Shaping The Market Offering Essay

1045 words - 4 pages

The online market for travel services will reach $63 billion within a few years, and Priceline.com aims to capture a significant share; already, it is high on the top-ten list of travel Web sites. After a brief period of diversification into name-your-price sales of groceries and gasoline, the company has refocused on its core travel and financial services offerings, including airline tickets, hotel rooms, rental cars, and mortgage loans. The company guarantees that a Priceline.com mortgage is the "lowest-cost loan on the market" and backs this up by paying $300 to any customer who finds a better price.Visit the Cybrary and other Internet sources, to see how the Priceline system works. At the Priceline website, follow the link marked "How it works" to read about the name-your-price process. Then return to the home page and follow several of the links promoting discounted offerings.1. Define price sensitivity. Provide relevant examples.Price sensitivity is when a customer is willing to trade off dollars against product or service benefits. Some factors that influence price sensitivity are:Customer perception of uniquenessFactors Influencing Price SensitivityCustomer perception of uniquenessAwareness / availability of substitutesDifficulty of direct comparisonTotal expenditure (i.e., relative value in bundle)Shared cost (e.g., employer pays part)Sunk investments / switching costsPrice -quality inferencesAbility of customer to carry inventoryPrice-sensitivity decreases if the person choosing the product isn't the person paying for the product Example: Business travelers are fewer prices sensitive because their employers are footing the bill. Customers are most price sensitive that cost a lot or are bought frequently. They are less price-sensitive to low cost item or items they buy infrequently. They are also less when the price is only a small part of the total cost obtaining, operating and servicig the product over its lifetime.2. What can you say about the price sensitivity of Priceline's customers?Priceline.com creates a new balance between the interests of buyers, who are willing to accept trade-offs in order to save money, and sellers, who are prepared to generate incremental revenue by selling products at below retail prices, provided that they can do so without disrupting their existing distribution channels or retail pricing structures3. What effect would Priceline's prices be likely to have on the reference prices customers bear in mind for travel and mortgage services?Priceline.com has developed a unique pricing system known as a "demand collection system" that uses the information sharing and communications power of the Internet to create a new way of pricing products and services.. Priceline.com's demand collection system allows consumers to specify the price they are prepared to pay when submitting an offer for a particular product or service within a specified range of substitutability. Priceline.com then either communicates these...

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