S - Stability

$1.50 — that's the price of a hot dog with a soda at the food court of the Costco warehouse chain. The price hasn't changed since 1985.

Inflation, economic crises, pandemic — everything around changes, but the price of this combo remains the same.

If the combo price had risen with inflation, today it would cost about $5. Every year Costco suffers huge losses. Last year, over 130 million portions were sold, resulting in a loss of $195 million.

"It's branding," said Scott Mushkin, retail analyst at R5 Capital. According to him, the $1.50 deal helps boost customer loyalty. "It reminds customers who Costco is."


This strategic decision is known as the "Loss Leader" model. The company consciously accepts losing money on selling this cheap combo. The idea is that a customer comes for an affordable snack but ends up staying loyal and making other purchases. Losses on hot dogs are offset by sales of other items in the store. Again: the decision has not been revisited for over 40 years.

In digital ecosystems, this principle works exactly the same way. Companies often offer free delivery or a super cheap subscription to a basic service. The main goal is to pull the user into their infrastructure, where they will gradually start using much more high-margin services.


When the former CEO of Costco tried to raise the price, co-founder Jim Sinegal firmly shut down the idea. He literally replied: "If you raise the price of that damn hot dog, I'll kill you."

As you understand, the price of a hot dog with a soda has literally become a matter of life and death ☠️

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