business-model, pricing, economicsWe wish to create a reservation company, similar to booking.com and so many many others.
It works like this:
You promote another company’s product on the site
Users pay for that product
The other company gets the product price, less a percentage
Sites like this usually state something like this:
Minimum price guaranteed: You won’t get a lower price by going direct!
Let’s imagine one product is priced at $40, and it isn’t available for less on the vendor’s own site. We take 30%, which is $12. So the product vendor gets $28 net.
If they want to make sure they always get at least $40, they might decide to tell us that their best price is $60, when it’s actually on sale at $40.
How can we control this, so that we can genuinely offer products “minimum price guaranteed”?
If you offer a specific best price promise, you’re going to have to honour it. Which almost certainly means you need an agreement with the product vendor to cover you, if they tell you a price above the true minimum, or if they reduce their price on their own site.
If you’re really well established, then you can insist on the terms and conditions that cover you. But as a startup, that could be tricky.
I’m aware of a number of sites that do the job you describe, only with two different strategies.
There are sites that aren’t making individual agreements, but are either making use of the product vendors’ affiliate schemes, or else are working through intermediaries who connect each vendor to many consumer deal sites.
If that’s what you have in mind, then you need to examine the Ts & Cs carefully, and try and make sure that you have 100% back-to-back cover. If their Ts & Cs leave you with a financial or reputation risk, you need to make a different promise.
Then there are sites that use very similar language, but limit the promise - for instance, basing the offer on prices as checked on a particular date.
If that’s a way you’d like to go, I would strongly suggest getting legal advice, because some jurisdictions restrict the use of specific terms. If that’s the case, your small print may have no legal force, and because your supplier wasn’t making a matching commitment, you wouldn’t be protected.
All content is licensed under CC BY-SA 3.0.