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Abusing a strategic asset – Kirkland Signature of Costco

This post is by Evening UST MBA student Vitaly Demin, a strategy consultant at Eames Management Group.

abusing[1]I knew that the Kirkland Signature brand was being stretched beyond possible but I never really thought how bad it was till recently. I was at a Costco store the other day and I bought a $20 Robert Mondavi cabernet. As I was checking out, I asked their wine person if it was good and he said yes. Then he added that I should also try a Kirkland cabernet which is priced a little higher, at $30, but is really good. I said – a Kirkland wine at $30? He said – Yes, and please don’t be confused by the name… and that’s what got me thinking. There are certain things that you just can’t do to a brand.

Kirkland Signature is being positioned as a superior brand and it’s a great strategy and I’m sure it works for Costco but you still cannot stick it on everything. Moreover, the more high-end a brand is, the easier it is to destroy it by stretching it. Most executives don’t believe in this but it always happens. There’s always a short run for a brand that keeps it going while it’s being milked but eventually it’ll get damaged to the point of no recovery. Costco did a great job on building this house brand and it’s an extremely valuable strategic asset but if they keep managing it like this, may be 2-3 more years and it’ll start losing its brand equity because people will no longer take it seriously. It’s ok to have this brand on groceries or batteries but it’s not ok to stick it on a bottle of wine, especially an expensive one (leave alone shirts and some other product categories).

Think about it this way. Continue Reading