Subject category:
Entrepreneurship
Published by:
Harvard Business Publishing
Version: 1 August 2000
Revision date: 23-May-2019
Length: 29 pages
Data source: Field research
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Abstract
Priceline empowered consumers to 'name their own price' for airline tickets and hotel rooms; then it shopped these offers to marketers. Priceline's founder Jay Walker described the resulting transactions as a new ecosystem, that helped consumers realize lower prices while allowing marketers to turn excess inventory into profit and, in so doing, price discriminate without damaging their brands or their published prices. Airline tickets and hotel reservations were only the starting point for Priceline, however. By the end of 1999, Priceline had made inroads into the mortgage, new car sales, and car rental businesses. In November, Walker launched Priceline WebHouse Club to bring the 'name-your-price' concept to groceries, with plans to eventually scale WebHouse to include almost every type of retailing. Several pressing issues confront the Priceline WebHouse management team in this case. First, the company had yet to close a deal with any major brand manufacturer. Thus, to satisfy customers, WebHouse subsidized member savings out of its own coffers, which, combined with early consumer success, led to significant losses and cash burn. To continue its customer acquisition, Walker projected that USD200 million to USD500 million in additional capital would be necessary. Meanwhile, the company confronted questions about where and how quickly it should expand.
Location:
Industries:
Size:
USD1 billion revenues; 600 employees
Other setting(s):
2000
About
Abstract
Priceline empowered consumers to 'name their own price' for airline tickets and hotel rooms; then it shopped these offers to marketers. Priceline's founder Jay Walker described the resulting transactions as a new ecosystem, that helped consumers realize lower prices while allowing marketers to turn excess inventory into profit and, in so doing, price discriminate without damaging their brands or their published prices. Airline tickets and hotel reservations were only the starting point for Priceline, however. By the end of 1999, Priceline had made inroads into the mortgage, new car sales, and car rental businesses. In November, Walker launched Priceline WebHouse Club to bring the 'name-your-price' concept to groceries, with plans to eventually scale WebHouse to include almost every type of retailing. Several pressing issues confront the Priceline WebHouse management team in this case. First, the company had yet to close a deal with any major brand manufacturer. Thus, to satisfy customers, WebHouse subsidized member savings out of its own coffers, which, combined with early consumer success, led to significant losses and cash burn. To continue its customer acquisition, Walker projected that USD200 million to USD500 million in additional capital would be necessary. Meanwhile, the company confronted questions about where and how quickly it should expand.
Settings
Location:
Industries:
Size:
USD1 billion revenues; 600 employees
Other setting(s):
2000