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Priceline.

com: Name Your Own Price


Case study report
Group 2 Section D

Arik Das PGP/14/202 Imlisunep Imchen PGP/14/212 Mukesh Meena PGP/14/219 Sameer Bhiwapurkar PGP/14/239 Suman Saha PGP/14/245 Veerander Naik K PGP/14/252

Introduction
Priceline.com was founded and launched by Jay Walker in April 1998. Priceline flipped the conventional marketing system where buyers could advertise a unit of demand to a group of sellers. The sellers could then decide whether to fulfil that demand or not. The customer could advertise his/her demand by logging on to Priceline.com. Customer had to be flexible on time of travel and brand of supplier. The customer could not back out once Priceline had assigned it a seller. Priceline made its entry to the market with introducing its policy over providing Airline Tickets in 1998 and later moved on to automobiles, hotel rooms and home financing by introducing name your own prices service.

Problem
Priceline appointed new Chief Marketing Officer (CMO) in January 2000. The objectives for appointing new CMO can be given as: Enhance the brand and strengthen its position in multiple product categories. Expand into new categories Determine the category best suited for Priceline service Grow the revenues to over $1 billion

Problem Analysis
Here, the CMO had to come up with strategies to outwit its competitors. Expedia was a leading online travel service. Priceline had direct competition in the name your own prices service with Expedia. Expedia provided extensive destination information and strong editorial content with multiple booking options and focused on flights, hotels, cars, vacations and cruises. Since Priceline was extending its brand across multiple product categories, it had to compete against niche players like CarsDirect in automobiles and Lending Tree in home financing.

Background
Brand Building
Priceline followed an aggressive brand-enhancement strategy which included mass market and multimedia advertising, promotional programs and public relations activities. It had invested $24.4 million in1998 and $79.6 million in 1999. According to a survey conducted on the awareness of Internet Brands, Priceline was placed in the top five with 32.2% awareness in September 1998. By April 1999, Pricelines awareness reached 46.5%. On the other hand, its competitors such as Cheaptickets, Travelocity, Preview Travel and Expedia stood in the 8% to 10% awareness range.

Services
Priceline offered services like Airline Tickets, Hotel Rooms, Home Financing and New Cars and was coming soon with offerings in Groceries, Rental Cars and Long Distance Telephone Services. Apart from the increment in sales, the sellers were guaranteed with the following benefits: Brand Shield The brand did not erode as Priceline mentioned the lower prices only to the customer and did not advertise it publicly. Price Shield It maintained the integrity of the established prices as it never advertised that the lower price was being filled. Various services provided by Priceline: Airline Services Airline services accounted for a large portion of Pricelines revenues during 1999. Key elements of airline services: Customer would specify the date of travel, departure and arrival cities, and number of passengers in the party. The system queried about acceptable airports Customers were given opportunity to increase their chances by indicating a willingness to fly Customers were asked the Name Your Price indicating their willingness to pay for the ticket Customer guaranteed the price to a credit card

Hotel Rooms Key elements of Hotel Room services:


Offered brand shield to the hotel partners by calling them as nationally recognized,

name-brand or well-known independent hotel More than 12 leading national hotel chains were involved that offered space in 1300 cities, towns, and resorts

Customer would specify date, acceptable locations, and required level of room from one-star/economy to four-star/luxury Customer guaranteed the price to a credit card

Home Financing Name Your Price financing was available for mortgages, home equity loans, and refinancing. Key elements of Home Financing services:
Customer would specify the type of loan, amount, down payment, duration, property

information, credit history, and name your price interest Lenders charged a $200 good faith deposit to apply to the closing cost Lenders responded with a counteroffer via e-mail if no one was willing to meet the exact rate and terms named by the customer

New Cars Key elements of New Cars services:


Charged a fee ($50) to the customer of the car-buying service if the process resulted in

any transaction Provided the dealer cost, the Manufacturers Suggested Retail Price (MSRP) and also specified other fees Customer specified name your price number and acceptable location for pickup $200 penalty was charged if the customer did not show up at the dealership No car salesman could call to haggle or negotiate a different price as the offers were made anonymously First dealership to accept the customers price gets to sell the car

Grocery Items Priceline believed that for the horizontal extendibility of the pricing model to a large number of product categories the best category would be Groceries. Key elements of airline services:

For selecting a category, customer had to choose at least two brands from those mentioned. Further, the system provided the Typical Price Range and the customer designated one of the four prices characterized Customer could even type in exactly desired own price Webhouse Price Machine indicated accepted offers User printed Prepaid Grocery List and collected the items from a chosen store

Recommendations
To enhance the brand, strengthen its position in multiple product categories, expand into new categories and grow revenue the following actions can be taken into consideration: Priceline can target Airline service as its primary service. It was the service that Priceline started with and fits in well in the Pricelines business model. Pricelines benefits of Brand Shield and Price Shield have a great impact here.

Priceline can make cost cutting in advertising expenses by segregating the target customer instead of following the aggressive brand-enhancement strategy. Thus, rather than using a common medium of advertisement, it can use segment specific advertisement. Priceline can distribute vouchers of discount that can be used on its services for creating brand awareness. These vouchers can be distributed through internet media or press media. Moreover, Priceline can implement a methodology wherein a user earns points on making transaction of specific amounts and further, these points can be accumulated to grab a discount over a service. Apart from the existing products, Priceline can sought categories like electronic goods and household appliances, and books, magazines, novels, cds, dvds, etc. Priceline can collaborate with some companies that are already in such business and thus, improve the Priceline model with their assistance.

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