Priceline.Com Marketing Analysis

Priceline.com

Introduction

"Winners don't do different things, they do things differently." Priceline changed the conventional marketing system by introducing a role reversal of the traditional seller-buyer system. Launched in 1998, Priceline, the brainchild of Jay Walker, provided "lower than retail" airfare options for travel enthusiasts. Priceline is the "eBay" of airline tickets, allowing the buyer to bid (once) for the fare. By facilitating sales below retail price via the Internet, Priceline makes it possible for various sellers to move additional inventory, in the form of unsold tickets, while still protecting their brand's retail prices.

The company entered into partnership agreements with several airline companies and provided value to their businesses via brand and price shields. The sellers, or Airline companies, were not contractually bound to provide exclusivity of any form to Priceline while attempting to rid themselves of surplus tickets.

Operational Strategy

Priceline experienced instantaneous success in the Internet community, and reached its $1MM in just over a year of its inception. It effectively leveraged the Internet boom to locate the right kind of sellers for a particular buyer. Priceline later expanded its concept to include other industries such as hotels, automobiles, and home financing. Though serving different needs, the selling concept remained the same; potential customers would name their maximum price based on their budget, and Priceline would try to find the best deal for them. With the exception of home financing, consumers had only one opportunity to accept or reject the deal, thus prompting the consumer to make spontaneous decisions. The Priceline business model was horizontally scalable as well, and so lent itself to businesses such as groceries, car rentals, and long distance telephone systems.

Marketing Strategy

The company ran several brand strengthening campaigns which encompassed the elements of an aggressive marketing campaign. Once again, Priceline defied conventional wisdom by hiring a celebrity to market its web-based services. Priceline was endorsed by the well known face of William Shatner whose star power added a distinctive force to the Priceline brand popularity. Millions of viewers flocked to the website, making it a household name as well as establishing its popularity among big names such as Amazon, eBay, and E-Trade. Additionally, sweepstakes and incentives offered to affiliated websites helped increase the number of visitors to the website.

Current Issues and Competition

Expedia copied Priceline's "name your own price" model. They claimed to offer more services than Priceline as well as to provide customers with the option of naming their own price. Priceline filed infringement charges against Expedia which were in dispute at the time of this case. Though maintaining its stronghold in the brand awareness sector, Priceline was slowly losing its customer base to Expedia. The New Year presented several challenges faced by Priceline, namely those including brand enhancement, franchise expansion, and revenue growth over $1 billion.

Priceline SWOT Analysis

Strengths

The First One

Priceline was the first company to give the buyer the power to name the maximum price he/she could afford. It had already positioned itself as the company which provided the lowest possible prices. The value driven leisure traveler could not resist the temptation of flying at a price he/she chose. Suddenly the discounts offered by Airline websites appeared less attractive, and buyer-driven commerce became the centerpiece of a revolution. The company was also the first amongst Internet companies to hire a celebrity to endorse its brand. Priceline was "less for less" - easy on the pocket and low on convenience.

E-Business Giant

The advantage of Priceline's e-commerce model is that the site owns no inventory; it merely facilitates transactions. The site purchased each ticket only after a consumer paid for it by credit. Priceline was in whole a huge E-Business model which tied in several businesses, including airlines, hotels, and financing companies. These partners utilized Priceline's business model for better revenue management in conjunction with brand and price shielding. Priceline used a very effective cost strategy which allowed rapid supplier acquisition by enabling businesses to rid themselves of the unused inventory of tickets without much overhead. The 75 billion dollar airline industry had over 600 million customers but had still fewer selling options. Priceline not only provided new avenues for consumers, but also gave the industry an easy access to sell its products.

Horizontal Scalability

Priceline did not limit its reverse auction concept to just the airline industry. It expanded its business model to the new automobile industry, home loans, and hotels as well. The company now serviced a broader set of consumers looking to extend their savings beyond leisure traveling.

Mega Brand

Priceline used a very aggressive brand strengthening strategy: launching several advertisement campaigns on television, radio, public relation activities etc. Although a complete web-based company, Priceline leveraged the power of television and radio to extend its brand awareness to non-Internet users. Donning the Priceline mask was Captain James Kirk (William Shatner) whose star power, along with Priceline's innovative service, proved a huge success for the company. In less than a year, Priceline moved up the "Internet brands" charts and was placed well above the competition.

Weaknesses

Dependence on Buyer Driven Commerce

Priceline relied on the naivetй of those customers who would overbid and pay more than other sites. It depended completely on the trade-off made by the consumer's decision to choose price over convenience.

Unchartered Territory

Priceline chartered new waters whose strategy depended on the niche market whose consumer wanted to try something new. Not everyone had Internet access or was capable of understanding the idiosyncrasies of E-Commerce. It reached out to a very limited customer base. Out of 600 million passengers, only 1 million had tried making an offer in a single