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Price comparison start-up Netotiate claims it is blazing new - and higher-margin - territory for merchants now paying for cost per clicks on price-comparison sites. Instead, the start-up takes a piece of the final deal merchants strike with customers, in a cost-per-acquisition model that the firm hopes will distinguish it from scads of daily deal and price-comparison websites, from PriceGrabber to Bizrate.

Netotiate founder Amir Farhi acknowledges an ostensible similarity to Priceline, which uses actor William Shatner as its zany "price-chopper" pitchman for its travel services price-comparison and blind-auction deals. On both sites, customers can bid on the final price they will pay, with the sites providing feedback mid-transaction on the probability of the bid’s success. On Priceline, hotels, airlines and rental car firms keep volume rolling by unloading rooms, seats and cars at discounts, some steep, some not - depending upon their needs.

But that's where the similarity ends, asserts Farhi, whose company name is a neologism of "negotiate" and "internet." Netotiate's software allows merchants to counter the customer's offer, and customize that offer to their - and that individual customer's - needs: free or discounted shipping, a coupon for a future purchase, or follow-on discounts on related products. All of the interaction is tracked, so the site software learns about the customer's price sensitivity, and likely interest in benefits other than the lowest price.

"This is important for the merchant; you're countering with deals that are a good perceived value for the consumer," explains Farhi. "While discounts cut your margin, you can recoup some of that margin, increase that margin or maximize that margin," via the precise counter-offer, using information gleaned previous transactions with that customer.

The Boston-area newbie launched in public beta last month, with 14 firms - from watch and jewelry-retailer Ashford.com to musical instrument purveyor Cascio Interstate Music - that focus on those hard-goods, as well as power-tools, and appliances. Farhi sought out firms with 100,000-plus unique visitors, the bulk of whom have $10 million-plus in revenue, although it's the traffic Farhi says he values most.

Apparel firms will roll-out on the site in the next few months, says Farhi. Meanwhile, those firms that now allow for the Netotiate tool for their products - and others that do not - are fed to the Netotiate's main price-comparison site from partner Shopzilla.

Netotiate plans to roll-out a plug-in application within "a few weeks" for any merchant that wants it. This app will allow merchants to put a "netotiate" button on their site for whatever products they want to sell, using Farhi's model.

Although clearing excess, past-season and slow-moving inventory has found a solid home on the web, many merchants have found that has come at the cost of their branding, and margins. Now, social shopping is further challenging brand-loyalty with daily deals and online group-based coupons, some say.

New York City-based Ashford COO Joel Katz perceives several advantages in using the counter-offer feature, including protecting and building his brand, while developing the customer-merchant relationship that is often elusive online.

"We all compete like crazy online, but we are not interested in competing just on price. We're experts in our niche, and we want to compete on quality of service. And, this allows us to interact with the customer," Katz says.

Farhi echoes this, noting that merchants who pay for a click on a price-comparison site, but do not ring up a sale, typically do not know why they did not make that sale. The back-and-forth of offer and counter-offer using Netotiate - and the ultimate characteristics of the deal that is struck with the customer - can be data-mined by the merchant, to offer even better value the next time that customer comes around, he asserts.

Netotiate takes a piece of the deal, but will not charge a license fee for putting its plug-in on a merchant site. The goal, Farhi says, is to help increase merchants' variable margin, and conversions.

Katz agrees it could help with margins, but is doubtful about help with conversions, noting that his online conversion rate of 1.7% is already high for the Internet. Katz will maintain a presence on other price-comparison sites, as well as Netotiate, he says, noting that consumers do know what they want when patronizing the comparison sites, while on a broad product search, like Google's, they may just be surfing.

A description of how the service works for shoppers is found on this page, and, as of now, merchants must contact Netotiate for inquiries about listng products on Netotiate by emailing sales@netotiate.com.

About the Author
Dave Saltman is a writer, editor, and online producer. He has written for newspapers, a wire service and online publications including The Washington Post, the Sarasota Herald-Tribune, America Online, CitySearch.com and LandandFarm.com. He has been a freelance contributor to the Harvard Education Letter since 2010, where he writes the award-winning "Tech Talk" column. Dave holds a B.A. from Clark University, an M.B.A. from Marymount University, and a teaching credential from California State University, Northridge. He tutors with California's public library-based literacy programs for adults and youth.

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About the author:

Dave Saltman is a writer, editor, and online producer. He has written for newspapers, a wire service and online publications including The Washington Post, the Sarasota Herald-Tribune, America Online, CitySearch.com and LandandFarm.com. He has been a freelance contributor to the Harvard Education Letter since 2010, where he writes the award-winning "Tech Talk" column. Dave holds a B.A. from Clark University, an M.B.A. from Marymount University, and a teaching credential from California State University, Northridge. He tutors with California's public library-based literacy programs for adults and youth.

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