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A Case Study on the Powerful Business Model of Priceline

by | Case Studies | 0 comments

Priceline is an online travel agency company that primarily focuses on finding discount rates for travel-related proceedings mainly airline tickets and hotel stays. They are entirely owned by Booking Holdings. They’re headquartered in  Norwalk, Connecticut, United States. 

So, have you ever wondered how Priceline precisely deals with a draw to attract its customers? If not, then you’re at the right place. We will cover an in-depth analysis of the Business Model of Priceline, this will include its Advertising Strategy, Brands Distribution, Productivity analysis, and strategy to Capitalize their Opportunities. 

So, we should begin by discovering a bit more about Priceline as a company.

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About Priceline

Priceline Brand logo-Business Model of Priceline

Priceline is an online travel agency that aims to find refund rates for travel-related purchases. For instance, transporter tickets and hotel stays. The organization works with the arrangement of movement administrations from its providers to its customers. Priceline is settled in Norwalk, Connecticut, United States, and is entirely claimed by Booking Holdings, which additionally possesses Kayak.com, Booking.com, and different locales.

Priceline was established in 1997 on the rear of a splendid unique thought. Aircraft routinely flew just 66% full, with a large number of seats vacant. 1,000,000 lodgings may go unused consistently. The lone idea was, consider the possibility that they bridled the Internet to drive interest, filling those planes and inns. 

Success follows those who crave for that and take the initiative to achieve it seamlessly. The same goes for Priceline, they started their company with almost 10 people and in a small office in Connecticut. They discovered a very basic problem that a tremendous amount of people demand to pay less while travelling.

Millions of people who wanted to travel couldn’t afford the high prices offered by airline services. They carved their way around it and came up with an initiative that ‘what if customers could make an offer – place their own price – rather than pay the full fare?’

Priceline is presently essential for the world’s biggest travel organization, Booking Holdings. 

Now, we can move to the Business Model of Priceline.

 

Business Model Of Priceline

At the point when Priceline was established, it became well known for being the main Online Travel Agency to offer the “name your price” plot. Under this model, clients would express their ability to pay for travel-related assistance, and consequently, Priceline would show them a few alternatives without unveiling the name of the suppliers offering them. 

As passively people are adapting the practices of online booking and payment, the demand for this kind of services like online travel agencies has increased massively. People now feel convenient to book their travel tours online-only, compare the offers from several websites and travel agencies just at a glance is trending.

Priceline offers a valuable service to both travellers as well as industry operators. The turn out to be the opportunity that clears access for inventory rapidly and under special conditions. Priceline generated $2.4 billion in gross profit last quarter, and $2.1 billion of that money came from international markets.

Online travel agencies mainly work on to kinds of business model, the first one being the intermediary between customers and companies and the and the second one is being the industry operator they can list down their own prices and conditions on the platform and can earn a decent amount of commission from every sale.

At whatever point the client picked one, Priceline would acquire the spread between the thing the client was able to pay and what the assistance cost. This income source was an upper hand since it permitted the firm to separate before shoppers and to charge an appealing expense to suppliers by going about as a trader while picking the supplier for customers as opposed to having purchasers pick themselves.

To optimize their Business Model, they’ve come up with a Promotional Initiative on their Platform.    

So, this was a brief introduction to the Business Model Of Priceline. Now, Let us look at the Advertising Strategy of Priceline.

  

Priceline Advertising Agency

Priceline’s other two income sources are agency incomes and publicizing incomes. Agency incomes address the expenses Priceline charges for the service providers through the customary cost unveiled model when somebody picks one of their items offered on one of Priceline’s websites. 

Advertising income is the thing that Priceline charges service providers to put promotions on its website pages. As of December 2014, the conveyance of the association’s all-out incomes between shipper incomes, agency incomes, and promoting incomes is 26%, 69%, and 5% incomes individually. The Agency model has become Priceline’s most important model as it requires a lower level of venture from the organization and conveys lower functional expenses, therefore it is the most productive.

Priceline depicts its framework in its 2014 10-K as being made by four segments to continue creating and growing its relevance in the Online Travel Agency market which are:

  • Giving the best customer experience when looking and booking through Priceline’s numerous online stages. 
  • Banding together with travel service providers in commonly valuable connections. 
  • Keeping up with various autonomously oversaw brands to offer reservation administrations in manners that appeal to various buyers.
  • Putting resources into beneficial and maintainable development through growing new administrations, entering new business sectors, and seeking after essential exchanges like acquisitions and joint endeavours.

Priceline contends with major online travel organizations like Expedia (EXPE), Ctrip (CTRP), Travelzoo (TZOO), MakeMyTrip (MMYT), and TripAdvisor (TRIP). Priceline represents 3% of the Top Guru Holdings Index ETF (GURU).

Property sequencing nearby Algorithm for show depends on the accompanying:

  • Popularity 
  • Value
  • Service reviews 
  • Availability = 365 days 
  • Conversion rates
  • Rate parity 
  • Guest reviews 
  • 14-month profile 

These are not arranged by how they are weighted. Moving next, we have covered the various brands present under the Business Model of Priceline. Let’s study them thoroughly.

 

Various brands Under Priceline 

Booking.com

It’s the world’s top innovator in web-based booking facilities. It helps businesses in utilising the leisure travellers with changing spending sift and holds to find and book travel reservations from one side of the planet to the other. It looks to offer the best benefit for a wide range of properties counting inns, quaint little inns, condos, manors, even igloos and treehouses. The site is accessible in 42 dialects, offers more than 600,000 facilities in 200 nations, and presentations client surveys of properties. Booking.com gives its in-house client support group to give the best client experience. 

Agoda.com 

It centres around assisting clients with withholding inns all through Asia. It is the first global organization to foster associations with lodgings and show reservation accessibility on its site. It has developed to turn into a forerunner in worldwide travel with workplaces in more than 30 areas in 28 nations around the world. 

Rentalcars.com 

It centres around being the worldwide forerunner in online vehicle rental appointments. Utilizing its site, individuals can book the best-esteem rental vehicle by contrasting vehicles and understanding audits. The organization accomplices with rental vehicle organizations in a great many areas in more than 180 nations around the world. 

OpenTable 

It spotlights on being the worldwide forerunner in giving on the web café reservations. By and large, OpenTable seats more than 15 million cafes consistently across 32,000 eateries. It looks to assist clients with partaking in the best feasting experience. 

Ctrip (Priceline has a $500 million interest in convertible bonds) centres around the movement. With this, we can develop the idea of its expansion and Production capacity.

Next, we have the Productivity Analysis for Priceline in detail.

 

Productivity of Priceline 

Priceline can work in a truly productive manner comparative with contenders. High edges, including a net edge of 88.90%, a working edge of 36.00%, and a profit edge of 27.40% permit Priceline to create higher pay from deals. 

Remarkably, the following best contender has a working edge of 36%. Priceline can work with just 12,700 representatives around the world, while Expedia utilizes 18,210 in spite of having a few billion dollars less in yearly income. 

Priceline can do this given the enormous economies of scale they have reached after some time. Furthermore, Priceline’s pay yields an exceptional yield on value and return on resources contrasted with the business normal, 30.90% and 19.60% respectively.

Now, we’ve reached the last segment Business Model of Priceline that is the utilisation of opportunities.

The Utilisation of Opportunities by Priceline

Priceline isn’t only a promising development story; the organization has demonstrated its capacity to convey over the long haul. The graph shows income, free revenue, and profit per share for Priceline and Expedia over the last decade. Words usually can’t do a picture justice, and Priceline has created amazing monetary execution while leaving its fundamental rival in the residue.

Priceline is a top part in a surprisingly encouraging area, with strong qualities, a productive plan of action, and monetary execution over the drawn-out that passes on little to be wanted. In light of these components, it’s straightforward why Priceline stock has delivered exceptional increases for financial backers throughout the long term.

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CONCLUSION

In case there is one organization that knows the stuff to be in the best positions of the internet searcher results, it’s Priceline. Since they see what people look like for travel-based on the web. 

Sharpening their computerized promoting methodology, Priceline is making ace moves to guarantee that they are at the bleeding edge of advanced advertising and giving customers what they need, simple and quick. 

Having likewise made a character of being the greatest web customer-facing facade on the planet, Priceline should keep on delivering all the more intriguing content and execute them in the most ideal manner conceivable to stay as aggressive as they are right now.

Liked our work? Interested in learning further? Do check our website for more. Also, if you’re interested in Digital Marketing, you can check out our Free Digital Marketing Masterclass by Karan Shah.

Let us know your thoughts on the business model of Priceline in the comment section down below. Thank you for reading, and if you liked our then do share this in your circle. 

Until then, see you next time!

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]

Aditya Shastri

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