Businessmodel of Priceline

Customer Segments

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.

Value Proposition

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.

Channels

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.

Customer Relationships

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.

Key Activities

Priceline’s business model entails maintaining a robust platform between two parties:  vendors and consumers.

Key Partners

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.

Key Resources

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.

Cost Structure

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).

Revenue Streams

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.