PRICELINE.COM

Here’s an interesting twist: Priceline.com founder

Jay Walker is this year’s DMDNY Direct Marketer of the Year-despite the fact that he chose not to use direct marketing campaigns to launch the Web site. In fact, a year after the launch of its flagship “name your price” airline ticket service, Priceline.com has yet to undertake a marketing campaign, and has no plans to do so in the foreseeable future.

“Our first objective was to build a powerful consumer brand, and we’ve used radio and newspaper as our primary means of reaching consumers,” Walker says.

One look at the company’s record-breaking IPO earlier this year and you’d say the strategy has worked. Using actor William Shatner as its spokesperson, Priceline.com has quickly become one of the most well-known brands on the Web-by its own claims, the fifth-most-recognized Internet brand in America.

Walker attributes Priceline.com’s popularity to two factors: the Web service offers a compelling consumer benefit in the form of a name-your-price service, and it delivers on the promise of the Internet.

“Everyone who touches the Internet can sense it offers benefits that no other medium offers, but they have to ask, ‘Like what?'” Walker says. “Priceline.com is the answer to ‘Like what?'”

According to a DMDNY board member, Walker is being honored for “creating a new genre of interactive marketing that never existed before, one that’s beneficial to both consumers and vendors.”

But is Priceline’s interactive marketing direct marketing? Walker believes so, though not within the popular understanding of the practice. “It’s an entirely new invention of how direct marketing can be done,” he says, noting whereas marketing has traditionally been driven by sellers, Priceline.com challenges buyers to initiate the relationship in what company officials have dubbed a “demand collection system.”

“We ask consumers what they want, what trade-offs they’re willing to give, what price they want to pay. We turn the direct marketing model upside-down.”

Priceline.com currently invites consumers nationwide to name their price for airline tickets, hotel rooms and home mortgages. Participating in Priceline.com’s leisure airline ticket service are 18 domestic and international airlines including Delta, Northwest, TWA and America West. The company’s current hotel partners include Marriott, Renaissance, Sheraton, and Westin, while its mortgage service is offered through a joint marketing arrangement with the Internet-based mortgage service provider LendingTree, encompassing 20 mortgage lending institutions. In addition, Priceline.com continues to offer New York Metro area consumers the opportunity to buy a new car online, continuing an online test service launched last July, despite the fact the service did not contribute substantially to revenues last year.

Priceline.com brought in total revenues of $35 million for its first eight months of business in 1998, primarily represented by airline tickets sales. To launch Priceline.com, Walker and his partners raised over $100 million in financing between 1997 and 1998 from corporate, institutional and private investors. Then on March 31, Priceline.com sold its shares publicly for the first time in a record-breaking offering that left the company at a market value of $9.8 billion, the highest first-day value ever achieved by an Internet company, according to The New York Times. This despite Priceline.com’s brief 11-month history of sales.

But Priceline.com hopes to supplement revenues from online sales by selling credit cards and other products through its Web service. Of total 1998 revenues, marketing partnerships accounted for $5 million.

Calling its partnership program “adaptive marketing,” Priceline.com allows companies like Capital One Visa and Arthur Frommer’s Budget Travel magazine to market to Priceline.com Web site users.

So even though Priceline.com is not yet engaging in direct marketing activities and is not a direct marketer in the traditional sense of the term, the company is grounded in direct marketing traditions and principles. A graphic example: the Priceline. com Web site resembles a print catalog, right down to the pictures of call center “customer care representatives” wearing headsets-even though the online reps interact with customers by keyboard rather than by telephone.

In addition, Priceline.com is one of few e-commerce companies to launch simultaneous Web and telephone distribution channels. Its 1-800-Priceline call center accounts for 15% of total sales.

In this and other ways, Walker is empowering Priceline.com with DM principles. “We talk to customers one-to-one, and we view both our Web site and 800 number as a marketing relationship,” he notes. His business model is less Amazon.com and CNET.com than L.L. Bean and Lands End. “We often look at the catalog industry as role models,” Walker said, noting the industry’s high-quality customer value propositions. He hopes to achieve on the Internet the level of respect that L.L. Bean and its peers have achieved in print.

These aspirations are no surprise to anyone familiar with Walker’s background. The entrepreneur and marketer first made his name in the catalog business, where he’s known as the person who aligned catalogers with FedEx for overnight shipping, extending the holiday shopping season and revolutionizing catalog shopping. In 1992, he co-founded NewSub Services, which pioneered the practice of using credit card statement inserts to sell magazine subscriptions and other loyalty products.

And now, through Walker Digital Corp., his 25-employee think tank, he is inventing and patenting new business methods “to leverage the information architecture of the commercial world.” Walker believes the future of commerce is based in direct interactive marketing relationships.

“It’s never before been possible at zero cost to send out a million messages, to receive a million messages, or to talk to someone for half an hour. Any system that has zero cost drives out all other systems. With the Internet, direct marketing is radically and totally changed.”