Priceline: A Two-Way Price Interaction


Ever wished you could name your own price for a flight or hotel? For those who have the urge to secure the best deals Priceline.com offers the perfect platform.

While Priceline.com — yes, the one with the annoying father—daughter commercials — enjoys a well established position in the travel industry in the United States, parts of Europe’s mainland are still waiting for their own version of the “name-your-price” travel website. Hence, it is interesting to briefly consider the ingredients behind the success of Priceline.com in the U.S.

With services ranging from a car rental interface to cruise bookings, Priceline.com offers a platform for both professional and leisure travelers to connect with offering companies. While this is nothing special these days, the ‘name your own price’ function that the website boasts offers a unique opportunity to interact with the offering travel companies: it allows the user to set a price for a particular service. To demonstrate this, lets say you are looking to stay the night in a hotel on your way to visit relatives. Priceline.com allows you to name your own price while selecting a particular city and comfort level; the downside here is that you outsource control of the final pick to whichever hotel decides to accept your proposed solution without the ability to withdraw or cancel your offer. Yet, it puts you as a traveler in the situation where you can actually try to find the bottom price a hotel is willing to accept—securing that special deal that will fuel your enthusiasm for days to come.

Priceline Inteface
Priceline’s Name Your Own Price Interface

 

Sounds too good to be true? Well, the benefits of this exemplary two-sided market platform extend to the offering side of the deal as well.[1] Priceline.com provides companies with the opportunity to reach millions of travelers [2] while allowing for price control. The selling party sets its required selling price—and can choose to accept prices below this set price—while Priceline.com will retain the differences between the required selling price and the price offered by the buyer. Additionally, Priceline.com offers the selling companies with a regular booking interface and charges a booking fee to the selling companies. In this sense, Priceline.com exemplifies the ‘network effect’ where the two sides of the network attract each other.[3] Priceline.com attracts 30 million of users a month which allows it to attract and charge the largest travel companies. The same holds true vice-versa; the large number of associated companies attract the large numbers of visitors. [4]

Especially the name your own price option on the websites provides the ability to create value for both the selling and the buying parties. While it offers the company an effective way to recover its costs when facing the threat of obsolete products, it offers buyers the chance to control costs and spend what he or she actually wants to spend.

Additionally, the two-sided market platform enables Priceline.com to “draw revenue from both sides” as it charges the companies a regular fee for normal bookings through the website while it retains the difference in required selling price and the named price from the ‘name-your-price’ option—effectively charging the buyer.[5] Add regular advertisement income to this mix and it becomes evident why Priceline.com enjoys a prominent position in the U.S. market place.

If you are still interested after reading all this: join the interaction to get your own deal here: www.Priceline.com

-Tilman

References:

[1] Eisenmann, Thomas, Geoffrey Parker, and Marshall W. Van Alstyne. “Strategies for two-sided markets.” Harvard Business Review 84.10 (2006): p. 93.

[2] http://www.Priceline.com

[3]Eisenmann, Thomas, Geoffrey Parker, and Marshall W. Van Alstyne. p.94.

[4] Priceline Group. http://ir.pricelinegroup.com/releasedetail.cfm?releaseid=725462

[5]Eisenmann, Thomas, Geoffrey Parker, and Marshall W. Van Alstyne. p. 94.

 

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