Careers at Priceline
The Priceline Group’s mission is to help people experience the world.
In the mid-1990s Jay Walker was the head of Walker Digital, a think tank for business-related patents. The group generated numerous ideas, one of which was a pricing system that reversed the retailer-customer dynamic. Under this arrangement, consumers interested in a particular product placed a bid at a price they were willing to pay. Retailers then accepted or turned down the offer. The system offered companies the benefit of getting rid of surplus inventory without drawing attention to discounted pricing. For customers, it provided the chance to “name your own price.”
In 1996, Walker decided to implement the new business model in the airline sector. It was an ideal test ground because on a given day, airlines flew with half a million empty seats, meaning they had a lot of surplus. Walker launched his service, Priceline, as an Internet travel site in 1997, putting up $500,000 of his own capital. Consumers could identify their chosen ticket prices while accepting certain restrictions, such as travel times and specific airlines; the site could reject unrealistically small bids. Priceline’s software then connected them with airlines open to their bids.
Despite the advantages offered, the site initially met with resistance from top airline companies. Many were attempting to launch their own websites, and viewed Priceline as a possible competitor. At the start of 1998, Walker only had two small airlines on deck: America West and TWA. He pushed forward and the site officially went live in April, promoted with a high-profile ad campaign starring Star Trek actor William Shatner. On the first day of operation, the site generated over 600,000 hits; within two months, it achieved 30,000 ticket sales.
Even while successful in drawing interest, Priceline was not able to fulfill demand with just two airlines, and was compelled to purchase tickets on the retail market – subsidizing orders at an average of $30 per ticket. Losses grew, and the firm soon seemed ready to fail. In August 1998 it tried to reverse its fortunes by turning over control to Richard Braddock, a former Citicorp president. This move lessened hesitance among airlines, and by the end of the month the company signed its first major client, Delta. The firm next expanded by offering car rental and hotel reservation services.
The changes were working. By October 1998, Priceline had sold over 60,000 airline tickets and generated $2 million in car rental revenues. By the start of 1999, it was placing orders for 1,000+ airline tickets and 1,000+ hotel rooms a week. The company’s success encouraged it to go public in April 1999; by May its stock value jumped to $165 per share, valuing the firm at $19 billion. This performance motivated other major airlines to give the site a look, and with the promise of attractive stock options, Priceline was able to sign American Airlines, US Airways, and United Airlines.
Priceline now had over four million customers, and one of the top rates of recognition among tech brands. Sales exploded from $35 million in 1998 to over $480 million in 1999, then tripled in 2000. Changing its parent name to The Priceline Group, it eventually went on to launch a range of other sub-brands: KAYAK (a price comparison site), Agoda (an accommodation reservation site targeted at customers in Asia), Rentalcars.com (a separate car rental site), and OpenTable (a restaurant bookings site). The company is now the leading global provider of online travel services.
Benefits at Priceline
Business model of Priceline
The Priceline Group has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:
Vendors: Businesses who provide their surplus merchandise/offerings on the site.
Consumers: Individuals who bid on the merchandise/offerings to obtain discounted prices.
Priceline offers four primary value propositions: accessibility, convenience, price, and brand/status.
The company creates accessibility for vendors by offering them a channel through which they can unload excess merchandise or services. It also increases access for consumers by enabling them to use this channel.
The company offers convenience by gathering the offerings of multiple providers in a given industry in one location. Previously, the only option was visiting websites for multiple vendors to see how their prices compared.
The company offers a price value proposition by allowing consumers to place bids featuring their desired payment amount and having vendors respond. This allows buyers to save money.
The company has developed a strong brand. It was one of the first online travel comparison sites, making it well-established. It also has the largest presence of any of its competitors, making its services available to consumers in more than 220 countries in North America, Europe, the Asia-Pacific, South America, the Middle East, and Africa. Further, its site can be read in 42 languages. Lastly, with $55.5 billion in gross bookings in 2015 alone, it is the most successful site of its kind.
Priceline’s main channel is its website, through which it recruits vendors and acquires buyers. The company promotes its offerings through online (search, affiliate) advertising and offline (primarily TV) advertising.
Priceline’s customer relationship is primarily of a self-service nature. Customers utilize the service through its website while having limited interaction with employees. That said, there is a personal assistance component in the form of phone, e-mail, and live chat support.
Priceline’s business model entails maintaining a robust platform between two parties: vendors and consumers.
Priceline operates the Priceline Partner Network, an affiliate program. The company tasks its members with promoting Priceline on their platforms (websites, mobile apps, etc.); they earn a commission for referrals that translate to sales. Additional benefits for partners include exclusive discounts, 24/7 customer service, and dedicated account management.
Priceline’s main resource is its technology employee group, which maintains and updates its collection of websites. The infrastructure for the sites is hosted in data centers located around the world (in the U.S., Europe, and Asia). The company also relies heavily on customer service staff, which primarily consists of independent contractors who operate out of call centers.
Priceline has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is sales and marketing, a fixed expense, particularly online advertising. Other major drivers are administration (a fixed expense) and cost of revenue (a variable expense).
Priceline has two revenue streams:
Transaction Fees – These consist of the following:
- Agency Fees – These are fees for travel-related transactions where Priceline is not the merchant of record and prices have been determined by third parties. They include travel commissions and reservation booking, customer processing, and travel insurance fees.
- Merchant Fees – These are fees for services where Priceline is the merchant of record and charges the buyer’s card. They include customer processing and ancillary fees.
Advertising Fees – These are fees earned for advertising third-party vendor offerings on Priceline’s websites and in its mobile apps.
info: Jeffery earned a Bachelor’s in Government at St. Lawrence University and a JD at Cornell Law School. His previous positions include Chief Operating Officer and President of Priceline. He also acted as EVP and General Counsel of Oxford Health Plans.
info: Daniel earned a B.S. in Accounting at St. John’s University. He previously served as VP and Chief Compliance Officer of Priceline and Chief Financial Officer of CS Technology, a consulting firm.
info: Glenn earned a B.S. in Economics and Finance at the University of Pennsylvania and a JD at Harvard Law School. He leads strategic alliances and merger and acquisition plans at Priceline.
info: Maelle earned a Bachelor’s degree in Russian Language and Literature at Sorbonne University and a Master’s degree at IEP Paris. She previously served as CEO of OZON, and eCommerce firm, and worked as a Principal at The Boston Consulting Group.
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