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PriceLine Essay

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The number of Internet users has multiplied manifolds in the past few years that have influenced business strategies across the globe. The travel industry too has undergone significant changes with companies utilizing online platform to reach out to millions of customers at a given point of time. E-commerce has emerged as the new marketplace where travel package sellers provide prompt service to customers looking for holiday packages, flight ticket bookings, hotel reservations and sight seeing trips.

The online travel industry has equipped the customers with access to vast information related to travel plans, cost of tickets, options and alternatives available to minimize costs and make more effective travel plans.

This proves not only convenient to the customers allowing them to make better decisions but also saves a lot of time in commuting to the local travel agent or making reservations on phone. The flexibility offered by this mode of transaction has induced most people to venture online to book flights and make travel plans.

The industry has witnessed widespread growth due to increasing consumer demand for online services.

Many firms have entered the industry owing to the low cost of setting up virtual operations and increased market accessibility. PriceLine. com was one of the pioneers in this field owing to its unique business model “Name Your Own Price” that set the cash registers ringing for the company. Eventually many companies followed to adopt the demand collection business model to achieve increased sales and growth.

Company overview Priceline. com was founded in the year 1997 and is an online travel service provider with its headquarters in Connecticut, United States. Priceline. om currently provides online travel services to over 60 countries in Europe, America, Asia, Middle East and Africa. It operates under the banners booking. com – an online hotel reservation service serving European markets, priceline. com – an online travel booking service operating in United States, and agoda. com – an online hotel reservation service in Asia. Additionally the company operates other travel websites that include travelweb. com, lowestfare. com, rentalcars. com and breezenet. com. The company also provides personal finance services that offer home mortgages, refinancing and home equity loans.

Priceline. com offers its customers various alternatives to plan their vacations in a cost effective manner. The various services provided by the company allow the customers to save on their airline tickets, hotel reservation charges, renting cars, vacation packages and cruises. In addition to discounted prices and cost effective travel packages the company provides its customers with Name Your Own Price service that enables the customers to bid for tickets and reservations, car rentals and cruises at their own specified price that is accepted or refused by the company based on booking availability.

The company generates revenue on the margin between the customer paid price and the price paid by the company to the airlines, car rental agencies or hotels for bookings. Priceline. com soon expanded to other areas of servicing including car rentals, hotel reservations, car sales, vacations packages, and cruises. The sales of the company increased from only US$ 35 million in 1998 to US$ 480 million in 1999.

In the year 2007 the company reported a gross sale of US$ 4. 8 billion that was almost 45. 5 percent increase over the previous year sales (Priceline. om). Priceline – The Business Model Advancing technology and rapidly changing business application scenario has made a deep impact on the way organizations are adopting innovative ways to reach the customers and increase profit margins. E-commerce is the latest business strategy that has provided greater competitive edge to industries across the globe. The online travel business is one of the most rewarding aspects of rising e-commerce applications. Consumers now do not need to visit the ticketing or booking office to make their travel plans.

All they need to do is log on to the Internet and access websites that offer online flight ticket bookings, hotel reservations, car rentals and host of other travel related services such as arranging local sightseeing trips and avail special tour packages. Priceline. com is one of the pioneers in providing its customers with cost effective travel services introducing a novel approach to online travel sales.

The business model “Name Your Own Price” became a huge hit with the customers and Priceline made headlines in the forthcoming years. Priceline. om was the brainchild of Jay Walker, an entrepreneur, who developed a new business model where the customers could bid their price for a specific product. The seller would then decide if he is ready to sell at that price or not. This model enabled the sellers to offload their old and excess stock at a discounted price. In 1996 this model was applied by Jay Walker to an airline industry where unsold extra seats were sold off to customers at a discounted price. This formed the origin of an Internet-based software “name your own price” ticketing service for airlines.

Customers placed bid on tickets for specific destinations of their choice. Priceline would match the available airlines bookings for the specified destinations and decide on accepting price bids placed by customers. The company discarded requests for unreasonably low prices quoted by customers. Moreover, the customers had the limitation of choosing airlines, exact time of travel and if needed, take a connecting flight. This business model was not readily accepted by major airlines since they had plans of launching their own website services.

Walker had entered into agreement with only two partners – TWA and America West. Priceline. com was launched in April 1998. Initially the company faced losses and but in August 1998 the company signed agreement with one of the major airlines – Delta, and this turned the fortunes of the company. Other airlines followed suit and the company’s business model gained rapid acceptance among the consumers. There are three steps to PriceLine sales strategy online using the “Name Your Own Price” model.

The website collects consumer demand for a specific product or service at a desired price level. The company then communicates this demand to the available sellers’ database and decides on a specific dealer who is willing to sell at that particular consumer-mentioned price. Once the seller agrees to sell at that price, the company communicates this offer to the consumer who finalizes the sales process. In case the consumer does not respond to the offer within a specified time period the offer is declared null and void. Company Growth Strategy

The company’s management has ambitious growth plans for the future and is focused on growing and expanding to new emerging markets in Asia and other corners of the globe. The company is experiencing extraordinary growth rate and this is evident in its positioning in the Top 50 hot growth company list on the Business Week magazine. Jeffrey H. Boyd, president and Chief Executive Officer of Priceline claims “Internationally, we believe that our wide geographic reach, new market initiatives and extensive inventory are providing sustained impetus for growth.

We believe that in the United States, our value positioning and brand promotion through offline and online channels is driving above-category growth rates in an uncertain economic environment. ” The “Name Your Own Price” business model launched by PriceLine became the stepping stone to success. The company adopted this model effectively in the travel bookings industry and then re-applied this theory to other segment of customer service that included financial mortgages and car sales.

PriceLine has evolved as a reputable brand in the past few years in the area of online travel bookings. The company utilized this brand name to promote franchisees across various geographic regions. The market expansion strategy through appointing licensed operators to offer similar kinds of services to customers using their business model was very effective. Richard S. Braddock, the CEO and chairman of PriceLine had stated “We believe that priceline. com has the two most important ingredients in place to make our travel growth strategy a success.

One is our industry leading travel brand and the other is our customer franchise, which provides a steady average stream of 4 million visitors who come to priceline. com each month looking to make travel purchases. ” Prompt query processing and customer service is another area of marketing and sales strategy that is emphasized by the company management. The effectiveness of travel booking companies is measured by their capacity to provide host of cost effective travel packages and prompt customer servicing.

Ron Rose, the Chief Information Officer at PriceLine observes in priceline. om “Our goal is to lead the industry as a world class customer-centric company, with an infrastructure that delivers the best, personalized customer service experience is absolutely fundamental to our company’s long term success on the Internet. ” PriceLine started its initial operations with airlines ticket booking services and the wide popularity and acceptance that their business model experienced during the first few years prompted them to move to new areas of operations related to travel market. The online booking of airlines services was extended to hotel reservations, car rentals, vacation packages and cruises.

The number of sellers associating with PriceLine. com also increased owing to their rapid market expansion and growth strategy. Major airlines, hotels, car renting agencies and cruise companies entered into agreement with PriceLine to meet the growing consumer demands. PriceLine has adopted aggressive outdoor advertising and online advertising campaigns to generate interest among potential consumers on a global scale. It has set up physical locations at strategic market locations to increase accessibility and provide a more effective customer service.

This step was taken to attract customers who are not Internet savvy and prefer to transact offline. Technology The launch of the Internet applications and e-commerce in the 1990s made a deep impact on the business world. E-commerce business models revolutionized the way businesses are conducted today leading to increased opportunities that challenged traditional business outfits to accept new challenges. Low cost operations business models made an entry equipped with technology that had extensive global reach and the potential to generate higher profits.

The appropriate use of this technology in the online travel sales business provided Priceline with an edge over its competitors. It became a leading service provider in the industry owing to the ways it enabled its customers to save on their airline tickets, hotel reservations, rental car bookings, vacation packages and cruises. The company applied an advanced search technology, TripFilter that allowed the travelers to narrow their searches and create their own travel packages that were most cost effective using the lowest price booking services offer.

Application of e-commerce technologies and applications have made significant impact on the sales of the company. The company website has been ranked as one of the most available e-commerce site in the past four years according to Keynote systems (www. keynotesystems. com). Technology has been a great enabler of changes in modes of business practice and models adopted by the entrepreneurs to maximize gains. The company realizes that it needs to maintain a strong database and advanced technology features in terms of data storage capacity to accommodate its growing customer base online.

The management implemented a system that took care of its growing backend processing needs without compromising on the speed of customer request processing. PriceLine utilized the technology platform to provide a base for new means of marketing, revenue earning model, and communicating with existing and potential clients. The online market penetration strategy adopted by PriceLine offered huge economic benefits in terms of extensive market penetration, easy access to consumers and wide scale accessibility of products and services. Market Expansion Strategies

The globalization of the market owing to the extensive reach of the Internet, information, and product details accessible to consumers across physical borders translates to increased sales and revenue figures for the sellers online. They can now reach any corner of the globe to display and sell their products ensuring wider scale of operations and greater market share. This owes to the millions of people globally who now have access to the Internet and with telecommunication service providers facilitating the broadband services; the quality of access has improved considerably.

The online travel market demand is increasing in emerging Asian economies and most reputed travel brands are establishing their presence in these countries to tap the enormous market potential. The United States market has the maximum number of users online to meet their travel demands. Online ticket bookings and travel related purchases are one of the primary contributors to e-commerce revenue. The markets of United States and Europe are more matured compared to the emerging Asian markets that hold a lot of promise for the industry in the future years.

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