Consumer Behaviour Case study Priceline.com
Priceline approach is truly unique, and, back in 1998, it has indeed turned marketing buyer system upside down. Jay Walker was the innovator of "name-your-price" concept, which can be interpreted as allowing people to set up prices for products or services. The model was mainly based on shifting power into the hands of consumers and away from the companies; and, according to impressive revenues of 482 million during the first year; it [concept] really worked. The idea of the venture lay in providing solutions to various needs of customers across the globe through application of new Internet technologies. It was also intended at finding new ways of doing business..
Initially Priceline had big hopes and massive expectations among those who invested millions in it. However, after nine years since the foundation and pre-announced bankruptcy in 2002, the company does not perform as good as expected, though does not look bad on paper either. There has been substantial improvement in bookings comparing to last year and impressive growth in Europe, resulting in over 60% gross profits. In view of that, first question comes to mind: why the company has not been as successful as first imagined.
At the beginning many people, mainly money saving driven segment, were actually attracted to the pricing innovation scheme, as for the first time they felt that they were able to set their price and get offers which, according to the Priceline advertisement, were 20 to 40% less than buying from traditional channels. What majority of the customers were not realizing or understood only later is that they were not really setting up prices, but only saying how much they were willing to pay for product or service; and then Priceline would search if there were any suppliers willing to fulfill the request at that price.