thought the piece was too cluttered or wordy or ‘fill in the blank’); 2) testing (my version was the “no clear features or benefits” cell); or 3) Rank incompetence (oops, how could we forget that?). Without any more data, take your pick. I wish it were 2, but in my experience, it’s far more likely it’s 1 or 3. And it it is 2, then it’s even possible that not only was it a test, but if testing showed a higher upsell response without features and benefits than with them, that my cell wasn’t a test cell, but a control. That’s why we test, right? Because no matter how experienced we may be, testing can often lead unexpected and surprising results.

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