The $1.50 Costco hot dog hasn't changed price since 1985. On purpose.

A quarter-pound hot dog and a 20-ounce soda: $1.50. That price has not moved since 1985. A 1985 dollar buys roughly $3.00 of stuff today, so the combo should run near $4.50. Costco holds the line at $1.50 and eats the difference on every single one.

Diagram: dollars · $1.50. Still. · what it should cost · frozen on purpose since 1985 · The gap is the marketing. Costco buys that loss on purpose, and the deal-feeling it creates is what sells the membership.

The hot dog is a price anchor. It is not there to make money. It is there to make you believe everything else in the warehouse is a deal too. That belief is the real product. Costco runs razor-thin margins on the merchandise itself, and a large share of its operating profit comes from the annual membership fee. Keep the hot dog cheap, keep the fee worth renewing, and the whole machine keeps turning. When Craig Jelinek once floated raising the price, founder Jim Sinegal told him: 'If you raise the effing hot dog, I will kill you. Figure it out.'

The hot dog is the ad. The membership is the business.