Service-Product Bundles

The first of the three elements of the service-product bundles are tangible service, those which provide household products at low costs. The second element is implicit benefits, which includes savings and great bargains for customers. The third and final element includes physical goods, those which are actual household commodities.

Service Matrix Bubble

Costco customers can expect the same types of service each time they enter into a Costco store. The experience is unlike a shopping mall, where it has the possibility of changing. The delivery of the service is highly standardized. Costco is therefore a provider routed company in the Service Matrix. They have a highly standardized process sequence with limited number of pathways.

Costco Customer Contact

Costco is both a high and low contact business. If a customer is shopping online, contact is low, but if a customer decides to shop at one of Costco's warehouses, contact is high. There is face-to-face contact between the customer and employees, however there is also a self-service aspect as well since the customer walks through the warehouse and picks out their desired merchandise.

Costco also uses technology to enhance both the consumer and employee's experience. Shopping online is convenient for customers and can be enjoyable, not having to deal with crowds or lines. If the customer chooses to shop in a warehouse, technology is also present but not to replace employees, to enhance their efficiency. Everything from forklifts for stocking shelves to conveyor belts and registers helps employees better serve the customer. If a cashier had to manually lift every item, write down bar codes, and add up totals all day efficiency would not be nearly as high as it is with the help of scanners and registers. It would also take much longer to complete the customer's shopping trip and most likely lower customer satisfaction.

Costco is well rounded in the way it has options for low contact, high tech online shopping, and high contact in warehouses with enough technology to create an efficent process and allow employees to provide service with a smile.

Focused Operations

Employee Benefits: http://www.lgrmag.com/Putting-Employees-First-article77762

Costco main focus of its business is to provide great products at low affordable cost to its customers; which it does through improving management operations by using economies of scale.


Costco takes a lot of pride it its employees, treating employees in the complete opposite of their competitor Wal-Mart, and this shows because Costco largest operation cost is employees cost. The number of ways which Costco does this is as follows.

1) Promoting within the company and supporting positions with training.

2) Offering a wide range of health benefits to full-time and part-time employees.

3) 401K investment options, which Costco match 50% of the first $1,000. Costco also put additional money into 401K for years of service the employee has provided.

4) Competitive wages averaging to $17 an hour and a bonus twice a year, which is determine by years of service.

Since Costco makes employee satisfaction a priority, majority of their employees, hardly leave. This leaves Costco with highly trained, happy and productive workers.

Service Recovery and Guarantees

Costco offers a no hassle return policy, which allows customers to return merchandise at any time if they are not happy with their purchase; Costco asks no questions and guaranteed a full refund. Costco Membership fee are also refunded in full, if for any reason the customer is not satisfied.

Costco also offer its customers Concierge Services. This is a technical support service that Costco offer all customers who purchase electronics products, anywhere from flat screen televisions to iPods. On all electronic products, Costco extends their warranty and offer customers the option of having Costco come into their home and set up their entertainment purchase.

All of these service recovery and guarantees Costco offers ensures customers, that merchandise sold at Costco are high end and of good quality. This leaves customers with a great feeling of satisfaction because they have saved a lot of money, along with the Costco membership card, customers now have a tied to Costco and a sense of belonging, giving customers another reason to come back and shop at Costco.