Case Study: Costco.com Is Leaving AT LEAST $53,580,000 USD Per Year On The Table

After an entire day of research I have come to a conclusion which I am quite certain will lead to a lot of controversy.

My thesis: Multi-million corporations barely have a clue about what they are doing when it comes to internet marketing. And I have created a brief case study in order to prove this.

Now, surely most of you will be shocked by my statement and I know a lot will disagree, nevertheless allow me to elaborate.

First of all, I would like to emphasize how my theory discusses internet marketing itself, not offline marketing, which is an entirely different beast. That's right, offline marketing is barely related to online marketing.

These multi-million companies I speak of are brilliant when it comes to offline marketing and the proof is in their revenue. However, after this analysis I can assure you they are missing out on millions of dollars when it comes to their online effort.

So ladies and gentlemen, without further ado, here is my case study:

Costco.com is leaving AT LEAST $53,580,000 USD per year on the table.

Another shocking and controversial statement, right? Not after you finish reading this.

As an internet marketer myself I have several tools at my disposal which allow me to do research regarding other sites. For this case study I used http://Costco.com, a site owned and created by the "Costco Wholesale Corporation" which I am sure you have heard of.

According to www.Quantcast.com, Costco.com has an estimated monthly traffic of 4.7 million United States unique visitors, certainly much more worldwide (but those statistics are not available). Impressive, right? You would think so.

Digging around even further, I figured out what their main method of monetization for such traffic is: Selling advertising space. That is good and all and I am sure they make some nice spare change out of it, but they are NOT fully leveraging the exposure they are receiving.

My internet marketing colleagues will agree that the most powerful method of leveraging traffic is lead capturing, which has several forms, you can simply capture a visitor's e-mail, their zip code or even their full physical address. The more details you capture is obviously the better.

Why is this method so powerful? Simply because after having those details you can send all types of promotions and push offers to the potential customers on a massive and almost automated scale.

If you visit Costco.com you will see how they have an almost invisible form on their right sidebar which says: "Sign up to receive offers by email" followed by a space where a visitor can insert their e-mail address and a "Go" button.

Now, who in their right mind would be compelled to provide their e-mail address based on such an offer and poor call to action? Very few people. I would be willing bet my life that opt-in form has a 1% or lower conversion rate (which means 1% of those 4.7 million US visitors actually provide their e-mail on that form). It's so vague it CAN'T possibly be more than that. In fact, I would be surprised if it even reaches 1% conversion.

Why am I throwing these numbers? According to Google Analytics my very own opt-in form at www.TheNewbieBlueprint.com has a 20% conversion rate, meaning 20% of my visitors actually add their e-mail address and name to receive my free newsletter, they even confirm their subscription as a verification e-mail is sent to them to make sure they want to receive my newsletter (I would never dare to spam).

Not to say my squeeze page opt-in ad is extraordinaire, I would consider it average, yet highly superior to that of Costo.com in terms of conversion.

Of course my level of traffic is nothing compared to that of Costco.com, but in comparative equivalent terms it is enough for this case study.

As a nobody, I am getting 19% more conversion than one of the most well positioned brands out there, which has an impressive brand equity.

Why is this happening? The Costo.com opt-in form does not have a compelling reason to opt-in; Why as a visitor should I give them my e-mail address? And they don't have a good call to action.

With the branding and leverage they posess and with the right offer, I am positive they could achieve at least 30% conversion on the lead capture, they could even achieve physical address capture in exchange for a discount coupon or something of that sort.

Anyway, back to the case study. Let's play with some numbers. Right now, as stated before, I assume their conversion is of about 1%.

4,700,000 US visitors multiplied by 0.01 (1%) opt-in conversion = 47,000 e-mails captured per month, 564,000 per year.

Costco.com offers a wide range of products and services ranging from 2-4 figures, therefore let's take a $100 USD average price point per product/service. An estimated sales conversion for a corporation of their caliber would be of anything between 10%-20%, but let's take the lowest worst case scenario figure possible: 5%.

That would be:

564,000 e-mails x 1 promotion/offer x 0.05 (5%) x $100 = $2,820,000 in sales per year from 1 single promotion based on their current lead capture internet marketing model alone.

A couple of extra million dollars for little to no cost per year, sounds good, doesn't it? It could be MUCH higher.

Time to insert my own numbers (as a comparative nobody) to the equation if I were to implement my very own internet marketing strategy to the current Costco.com online business model.

4,700,000 US visitors multiplied by 0.20 (20%) opt-in conversion = 940,000 e-mails captured per month, 11,280,000 per year.

Using exactly the same variables as before with our new number of e-mails captured per year:

11,280,000 x 1 promotion/offer x 0.05 (5%) x $100 = $56,400,000 in sales per year from 1 single promotion based on MY lead capture internet marketing model alone.

Let's wrap it up:

$2,820,000 – $56,400,000 = -$53,580,000 USD

That's right, Costco.com is leaving AT LEAST $53,580,000 USD per year on the table.

This is a completely speculative and hypothetical scenario, I used only a few variables to prove my point.

You will find that in reality they are probably missing out on 10 TIMES that amount.

Not to mention those are the worst case scenario figures. Considering a corporation of their caliber, the figures are a lot higher. I didn't even take into account variables such as physical address capture, phone capture, more promotions/offers, cold calling, direct marketing etc… Which would drastically increase the amount of cash NOT being made.

The numbers used are not even the global traffic figures. Those are only the estimated number of United States visitors, hence it is even more money being left on the table.

Also, I only used the e-mail marketing example alone, they are also missing out on a lot of other potential sources of internet income such as Search Engine Optimization, Keyword Research, Article Marketing, Cost Per Action and so on (all advanced methods of internet marketing).

But no offense Costco, this is an issue that every single multi-million corporation has when it comes to online marketing, I have yet to see ONE site from from a multi-million offline corporation that is exploiting the full potential of the web. In regards to this example, there are some corporations that DON'T EVEN have an opt-in form.

In short, they have a brilliant offline marketing and offline business model, yet an extremely poor online model.

I hope you enjoyed this. For information about my internet business consulting program visit this section now: Consulting Services

Best of luck,

Daniel Molano

P.S: Please take into account that most figures and variables used are based on a speculative and hypothetical scenario.

No related posts.