Do you think Priceline will ultimately succeed or fail? Why?

Do you think Priceline will ultimately succeed or fail? Why?

a. Students who take the position that Priceline will ultimately succeed could cite the following: Priceline will ultimately succeed because it has one of the strongest brand names in the discount travel services market. Its long-term viability looks strong because it is the dominant player in its niche market. There will always be customers seeking to pay as little as possible for air travel and customers willing to forfeit such conveniences as choosing their own departure times, flying direct, or earning frequent-flier miles. Priceline has a loyal core of users; brand loyalty could help Priceline fend off competitors. Also, Priceline has proven that its business model works in the travel services market, and its strategy of focusing primarily on this market is enabling it to achieve profitability.

 

b. Students who take the position that Priceline will ultimately fail could cite the following: Priceline will ultimately fail because its rivals offer a simpler way to buy airline tickets. Priceline's tickets are nonrefundable; consumers agreeing to purchase tickets through the site are locked into buying flights before they know the travel schedule, and often end up flying at inconvenient times with multiple transfers. While some believe that Priceline presents an opportunity for customers to make trade-offs, these trade-offs appear to be far too numerous for the long haul. Furthermore, Priceline seems to depend, at least to some extent, on customers overbidding in order to make a profit. Relying on the lack of sophistication of customers would seem to be a shaky premise on which to build a business model. Priceline has had to retreat from markets for non-perishable goods, and its non-extensibility into other markets makes it a poor market risk. They have also experienced customer service problems, which hurt their image and may drive customers away.

 

The competition is also intensifying: Hotwire, Expedia, Travelocity and Orbitz all pose a challenge to Priceline, as do the airlines and hotel owners themselves. The proliferation of discount airlines such as Southwest, Jet Blue, and Spirit offer additional competition. All of these competitors offer a far simpler way to purchase airline tickets than does Priceline at a competitive price.

 

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