Priceline.Com and the Search for a Business Model That Works

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Priceline.Com and the Search for a Business Model That Works

By | December 2012
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Case Study Questions
1. What are the core components of Priceline's business model? Priceline is a business-to-consumer (B2C) e-commerce in which online businesses seek to reach individual consumers. Its major business model is based on market creator because it’s a web-based business that uses a digital environment such as the Internet to create market by bringing buyers and sellers together. One of the fundamental core components of Priceline’s business model lies in its relatively unique value proposition. At Priceline, consumers can use their reverse-auction pricing system “Name Your Own Price” which gives customer the ability to find and negotiate a discount price online. Priceline's business model is geared toward suppliers that can offer inventories such as hotels room reservations, airlines, car reservations and others to sell at much lower prices retail. As a result, Priceline allows customers to save money by providing a unique experience. Other core components of Priceline’s business model are competitive advantage, competitive environment and revenue model.

2. Do you think Priceline will ultimately succeed or fail? Why? I think they will ultimately succeed because they understand the revenue potential in their market place. At the early history, Priceline initially lost over $1 billion in 1999 followed later by losses to $23 million by 2002 based on the tragic event of September 11. However, Priceline survived the crash and turned around in 2003 recording $10.4 million in net income. The good news has continued since. From 2004 to 2008, Priceline’s revenues shot from $900 million to $1.9 billion, and its net profits from $31 million to $193 million. This has proved that the reverse-auction pricing system “Name Your Own Price” has made it profitable and Priceline has managed to maintain a more unique identity than most its competitors. Nevertheless, Priceline has provided a niche service that customers want by offering them the best price. As long...
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