PRICELINE.COM
MARCH, 1999

Word-Of-Mouth, The World' s Oldest Form Of Marketing Finds A New Home On The Internet

Priceline.com builds its brand equity by letting customers do the talking

STAMFORD, Conn., April 28, 1999

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While some Internet start-ups debate portal strategies and the merits of TV advertising, one e-commerce company, priceline.com . has found that word-of-mouth may be the most powerful way to build a brand name in cyberspace.

After one year in the market, an independent study shows that nearly half the entire U.S. adult population, or 91 million people, is aware of priceline.com's name-your-own-price service for leisure airline tickets, hotel rooms, new cars and home mortgages, making priceline.com the fifth most-recognized Internet brand name and the second most-recognized e-commerce brand name. Awareness of the Internet startup has grown almost 50 percent in the past six months.

Priceline.com attributes the increased awareness to broad national advertising featuring celebrity spokesman William Shatner and a powerful, growing word-of-mouth among priceline.com customers and even those who have only heard about the name-your-price service. While 193.6 million people first heard of priceline.com through advertising, another 40.7 million were told about the service by someone else. Those results are according to a recent projectable poll of 1,011 adults conducted by Opinion Research Corporation International of Princeton, NJ, and sponsored by priceline.com.

"Word-of-mouth delivering 21 percent of priceline.com's total awareness is staggering," said Don Tapscott, chairman of The Alliance for Converging Technologies in Toronto. "Normally it takes a business five to 10 years to begin generating that kind of pass-along excitement among consumers."

Much of the excitement goes directly to the priceline.com premise. "Priceline.com is the first service on the Internet that puts a tremendous amount of purchasing power into the hands of consumers," said Rick Braddock, priceline.com's chairman and CEO. "We empower consumers by letting them tell big companies what they want to pay for goods and services. Consumers who do their homework can save significant money through priceline.com."

In a separate study sponsored by priceline.com, Opinion Research surveyed 1,000 priceline.com customers and found that the average customer using priceline.com's leisure airline tickets service says he or she saved an average of 47% on tickets purchased less than 21 days before the flight, and 23% on tickets purchased more than 21 days before the flight. Customers for priceline.com's hotel room service told Opinion Research that they saved an average 15% to 40% on their rooms.

With these savings in hand, 73% of priceline.com customers said they felt like they "won something" when they successfully named their price. "Priceline.com is unlike any other kind of purchase," said Jay Walker, priceline.com's founder and vice chairman. "Our customers just beat the system. It's an exhilarating feeling. People can't wait to tell their relatives and friends how smart they were to use priceline.com."

In April 1998, when priceline.com launched its first service for leisure airline tickets, the company’s marketing executives listened to the enthusiastic customer feedback and decided to build word-of-mouth into the priceline.com marketing mix. Special ticket jackets were designed with stamped, self-addressed surveys for customers to fill out. Over 12,000 testimonials poured into priceline.com. The company’s Web designers created a special section of the www.priceline.com site where these customers could share their experiences with others.

Radio advertising focused on talk radio, where radio personalities were encouraged to put customers on-air talk about priceline.com, and try the service themselves. William Shatner's radio spot spots were tailored to talk about actual customer savings. "Naming your own price was such a new proposition that we felt the best way to attract new customers was to let their peers describe priceline.com's benefits," said Paul Breitenbach, priceline.com's senior vice president, marketing and new business development.
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In January, priceline.com decided that, for the first time, customers would join Shatner in the company's print advertisements. The company sent out an e-mail asking customers to send in photographs that would be used in a series of ads in national newspapers. Less than 12 hours after sending the e-mail, the photos began arriving. In two weeks, the company received more than 1,200 photographs from customers willing to tell their priceline.com story in print.

In its first year of operation, priceline.com attracted over 1 million unique customers who named their own price, and continues to add some 300,000 new unique customers every quarter. "Priceline.com has experienced fastest customer ramp-up of any of the new breed of e-commerce services," said Tapscott.

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As priceline.com's airline tickets service grew and the company added other services, consumer buzz about the service continued to grow through word of mouth. "Word of mouse" also entered the picture as customers spoke of priceline.com in e-mails, chat rooms and newsgroups. Already, according to Opinion Research, 25 million people have recommended priceline.com to a friend or relative. Twenty-one million people say they know of someone who has named their own price through the service. And 130 million people say they would recommend priceline.com to a friend or relative who wanted to buy airline tickets or hotel rooms, but couldn’t afford the prices being charged by an airline, hotel or travel agent.

The statistic that surprised priceline.com executives the most was the level to which satisfied customers had become priceline.com evangelists. According to Opinion Research, the average priceline.com customer tells an average 17.8 people about his or her priceline.com experience. On average, they tell 3.5 family members, 2.3 relatives, 1.4 neighbors, 5.5 friends, 3.7 co-workers and 1.4 others about the service.

"We were totally taken aback by this number," said Walker. "we thought the average person might tell a handful of close friends, but to recommend priceline.com to a much larger circle that includes neighbors and even co-workers is a real statement about the empowering ability of the priceline.com model."

"What priceline.com has achieved is to build a base of raving fans," said James Dettore, president of The Brand Institute, a biotechnology branding, pharmaceutical branding, and consumer branding consultancy firm. "Ninety-eight percent of priceline.com's customers say they'll recommend the service to friends and relatives. Once you get that kind of viral (or buzz) marketing going, it will be the most powerful element in your brand-building arsenal. In the whole debate over portal advertising and TV versus print strategies, word of mouth is the secret ingredient that too frequently gets overlooked. Priceline.com got it right, which is why they've been able to build an Interned mega-grand with a 47% overall brand awareness in just one year."
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