Costco has a unique business model that’s served the company well for many years.

Most retailers rely on profits from the products they sell to make money. Costco, on the other hand, gets a large chunk of its revenue from membership fees. And so rather than focus on maximizing profits on a per-product basis, Costco would rather use its resources to find ways to encourage people to:

  • Sign up for new memberships
  • Upgrade their memberships
  • Renew their memberships every year

To encourage upgrades to the Executive tier, which costs $130 a year, as opposed to $65 for a basic Gold Star membership, Costco has been increasing the number of perks associated with its more expensive membership.

Executive members have long been able to earn 2% cash back on most Costco purchases. But recently, Costco added two very important benefits to its Executive membership program:

  • Early store hours 
  • $10 off same-day grocery orders of $150 or more

If Costco keeps building on its Executive membership perks, more people might opt to upgrade. 

Costco currently has a strange giveaway that is leaving members underwhelmed.

Image source: Hennessy/SOPA Images/LightRocket via Getty Images

Costco isn’t just pushing membership upgrades

Costco wants as many members as possible since those fees are a major driver of revenue. In addition to pushing Executive memberships, Costco has also been focused on getting members to sign up for automatic membership renewals. 

To sweeten the deal, Costco is offering a limited-time promotion. But it’s not a very exciting one.

Related: Aldi adds convenient new perk many customers can’t afford

In the past, Costco has given out promotional items like tote bags to encourage auto-renewal. Now, in select warehouse club locations, it’s giving out 3-pound bags of gala apples. And members aren’t exactly jumping for joy.

As Renee C. from New Jersey said, “Giving away apples is like giving away white bread. It’s fine, I guess, but not very interesting. It’s certainly not going to get me to do anything different.”

Costco may want to rethink its membership strategies

It’s easy to see why Costco is so intent on attracting and retaining members. But the company seems to be going about it in a very strange way. 

In recent weeks, Costco shoppers have complained about being bombarded at the checkout lanes by employees asking them to upgrade their memberships to the Executive tier. And the people pushing auto-renewals have been pretty pushy in their own right, too.

If Costco wants more customers to become Executive members, it should focus on ways to justify the higher cost and add more value to that program. Options there could include anything from one free food court meal voucher per month to extra cash back on big purchases like appliances.

Related: Sam’s Club makes bold move to win over Costco members

Similarly, if Costco wants to encourage auto-renewal, it should look at promotions that entice members more so than a bag of apples.

One thing Costco probably won’t do, however, is offer money off a membership to sign up, auto-renew, or upgrade. 

“Costco almost never discounts its memberships, and it should be very careful about ever doing that,” said TheStreet co-Editor-in-Chief and retail expert Daniel Kline.

Given its loyal fan base, Costco probably does not need to go to that extreme. But it wouldn’t hurt the company to get more creative, as opposed to trying to bribe members into auto-renewals with a pretty mundane offering.

Maurie Backman owns shares of Costco.

Related: Walmart makes a major purchase customers may not notice