MISRC Seminar
April 7, 2006
Multi-Channel Market Transparency
Strategy
Nelson F. Granados
Information and Decision Sciences
Carlson School of Management
University of Minnesota
Copyright © 2006 Nelson F. Granados
The Challenge
> “Before, companies guarded and filtered information,
now, we are all naked.”
Eugene Polistuk, CEO Celestica
> The strategic paradox of the Internet (Porter, 2000)
• Orbitz
• Priceline.com
• Hotwire
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Orbitz
BACK
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Priceline1
Source: “Can You See What I See? Market Transparency, Consumer Demand, and Strategic Pricing in
B2C Electronic Commerce,” Proceedings of the 8th INFORMS Conference on IS and Technology (CIST),
Atlanta, GA, October 2003. www.priceline.com.
Copyright © 2006 Nelson F. Granados
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2
priceline.com
BACK
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Hotwire
Source: “Transparency Strategy in Internet-Based Selling,” in Advances in the Economics of Information
Systems (Ed. K. Tomak, University of Texas, Austin), Idea Group, Publishing, PA, 2005.
www.hotwire.com
BACK
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Market Transparency Space in Air Travel
100
MetaSearch
Agents
Orbitz
Offline
80
Expedia
Product
Transparency
60
Travelocity
40
20
Priceline.com
Hotwire
0
1
10
100
Price Transparency
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Copyright © 2006 Nelson F. Granados
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Market Transparency Strategy
> Market transparency: The availability and accessibility
of product and price information
> Strategy
• Participate in one or more channels with different
levels of market transparency
• Create and manage own channel
– Internet Portal
– Website design
• Align prices across channels
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Copyright © 2006 Nelson F. Granados
Research Results
> Price transparency
increases price elasticity
DEMAND
> Product transparency
decreases price elasticity
PRICE
Source:
The Impact of Market Transparency on Consumer Demand and Price Elasticity Evidence
from Air Travel Industry (Granados et al., 2005)
Copyright © 2006 Nelson F. Granados
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Price Elasticities by Channel
Price Elasticity Relative to Offline
0.70
Aggregate
Offline
0.68
0.81
Online Total
Expedia
1.20
1.09
Travelocity
Online Other
0.67
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Price Elasticity
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Recommendations
> Enhance product information search for the customer to
decrease consumers’ sensitivity to prices
> Develop, use, or patent digital and search technologies
• Orbitz, Flyspy
> Align IT, multi-channel transparency, and pricing
strategy
Copyright © 2006 Nelson F. Granados
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Market Transparency Space in Air Travel
100
MetaSearch
Agents
Orbitz
Offline
80
Expedia
Product
Transparency
60
Travelocity
40
20
Priceline.com
Hotwire
0
1
10
100
Price Transparency
Copyright © 2006 Nelson F. Granados
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