Priceline and the Importance of Getting to 'Wow'

NEW YORK (03/01/2000) - How can companies build Web sites that add a million new customers every few months? According to Priceline.com Inc. Founder and Vice Chairman Jay Walker, who has succeeded in building a business that does just that, it can be boiled down to just one thing.

"E-commerce is about one word -- wow," Walker said in a keynote address here at market research company Gartner Group Inc.'s Internet & Electronic Commerce (iEC) show. "If your customers say 'wow,' you've got it, and if they don't say 'wow,' you don't," Walker said.

Priceline.com has revolutionized the relationship between buyers and sellers, allowing consumers to name their own price on a variety of goods and services like air fares and hotel room prices. While establishing its business, Priceline has become the envy of any budding Internet entrepreneur touting a business plan.

The "wow" factor is the "central experience" of any successful Web site, and the key litmus test of any site, because when a customer experiences that "wow" feeling, then he or she goes and tells friends, business associates, and the word of mouth expands, fueling the customer base, Walker said.

"It's not about re-engineering the supply chain, it's not about reducing costs... it's about increasing value in ways customers didn't realize they wanted," Walker said.

Online businesses that so far have generated this type of excitement in customers include online trading, search engine, and auction sites.

An e-commerce site, Walker said, has four building blocks to use to construct an experience that will elicit the "wow" type of reaction in a customer: convenience, information, entertainment and cost savings. These building blocks are applicable to traditional businesses as well as e-commerce businesses -- and have revolutionized commerce in different eras. In addition, these building blocks apply to consumers as well as to business-oriented sites, though the building blocks affect consumers and business customers in different ways.

Convenience can be an overrated factor, though some business breakthroughs have been entirely due to convenience. "The ATM (automated teller machine) was the poster child for convenience," Walker said. In general, though, convenience alone is not enough to generate loyalty to a business, he added.

Information is a valuable commodity in both the consumer and professional worlds, but the down side is that it is a commodity that people often don't want to pay for, Walker noted. "People get information everywhere, on TV, newspapers... and it's all free," he said. Consumers don't like paying for information, while professionals will tell you they will pay for information, but when it's actually time to pay, they often balk, Walker added.

Entertainment is probably an underrated factor in the success of Web sites so far, and particularly for business-to-business sites, Walker said. "We live in an entertainment culture in the U.S.... but people in B2B (business-to-business) say 'That doesn't apply to me,'" he said.

But business-oriented goods and services that entertain go a long way towards generating the "wow" reaction from customers, he said, using the Wall Street Journal, the U.S.'s premier business daily newspaper, as an example. "On the front page of the Wall Street Journal, the stories are entertaining," Walker stressed. "They make business stories interesting because by making them entertaining and not dry... they create brand loyalty."

Priceline solved a technical problem using this idea. When a customer types in the price he or she is willing to pay for a service, it takes time for Priceline's back-end database and AI (artificial intelligence) search engines to come up with a seller to match the price. So, the company thought of putting a little slot machine animation on the screen. The user can see the slot machine screen whirling around until a seller is found and the animation stops, telling the user a matching price has been found.

"In focus groups, we got an incredible reaction, people actually started clapping when they saw this -- they were so excited," Walker said. "We asked why and one lady said... 'Because I won!'"The end note to the story, Walker added, was that "The engineers couldn't figure it out; their attitude was, 'Why don't we just get 'em the information quicker?'" Cost savings is probably the largest factor, at least in consumer sites, Walker said. People drive 20 miles to out-of-the-way warehouse outlets to just to obtain price savings on goods, he pointed out. "These (outlets) are inconvenient to get to, they make you buy stuff in huge quantities, you walk on a concrete floor when you're in them, they don't give you bags to carry your stuff in, and they don't take credit cards... so why do you go? To save money!" he said.

If a site does well on the cost-savings side, then it can make up for a lack in convenience, entertainment and information, he said.

On the business side, at least for individual customers, it's not as important since, for example, when a professional person books their own hotel room, it costs them, personally, nothing.

However, the cost-saving factor is being applied to the business-to-business market at the corporate scale, and Priceline -- with its proprietary back-end engines that bring buyers and sellers together, expects to get into that area as well, Walker noted.

Some attendees said Walker hit the nail on the head, especially as far as the importance of entertainment value is concerned.

"This is something a lot of people overlook when they build a site... but a boring site can really kill you," said Kimberly Kiriazidis, a marketing executive for Byte Interactive LLC, a Web site designer in South Norwalk, Connecticut.

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