ANALYSIS: Client Profile - Priceline pays for not building relationships. Although many dot-coms are in trouble, Joe Mullich finds that Priceline is also suffering from its failure to build key relationships during the good times

Not a week goes by these days without news of another dot-com in decline. While not even the greatest PR practitioner can rescue a bad business model, commentators think Priceline should at least be mounting an aggressive PR push against the volley of bad news.

Not a week goes by these days without news of another dot-com in decline. While not even the greatest PR practitioner can rescue a bad business model, commentators think Priceline should at least be mounting an aggressive PR push against the volley of bad news.

Not a week goes by these days without news of another dot-com in decline. While not even the greatest PR practitioner can rescue a bad business model, commentators think Priceline should at least be mounting an aggressive PR push against the volley of bad news.

In-house, Priceline's PR is spearheaded by Brian Ek, vice president of communications. Consumer PR is further supported by Connors Communications.

Ek refused to comment for this piece, but it appears the company has now drafted in Hill & Knowlton's crisis team under EVP Harlan Teller to formulate a strategy.

Positive start

Founded by Jay Walker in 1998, Priceline attracted a tsunami of positive clips about its new business model, one that allows consumers to bid on everything from airline tickets to hotel accommodation to home mortgages But the signs of crisis for the firm are everywhere. In the last three months, its shares have plummeted from dollars 60 to under dollars 3, amid a stream of bad news.

Walker's stake in the firm soared 331% on its IPO day in March 1999.

But then venture capital firms and Wall Street went cold on the Internet and on Friday, November 17, Walker sold nearly 2.1 million shares at a significant loss.

This month, four top executives left, including CFO Heidi Miller, a former Citigroup executive. The others are: William Pike, VP financial planning and investor relations; Allison McEnerney, director of investor relations and Maryann Keller, who was president of the automotive service business.

On leaving, Keller raised yet more questions about Priceline's business model. 'For car buying, the Internet is an idea whose time has not yet come, and may never,' she told the press.

In October, Priceline announced lower-than-ex-pected profits and shuttered its first licensee, WebHouse Club after less than a year. The VP communications, Robert Padgett, left to join FitzGerald Communications in Cam-bridge, MA. However, former Wall Street Journal reporter, Kevin Goldman, who was senior VP of communications remains.

The bad news didn't stop there. The attorney general in Priceline's home state of Connecticut launched a high-profile investigation into the company following consumer complaints. Hill & Knowlton is helping the firm deal with the problem.

Current PR strategy appears to be 'batten down the hatches.' The Wall Street Journal was unable to gain comment on Walker's stock sale. Communications VP Brian Ek told PRWeek: 'I've been in this business over 20 years, and I've never been a fan of PR using the media to promote themselves, their departments, or their strategies.'

But Connie Connors, president and CEO of Connors Communications, defends the firm saying: 'They have recorded dollars 1 billion in revenue in the first three quarters. They have eight million customers and 50% repeat business.'

Connors says the media are overly obsessed with dot-com failures and denies that Priceline has been unresponsive to the press. 'The PR people have been good at responding to every inquiry,' she says. She expects the firm to be around in a year's time.

However, reporters and analysts suggest Priceline doesn't have a PR strategy to talk about.

'Priceline is like Cleopatra - they are the queen of denial,' says Henry Harteveldt, senior analyst of Forrester Research, an Internet research firm in Cambridge, Massachusetts. 'Business school students will someday study Priceline as a classic case of bad marketing and PR during a crisis.'

Priceline was tossed out of the Better Business Bureau in Connecticut and its main spokesman William Shatner told the CBS TV newsmagazine 48 Hours he had never used Priceline since he preferred to fly first class.

'Priceline hasn't been managing the news that has been hitting them very well,' says Andrew Bartels, a senior analyst at the Giga Information Group, a technology consulting group in Boston. 'The principle rule of PR on bad news is get it all out fast. Priceline has let the bad news dribble out.'

Lack of spin control

This is a situation that would seem to call for at least an attempt at spin control. Yet, in a 10-minute conference call with reporters in early October, Priceline CEO Dan Schulman spent 'nearly two minutes reading the Safe Harbor statement (a technical legal document) and didn't feature a question-and-answer session,' says Sergio Non, a writer with ZDNet Inter@ctive Investor, an online publication.

The result was a column by Non that joined a batch of reports questioning Priceline's basic business model.

Non is not the only reporter complaining that Priceline is doing virtually nothing to address its problems or answer the complaints. 'I dealt (with Priceline's public relations department) once and found them as dumb as Priceline's business concept,' says Jerry Knight, a columnist with the Washington Post. 'All I recall is getting rote answers and no real willingness to respond in a meaningful way.'

The company's PR team is still pressing on with the job of promoting the firm's offerings. It issued a release, via Business Wire, about the best days to fly over the Thanksgiving holiday.

It wasn't always so tough for Priceline. In February 1998, Priceline debuted as one of the 10 most visited sites on the Internet. By April 1999, a staggering 21% of Priceline's awareness was due to word of mouth.

'Normally, it takes a business five to 10 years to begin generating that kind of pass-along excitement among consumers,' said Don Tapscott, chairman of think tank, the Alliance for Converging Technologies in Toronto, at the time.

Observers say that one of Priceline's key mistakes was its failure to build relationships with analysts and reporters during the good times.

'They were completely arrogant,' says Harteveldt. 'Priceline didn't try to build key constituencies and get across its message of what it was trying to do. It also meant there was no empathy when the problems started.'

And just as Priceline ignored analysts and reporters, observers say it took the same tack to customers - leading to the complaints that triggered the company's ousting from the Better Business Bureau.

Priceline failed to appreciate that while the Internet can build reputations quickly, poor service and faulty execution can just as instantly tear a brand name down. The word of mouth that Priceline used to enjoy among Internet denizens has been replaced by protest sites, such as one called 'The Truth About'

A business that is totally based on Internet traffic might be expected to pay close attention to such negative action. Instead, there is a posting at the site claiming Priceline asked it to pull down a well-written response to complaints from an employee.

Harteveldt and others say Priceline should be mounting a strong PR push to acknowledge the problems and point out its good points, such as publicizing its new Web site. 'Priceline is doing no damage control and as a result the damage is becoming worse,' he says.


PR Department: Brian Ek, vice president of communications

Consumer PR agency: Connors Communications

Crisis agency: Hill & Knowlton.

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