Priceline.Com: Name Your Own Price

Ashutosh K      1501007        Group 8        Prem Kishor 1401095

Fahim B            1501078                Rushin P     1501098

Parasram M     1501025                Ulkrisht S   1501112      

Priceline.com: Name You Own Price

1. How Page 2 of the case quotes a Fortune article suggesting Priceline and its idea of buyer driven commerce as a marketing gimmick than a revolution. What is your point of view on this?

In our point of view it is revolutionary as well as a marketing gimmick than revolution.

Firstly, it is marketing gimmick than revolution because as a business model, it remains unproved within the travel industry, much less the half-dozen other industries Priceline plans to enter. As for the company's prospects, Priceline hasn't a penny of profit anyplace in view, and it faces competition at each flip from, among others, its own suppliers. There is even a dispute on whether or not Walker unreal his proprietary type of commerce or just recast another firm's earlier idea.

On the other hand, buyer driven commerce, where customers can "name their price" for airline tickets, hotel rooms, vacation homes, car rentals are revolutionary. Because customers can name the prices at intermediaries like Priceline.com but ultimately the airline set the final prices. And because Priceline keeps the prices of the available tickets hidden or secret, it provides consumers an offer or opportunity to pay more than the asking price. It will "restructure the P&L of the airline industry," for starters, and ultimately transform transactions worldwide in travel, retail goods, telecommunications, and financial services.

1. How viable is Priceline's business model? Can Priceline be disintermediated by the airlines (that is, now that they know how the entire thing works, can they do it themselves)?

Priceline’s is a great Business model considering the time and scenario it was started. It offers an attractive value proposition for both the regular customers and vendors. They enables flexibility on price for customers by a model called “Name your own price” for the services. The budget minded leisure traveller can get the air ticket on the price he wants while the airline companies would get brand and price shield. It is a win-win situation. But there too are certain flaws in the model employed by Priceline

1. Viability in long run: Priceline came into existence at a time when the price for the tickets was not much easily visible. You were really unsure about what the price would be. And it makes sense to offer customers to name their price. But with technological advances, now most airlines have adopted dynamic pricing and the prices for all tickets are available openly on internet.
2. Difficulty in horizontal expansion: Priceline wanted to expand itself into hundreds of products and services, but there is scepticism lurking over the possibility of such an expansion. Naming your own price model works well for perishable items like airline tickets and hotel rooms which if not used will be of no value addition to the airlines and hotel owners but such is not the case for non perishable items like gasoline or utensils. They can be on the shelf for a longer period and there is no incentive for them to provide it at a lower price
3. Failure to cater convenience: A lot of customers value convenience more than slightly lesser price. With the current business model Priceline won’t be able to guarantee convenience or service to the customers as the end decision making is with the vendors i.e. airlines and hotel owners. Lot of requests will be unmet and tickets might be schedules on days the customer would feel difficulty in using the service. While priceline provides flexibility on price, they are pretty rigid on customer convenience.

Airlines cannot disintermediate the service provided by Priceline as it would cannibalize its own product and service offerings. People would Name their price rather than book the tickets and if all the customers start doing that, airlines might have to sell the tickets at a price lesser that it’s cost. Also this model can’t be applied by a single airline.

3. How viable is Priceline's business model? Can Priceline be disintermediated by the airlines (that is, now that they know how the entire thing works, can they do it themselves)?