Service Process Design

Costco Wholesale offers lower prices than many of its competitors like Best Buy or Circuit City, however it is recommended to do your own research prior to purchasing a camera or computer because customer service is close to non-existent. The tangible service is accurate and fast at Costco’s tire center, pharmacy, and optical department, but the warehouse usually receives low marks for service by many club members.

The psychological benefits of the service include the “no frills” warehouse layout, "We stack the merchandise on the floor with a price and a sign on it telling what it is," said James D. Sinegal, president and chief executive officer of Costco Wholesale Corp. No frills

Other benefits include the satisfaction of purchasing a broad range of high quality merchandise at prices consistently lower than many of its competitors that is also focusing on environmental concerns and preservation.
And finally the facilitation goods are the wide range of products available in the various departments either at their physical warehouse or through their website.

In the service matrix Costco falls under the co-routed services, because unlike many retail stores Costco members join for more reasons other than just grocery shopping in bulk. Some members join only for the services provided at the tire center, others for the optical department which consists of its own in-house optometrist, and then there are those who choose the website services available such as financing or business services. The actual shopping in the warehouse would be considered provider-routed, because all the customers follow the same process and shopping, check-out, and loading in items in your car.

In the warehouse employees are available to answer questions about a product, help loading products or simply pointing a customer in the right direction. Costco has self-service warehouse facilities, in which the employees folding clothes or organizing the DVD sections have no trained knowledge of the department and can only answer questions they have learned along the way. Certifications are required however in the pharmacy, tire center, and optical department, since those sections have more customer contact. The employees in these departments are knowledgeable and confident in the products they offer. Even though these front-office employees focus on sales, they receive no commision from Costco. All employees are paid hourly, including the back-office accountants, inventory auditors, and stockers. Benefits and above-average salaries mixed with a lively work environment keep employees happy, which in turn will mean a happy customer.

Costco focuses on high quality products at a low cost, even though it is trying to shift its customer interaction by training most of its employees to be more aware of the products, it is still required to do some research prior to shopping. "Costco is no Walmart."

Being a warehouse club, customers at Costco must pay for a yearly membership. This means that management must satisfy its members to guarantee that they will renew at the end of their fiscal year. Technology is used with the cash registers, computer system for inventory, and handheld scanners to read a member's card number. These scanners display the customers annual shopping, and allow the employee to suggest the benefits of upgrading to an Executive Costco Card with 2% Cash Back.

Unlike many retail stores, Costco has a no-hassle refund policy; a customer can return a half-consumed rotisserie chicken and receive a full refund. Members are aware that they are paying to shop so they have no problem complaining to managers. Understanding that the yearly membership creates an economy of shopping, managers will gladly refund the value of a service and also extend their membership knowing that this just means they have more time to shop at Costco.