Viswanathan - 12DM-181 | E-Business | Sec C | Blog entry | Week 1

"Name your own price" - Priceline's mantra..

I was quite interested impressed by the Priceline.com model, when we discussed this in class. Below is a small study on their business model.

Priceline.com is a online commercial website in the business of air ticketing, hotel booking, Financial service and Car rental. It all started in 1998, when Priceline.com initiated a new trading model called "Name your own Price".

so what is this "Name your Own Price" model. This is basically a reverse auction process, where in we quote our price and the website checks the availabiltiy for the same. Priceline has patented this method as their asset.

Priceline was working on this model alone for the period 1998 to mid 2000s. In this Opaque pricing model, for discounted price upto 60%, users bid for the services and once a quote already provided service provider to Priceline matches this criteria, this deal is confirmed and Priceline earns the difference in the price requested and charged. This is the revenue model which has given them huge profits as most of the time, they were able to match with a low price provider to the customer and get the huge margins.

The model is considered Opaque because the customer wont get to know the name of the service provider (Hotel, Airline), and the deal is made non-refundable.

These are the riders, lots of times people have cribbed that since the provider is not a criteria that a user could choose/see, people have got services which were of quality lower than expected.

At present, the company has 2 ways of making reservations and the customer can choose any one of the ways. first one being the much talked about "Name your own price" opaque pricing model and the other one is a traditional pricing model followed by almost all the similar sites, ie., all the listings are open and the bookings earn a commission to Priceline.

The basic things that the website checks for the Name your own price model are the City of stay, Check in date, check out date and the number of rooms. Once this details are with them, they give you options of nearby towns and cities where you want to stay. In the next stage, you can choose the star level of the hotel and in the final stage, we quote a price which we think is the right price for the stay and which is affordable to us.  The website also gives a median retail price for the chosen criteria so that we can take a calculated price pick.

One the search is done, the website asks for the credit card details before showing the list of availability and booking. This way they protect their quotes and also make a blind deal to match between our requirements, the service providers quotes and the profit margin for the company.

To conclude, this was an interesting deal. As a bachelor who wants to spend less and make the best deals and adjust a little bit, this would work wonders for me. I am in.

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Cheers,

Viswanathan Muthu,

PGDM (Marketing) | IMT Ghaziabad

Mobile - 75038 63693