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> However, eventually the market catches on and your existing ten people start waiting for the GroupOn deals, and now only five people are willing to pay the fu
by lylejohnson 16y ago
> However, eventually the market catches on and your existing ten people start waiting for the GroupOn deals, and now only five people are willing to pay the full price.
> Selling unused capacity at a discount without cannibalizing your existing business is non-trivial, especially in this age of rapid peer-peer sharing of information. I suggest that the problem GroupOn solves--selling the capacity--is not the hard problem for this scenario, the hard problem is getting away with pricing discrimination.
Maybe, but it depends on the product or service too. For example, is there any evidence sites like Hotwire and Priceline, that sell unused capacity for hotels or car rental agencies, really cannibalize the existing (i.e. non-discounted) sales that much?
- raganwald 16y agoI can't speak to Hotwire, but in the case of airline seats and hotel rooms, one of the dynamics of the market is the uncertainty of availability. What you are really buying in the case of an airline seat is the guarantee of a seat on that flight. Couple this with businesspeople who absolutely, positively have to be in a certain city at a certain time, and you have a market where there is a limit on how much leakage you will have between classes of customer. That might play out for seats in a spin class, but it might not. It would depend on whether customers have flexibility about which classes they take and whether they care about which gyms they attend. The more flexible and mobile they are, the harder a business has to work to do this kind of price discrimination. I'm not suggesting it's impossible or that web businesses can't help, just that ONLY selling excess capacity at a discount is a problem. I posit that you must sell excess capacity and do something else to succeed.