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E-Commerce – Priceline.Com Essay, Research Paper

Priceline.com is an Internet company that has pioneered a unique type of e-commerce known as ?demand collection system? that enables consumers to use the Internet to save money on a wide range of products and services while enabling sellers to generate incremental revenue. Using a simple and compelling consumer proposition of ?name your price,? the consumer is in control of the product they wish to purchase. In the form of individual customer offers guaranteed by a credit card for a particular product or service at a price set by the customer and communicate that demand directly to the participating sellers or to their private databases. The company works by allowing the consumers to agree to hold their offers open for a specified period of time to enable priceline.com to fulfill their offers from inventory provided by participating sellers. Once fulfilled, offers generally cannot be canceled. By requiring consumers to be flexible with respect to brands, sellers and/or product features, the company enables sellers to generate incremental revenue without disrupting their existing distribution channels or retail pricing structures.

The company is grounded on the assumption of ?rational self-interest.? In other words, since individuals make rational decisions to achieve the greatest satisfaction or the maximum fulfillment of their goals, Priceline.com has now revolutionized the market industry. By their ?name and lock your price? strategy, more and more consumers have been able to maximize their satisfaction on differentiated products. The consumers want to spend their incomes to get the greatest benefit from the goods and services they can afford. Priceline.com helps them to achieve their goals. Since the inception of this internet-based company, millions of consumers were able to afford more with less expenditure on their goods. In addition, rational behavior varies among every individual because individual preferences, circumstances, and available information differ. Priceline.com offers various or ?differentiated goods and services? in a broad range of products to purchase from.

?E-Commerce Pioneer Priceline.com Sells 20,000 Leisure Airline Tickets In Six Weeks.? As ticket sales accelerated, priceline.com has become one of the nation?s top 10 most-visited commerce Web sites. In it?s first six weeks of operation, priceline.com sold more than 10,000 tickets. Sales have been monumental with a recorded 1,000-plus-ticket sale in a single day. Sales with an average of one ticket sold every 70 seconds. With its leisure airline ticket service, priceline.com collects consumer demand and helps airlines fill thousands of empty seats every week on their domestic and international flights. Consumers simply tell priceline.com the location, the date they want to travel, the price they?re ready to pay and the major credit card they?ll use to guarantee their request. Consumers then receive an answer from priceline.com in one hour for domestic travel, or 24 hours for international travel. The ?name-your-price? buying service that launched in April, sold a record 20,000 tickets online in the last six weeks.

In another article titled, ?After First 45 Days, Priceline.com?s New Car Sales Pass $2 Million Mark In New York Market Test,? Priceline.com launched a new car buying service in the New York metro area in July of 1998. The service enables buyers to name the exact car or truck they want, the price they want to pay and the counties they are willing to travel to in order to take delivery of their new car. However, all customers must either have their own financing or pay cash for their new cars. The financing plan is only a limit in the market test; priceline.com now has a financing option that enables consumers to name their own monthly payment plan. The patented e-commerce system has attracted thousands of car buyers and has sold more than $2 million worth of new cars just 45 days after launching in its first test market.

Lastly, there is an article titled, ?Name Your Own Price For Gasoline On The Internet, then Get Your Price At A Local Gas Station.? Since May 20th, Priceline Webhouse Club, a licensed affiliate of priceline.com, launched a new service that makes it possible for drivers to simply ignore the price at the pump. Instead, they can go to priceline.com on the Internet and name their own price for up to 50 gallons of gas a month. After locking in their price in 60 seconds or less, drivers can get their gas at local major-brand gas stations selected by Priceline Webhouse Club. Drivers can expect to save 10 to 20 cents a gallon, possibly even more.

Both buyers and sellers have benefited from this new concept of naming your own price for business transactions. The members of Priceline.com are submitting testimonials of how much they?re saving on airfares for leisure, business, and vacation travels. Sellers can move excess inventory at will without competing with their own retail prices or disrupting their established distribution channels. Buyers on the other hand, get the thrill of naming their own price for quality products and services. In addition, priceline.com has joined alliance with other internet-based companies as well to demonstrate new ways in which the Internet can deliver even greater value to consumers.

I believe Priceline.com is a unique new form of commerce that?s a win/win for sellers and buyers. Priceline.com is among the first of a new generation of e-commerce solutions that deliver on the promise that the Internet can develop compelling consumer benefits unique to the medium. Their revolutionary new way of doing business alleviates consumer satisfaction and self-interest. In other words, consumer?s marginal benefit exceeds their marginal cost. So, individuals have little to sacrifice in their choices as well as their decisions.

Until recently, the Internet was a solution primarily about convenience when shopping online for books, software, and music. Priceline.com is about saving money on the everyday items for tens of millions of consumers, beginning with groceries and now, gasoline. With the inflation of gas prices consumers are actively looking for alternative ways to reduce the prices they?re paying. More than half of all the drivers now say that price always or frequently dictates their selection of gas stations. Priceline.com offers consumers to do something about the high cost of gas. OPEC was a force to increase the cost of gas. Now, the Internet is the new counter-force to lower it. What better time to save then now!

However, the drawbacks to this innovative service are the fraudulent activity prevalent in cyberspace. The first time you come to the Priceline.com Web site to name your price for gas, you have to submit your identification number on the back of one?s priceline gas card along with a major credit card or debit card account number. The problem is individual identification or credit cards are being stolen for others personal access or use. It is especially rampant on the Internet and many people have become victims of stolen identities.

Another problem is that consumers have been complaining about the cost-efficient prices. One noted that ?you don?t know what you?re buying until it?s too late.? That is because your credit card is charged automatically the amount of your offer once Priceline finds someone to accept it. Some people like to expand their horizons for an alternative airport including off-peak hours, smaller planes, and possibly the kind of flight class. Unfortunately opportunities like that are not feasible and the consumer is stuck paying for an airline they are not satisfied with.

Priceline.com represents an oligopoly, a market dominated by a few large producers of a homogeneous or differentiated product. Specifically, Priceline.com is a ?differentiated oligopoly? because it is a consumer goods industry. The company is currently selling multiple services to its sellers across three distinct product categories: a travel service that offers leisure airline tickets, hotel rooms and rental cars; an automobile service that offers new cars, and a personal finance service powered by pricelinemortgage (a licensee of priceline.com and a subsidiary of a federally charted thrift) that offers home refinancing and home equity loans.

Priceline.com has also merged and joined alliance with other growth of dominant firms via Internet. It has merged with Travelcity.com to increase their market share, enabling the new and larger producer to achieve greater economies of scale. In addition, a larger firm may have greater flexibility to control market supply. If there is a more abundant supply, the buyers may be able to demand and obtain lower prices. More importantly, mergers are able to produce greater production, thus increasing revenue for the company.

In terms of the R&D expenditures Priceline invest their money on advertising and commercials to attract its customers. To get incremental business a portion of the money is used in advertising to reduce the cost of the consumer?s demanding prices. In doing so, Priceline?s marginal benefit exceeds the marginal cost. The expected rate of return is far greater than the interest invested in producing advertisement. Moreover, they expect companies to support their business strategy so the other companies in return can generate greater revenue as well.

Conclusively, Priceline.com has brought an exciting and provides other businesses with inspiration to follow their strategies. Many consumers have benefited from this Internet Company and as a result have saved money to spend on other wants. Now we have the option of choosing a price and giving countless vendors the chance to bid. For better or worse, this could transform the way we think of shopping, as well as the way in which we do it. Conceivably, it could alter the nature of balance and power between vendors and consumers. In addition, it restructures long-standing capitalistic business and sales traditions. This new business model appears to have the potential to give enormous new powers to people who want to buy things, since their price is being offered to many thousands, even millions, of possible sellers. The new business method venture is successful and it opens the doors for consumers who are tired of the fixed prices they have to pay.