Costco hot dogs, MLB video games and making money by not making money
As a new homeowner, I find myself slipping slowly into Dad Mode. I’m going to bed earlier. I don’t hate cleaning up the kitchen. I enjoy a well-organized garage. And, of course, I became a Costco member.
After an inaugural trip that set my fiancée and me back about $300, a celebratory meal was in order. Hot dog, soda, hot fudge sundae—all for a cool $3.49.
How do they do it, especially that $1.50 dog and a drink? Simple, because they want to.
As Twitter user @weirdcities noted in a viral tweet last year, here’s how that desire was relayed to Costco CEO W. Craig Jelinek by his CEO predecessor and Costco Co-Founder Jim Sinegal:
“I came to (Jim Sinegal) once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty. We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’ That’s all I really needed. By the way, if you raised (the price) to $1.75, it would not be that big of a deal. People would still buy (it). But it’s the mindset that when you think of Costco, you think of the $1.50 hot dog (and soda).
It’s the last part that’s key. It’s not about the money, it’s about a mindset—something intangible. It’s how people feel about you.
And this is one of my favorite anecdotes when people talk ROI and every single small part of a company or organization having to turn a profit.
It doesn’t have to be about that.
Another example—and honestly, I got a kajillion of these—comes from the world of sports and video games.
MVP Baseball, The Show and a generation missed
For the first time in 16 years, the XBox console will have a first-class MLB-licensed videogame. MVP Baseball 05, the last great MLB game on Microsoft’s console, came out on the original XBox. Three XBox iterations have launched since.
Now, the much-heralded MLB The Show, long a PlayStation exclusive, will make its way to XBox for the 2021 season.
So what’s the story? How’s it been so long? Wellllll, back in the early-2000s, there was a lot of competition in the sports video game market—a lot of good competition.
One year, Sega/2K Sports were selling their suite of sports games—NFL, NHL, NBA and MLB—for just $20 apiece. It was the same year they teamed up with ESPN on some sleek branding and in-game licensing.
The games were great and were received as such, especially at that price point. The longtime heavyweight in the space, EA Sports, got scared—especially as it came to their cornerstone Madden franchise.
Instead of competing on price or quality, EA brokered a deal with the NFL for exclusive licensing. Nobody else could use the league or teams in a game. So 2K shot back with exclusive licensing on MLB games.
The underdog company then proceeded to release terrible MLB games, to the point it made more sense to just stop after 2013.
EA made one college baseball game, in 2006, and closed down the MVP franchise for good—when the last Major League version, in ’05, was considered one of the best baseball video games of all time.
MLB took 2K’s money and called it good. Why shouldn’t they?
Well, for a number of reasons.
Since the XBox 360 and Playstation 3 generation, console sales in the United States have been split relatively evenly between Sony and Microsoft—setting aside Nintendo.
For a decade and a half, about 50% of console gamers didn’t have an MLB game. This meant a missed opportunity to:
- Learn how the sport worked—both in the macro and micro—by playing it.
- Learn the teams and players outside your own market.
- Play as your own team and fall in love with them in a new way.
Crazy as it is, I learned the basics of European soccer—even picking a team I follow closely now (Up The Toffees!)—because I started playing FIFA a few years ago.
Baseball has an aging fan base and a desperate need to get its players out there as stars. They need to be more relevant, and that’s something an exclusive licensing deal can’t pay for.
While it’s a long one, this is still just an anecdote. Everyone makes these mistakes.
The lesson here
A simple question to ask yourself as a marketer or businessperson or anyone at a company is this: “Does it matter if people like us?”
It’s one I’ve asked bosses before.
“Does it matter if people like us? Do we think we make more money or less money if people like us more?”
Of course it matters. It matters a lot.
And companies constantly ignore this truth because pricing something at a quarter more means a better number in this column. Or turning a new feature into a new paid product means a short-term bump in revenue.
Not everything has to make money. Not on its own. The ability for us, in 2021, to measure anything means that we try to measure everything. And you can’t measure everything.
You can’t measure a lot of the big things.
Sometimes the big things are as small as a $1.50 hot dog. And you just have to trust that doing things that people like is worth it.
Usually, it is.