2. AGENDA
OVERVIEW
WHAT IS PRICELINE.COM BUSINESS
MODEL
WHY PRICELINE.COM’S GROCERIED
AND GASOLINE VENTURE FAILED?
WILL PRICELINE.COM ULTIMATELY
SUCCEES OR FAIL? WHY?
12. WEAKNESESS
The site is less popular outside US and
Europe
The main advantage of lowest cost is
defenseless
Priceline's tickets are nonrefundable
13. CURRENT: US , EUROPE, ASIA
FUTURE:MIDLLE EAST,SOUTH AFRICA,BRAZIL
U.S TRAVEL SPENDING
2008 -$712 BILLION
2009-$772
2010-$754
2012-$866.5
SOURCE : TRAVEL INDUSTRY ASSOCIATION
WORK-LIFE BALANCE,
FAMILY MINDED SOCIETY
BUDGET TRAVELER
VS
VENDOR WHO WANT TO GET RID
EXCESS/AGING INVENTORY
INCREASE IN BOTH YOUTH AND
SENIOR CITIZEN
TRAVELER
INTERNET TRAVEL TREND
14. TRAVEL
INDUSTRY
STRONG
COMPETITION BY
MAJOR AIRLINES IN
EACH COUNTRY
E.G. AMERICAN
AIRLINES,
EMIRATES, JAPAN
AIRLINES,
SINGAPORE
AIRLINES
INFO WAR E.G.
ATTRACTIVE
PACKAGE, VALUE TO
THE MONEY
DIRECT
COMPETITOR
TRAVEL
AGENCY E.G.
EXPEDIA,
ORBITZ
VENDOR
ITSELF!
E.G. ALL-IN
AIRLINES
WEBSITES
INDIRECT
COMPETITOR
ONLINE
MARKET
MAKER
E-BAY,
AMAZON
OTHERS
GLOBAL ECONOMY
CONDITION
INFECTED DESEASE
E.G. H1N1
RISE IN MINIMUM
WAGE
THREATS
CUSTOMER
BRAND LOYALTY
15.
16.
17.
18. SUCCEED OR FAIL?
Forecast
: FAIL
Travelers simply didn't
like the “uncertainty”
“Unbelievable
customer service
problems.“ 300
complaints - The
Connecticut Better
Business Bureau (BBB)
WORST:
PriceBreakers--special
incentives for some
travel deals--are
unimpressive
Trend : Customer
LOYALTY , TRUST
and repeat
purchase
Relevancy : Direct
competition from
Airlines websites and
package
19. SUCCEED OR FAIL?
”I always fly on one airline specifically because of their brand.
Anywhere they fly, I choose them. And, I wish they flew to all of
my destinations -- I trust them and feel safe and to me that's
more important than price and times”. Nicole Andre, Teacher
“I develop brand loyalty [to an airline] because they have satisfied
me. The question does not arise whether they get me to my
destination on time. If I do not have brand loyalty then naturally I
am price conscious person”. Gopinath, Proprietor, Geaar Electrics
“As a brand professional, I may be biased. But I've been flying on
Singapore Airlines for the past 8 years. The only time I don't is
when I do not have a choice”. Jui Hong Teoh, Brand Director,
Phische/Company, Kuala Lumpur, Malaysia
20. SUCCEED OR FAIL?
SOURCE : The 2011 Barcelona European Academic Conference
The Impact of Price Perception on Customer Loyalty in the Airline Context
21. SUCCEED OR FAIL?
SOURCE : African Journal of Business Management Vol.5 (11),
Effects of promotion on relationship quality and customer loyalty in the airline industry
22. SUCCEED OR FAIL?
SOURCE : African Journal of Business Management Vol.5 (11),
Effects of promotion on relationship quality and customer loyalty in the airline industry
23. SUCCEED OR FAIL?
SOURCE : African Journal of Business Management Vol.5 (11),
Effects of promotion on relationship quality and customer loyalty in the airline industry
Respondents’ perceptions
24. SUCCEED OR FAIL?
SOURCE : African Journal of Business Management Vol.5 (11),
Effects of promotion on relationship quality and customer loyalty in the airline industry
Transaction-orientated vs. Relationship-orientated
25. SUCCEED OR FAIL?
SOURCE : (May 2011) American Express Global Customer
Service barometer
Stat: In a positive economy, 70% of Americans are willing to spend
an average of 13% more with companies they believe provide
excellent customer service – up from 9% last year
Stat: 60% believe businesses have not increased their focus on
providing good customer service. That number is up from 55% last
year. Among this group 26% actually think companies are paying
less attention to service.
Stat: 78% of consumers have bailed on a transaction or not made
an intended purchase because of poor customer service.
Stat: 78% of consumers have bailed on a transaction or not made
an intended purchase because of poor customer service.
26. #3 WHY PRICELINE’S
GROCERIES AND GASOLINE
VENTURE FAILED?
Use this: http://www.strategy-
business.com/article/23003?gko=1ccc3
27. Why Priceline’s Web House Failed?
Major issues:
Nature of product
There's an incentive for an airline or hotel to sell off
unfilled seats or rooms at the last minute, because they're
"perishable."
if a seat on a particular flight isn't filled, or a hotel room on
a particular night isn't used, the opportunity to sell them
at any price is lost forever.
You can't put them in inventory until you find a customer
28. Why Priceline’s Web House Failed?
Major issues:
Price flexibility
filling a seat or a bed uses capacity that is already
paid for. Therefore, the cost of adding a customer is
negligible.
In contrast, with groceries, there are costs for each
unit related to manufacturing, processing, shipping,
and maintaining inventory that must be covered.
29. Why Priceline’s Web House Failed?
Major issues:
flexibility to charge different
customers different prices
Airlines can offer a lower fare to one customer who is
willing to make last-minute travel plans, without
cutting prices to others
But There is little flexibility manufactured items (You
can sell day-old bread at a discount, but there's no
such thing as day-old gasoline or week-old laundry
detergent)
30. Why Priceline’s Web House Failed?
Major issues:
difference between commodity
products and branded goods
Priceline wants customers whose primary concern is price.
For them the product is a commodity
But WebHouse depended on the participation of brand-name
packaged-goods manufacturers, which viewed this sort of
permanent discounting as a dangerous liability for their
brands
So the target packaged-goods marketers for WebHouse
weren't as flexible on pricing as Priceline's suppliers
31. Evaluate Action & Approach
The Web can't compress physical labor and other fixed costs; all it
can do is make marketing and other information-intensive
processes more efficient..
There must be benefits for both buyers and sellers to change the
way they do business. Self-interest has to be part of the system
Middlemen will stay in business as long as they can provide
benefits to both sides. At a minimum they must match the right
buyer with the right seller (like eBay Inc.)
32. • Expand into new area through acquisition,
good choice would be Airbnb.com, Vayable,
Getaround
• Expand new market – middle east, china,
india, latin america – through partnership by
Maintain mix strategy – normal & reverse
36. NOTES AND SOURCES
1. Michael Rappa(2008) Case Study Priceline.com,[Online],
Available:
http://digitalenterprise.org/cases/priceline.html [11 [11
March 2012]
2. Seeking Alpha (2011) Priceline Investment Review,
[Online], Available:
http://seekingalpha.com/article/265840-priceline-
investment-review [11 March 2012]
3. Raman Muralidharan ,Rhonda Germany (2000) WebHouse
Rocked: Why Priceline's Groceries and Gasoline Venture
Failed [Online], Available: http://www.strategy-
business.com/article/23003?gko=1ccc3 [11 March 2012]
37. Main issues
4. The Impact of Price Perception on Customer Loyalty in the
Airline Context :
http://conferences.cluteonline.com/index.php/IAC/2011SP
/paper/viewFile/585/592 [22 March 2012]
5. Customer Service Stats Prove Why Everyone Must Deliver
Excellent Customer Service :
http://www.hyken.com/customer-service-3/customer-
service-stats-prove-why-everyone-must-deliver-excellent-
customer-service/ [22 March 2012]
6. Austin Carr (2012), For Turning Spare Rooms into the world
hottest hotel chain : http://www.fastcompany.com/most-
innovative-companies/2012/airbnb [21 March 2012]
