The future of inflight entertainment in Europe, according to passenger expectations

How the airline industry should embrace, and not fear, consumer technology.


Master's Thesis, 2013

111 Pages, Grade: 19/20


Excerpt

TABLES

EXECUTIVE SUMMARY

1. INTRODUCTION
1.1. Topic
1.2. Goal And Research Questions

2. LIMITATIONS
2.1. Focus Commercial And Cultural Barrier
2.2. Focus Europe

3. RESEARCH
3.1. Quantitative Survey
3.1.1. Kano Methodology
3.1.2. Online Methodology
3.1.3. Sample Size
3.1.4. Online Questionnaire
3.2. Qualitative Research
3.2.1. Methodology
3.2.2. Semi-structured Questionnaire

4. ANALYSIS QUANTITATIVE SURVEY
4.1. Demographics, Habits, Devices
4.2. Sub-Groups
4.3. Kano Matrix
4.3.1. Kano Matrix Of Whole Sample
4.3.2. Kano Matrix Per Sub-Group
4.3.3. Kano Analysis Of Each Alternative
4.4. Willingness to Pay
4.4.1. Willingness To Pay Of Whole Sample
4.4.2. Willingness To Pay Per Sub-Group
4.5. Key Findings Of Kano Analysis And Payment Willingness Analysis

5. ANALYSIS QUALITATIVE RESEARCH
5.1. Avianca Airlines
5.2. Swiss Airlines

6. CONCLUSION: A FUTURE IFE APPROACH Jasmin Schawalder. GGSB London. 2013. FMP. Future Inflight Entertainment
6.1. Current IFE Position Of Airlines
6.2. IFE Expectations By Passengers
6.3. IFE Future Model: Consumer Centric

7. APPENDIX
7.1. Sample Size Calculation Detail
7.2. Quantitative Survey Detailed Results
7.2.1. Part 1: Demographics And Habits
7.2.2. Part 2: Kano Analysis
7.2.2.1.Whole Sample
7.2.2.2.Women vs. Men
7.2.2.3.35+ years
7.2.2.4.Swiss
7.2.2.5.Frequent Travellers
7.2.2.6.Short-haul Travellers
7.2.2.7.Business Class Travellers
7.2.2.8.Travellers for Business
7.2.2.9.Travellers for Leisure
7.2.2.10. iPhone Owners
7.2.3. Part 3: Willingness to Pay
7.2.3.1.Entertainment Elements
7.2.3.2.WIFI and Power
7.3. Qualitative Survey Interviews Detail
7.3.1. Interview Avianca Airlines
7.3.2. Interview Swiss Airlines
7.4. Bibliography

EXECUTIVE SUMMARY

Consumerisation - passengers toting their tablets, laptops, smartphones and e-readers on planes - has forced airlines to re-think. Should they continue to invest heavily in Inflight Entertainment (IFE) hardware, or concentrate on offering WIFI and power in the cabin? The aim of this paper was to find out how an IFE offer of the future should look like. I identified four barriers that split the world into the three regions Europe, Asia and USA in terms of IFE development - the cultural, commercial, technological and legal barrier. This paper focuses on Europe that lags most behind with IFE out of these three regions. For example, as opposed to the US, no major European airline offers inflight WIFI widely on its network, and in contrast to leading Middle Eastern airlines none offers inflight live TV or the usage of mobile phones just like on the ground. The target was to define IFE from a consumer perspective. To capture the latter I evaluated consumer satisfaction methodologies and decided for the Kano approach, which categorises alternatives of a product or service, in this case IFE, in must-be, attractive and indifferent elements. The representative online survey revealed movies and power to be must, TV and WIFI to be attractive and the rest, e-books, music, games and duty free onboard, to be indifferent elements of IFE. The majority of people indicated they would pay for movies and WIFI but not for power supply, TV or other content. Differently said, content-wise passengers only insisted in the supply of movies, for the rest they expected the airline to provide Internet and power so they could themselves get the content. Further, I analysed sub-groups, people within the sample with mutual characteristics like gender, travel frequency or ownership of smart devices. So is music on a plane a must for women and owners of iPhones are more willing to pay for apps than others. Overall, country of residence, travel purpose (leisure or business) and flight duration (long vs. short haul) were the greatest dividers re IFE requirements. To answer my core question of how a future IFE should look, I am arguing that consumerisation means an enormous potential. If people are consuming IFE on their personal devices, IFE can finally be fully customised, increasing take up rate and revenue as my research indicated. Moreover, it can work as marketing tool outside the air cabin because it is delivered on a device that is constantly in a passenger’s pocket, IFE is no longer restricted to the air cabin. Airlines have been asking themselves for too long “What technology can we apply and what can we subsequently offer to passengers?” instead of “How does a frictionless great consumer experience of IFE look like nowadays?”. It should no longer be Inflight Entertainment but Airline Entertainment, starting long before passengers are airborne, e.g. by being incorporated in the smart devices app of an airline, displaying games to men that are browsing flights and suggesting duty free bargains to holiday goers so they can add them onto a wish list and purchase the items in the air. All of this, making entertainment part of the entire travel value chain.

TABLES

Table 1: Marginal profit airline industry

Table 2: Return on invested capital (ROIC), airline industry at bottom

Table 3: IFE offering airlines comparison

Table 4: Decision quantitative methodology

Table 5: Example of composing a Kano matrix

Table 6: Kano matrix template

Table 7: Questionnaire part 1: demographics

Table 8: Questionnaire part 1: flight habits

Table 9: Questionnaire part 1: smart devices

Table 10: Questionnaire part 2: Kano questions

Table 11: Questionnaire part 2: Kano question duty free

Table 12: Questionnaire part 3: willingness to pay

Table 13: Quant. survey: female/male

Table 14: Quant. survey: age distribution

Table 15: Quant. survey: flight frequency

Table 16: Quant. survey: travel reason

Table 17: Quant. survey: smart devices in the air

Table 18: Quant. survey: sub-groups overview

Table 19: Kano matrix template

Table 20: Kano matrix whole sample

Table 21: Kano matrix all sub-groups

Table 22: Percentage of people per sub-group that considered DF a like or a must

Table 23: Number of people that said they would pay for a service

Table 24: Percentage of people, that said they would pay for a service

Table 25: Willigness to pay of users and non-users of iPhone/iPad

Table 26: Accumulation of willingness to pay by sub-group

Table 27: Always on IFE Model

1. INTRODUCTION

1.1. Topic

Trans World Airlines were the first ones to introduce inflight movies in 1961. That was followed by video games in 1975 and individual seat-back videos by 1991. Today passengers have come to expect some sort of airline-provided Inflight Entertainment. And they get it. Often on personal, seat back multi-channel systems that deliver everything from creatively produced safety videos to movies, games, live television and shopping opportunities. But tech-savvy passengers toting tablets, laptops, smartphones and e-readers are giving airlines and the traditional inflight entertainment systems a run for their money. This has forced providers to re-think how they use technology to entertain and interact with passengers in the sky (Baskas, 2012).

How do airlines respond? Do premium carriers continue to invest heavily in hardware — in expensive in-seat audio and video systems that provide packaged offerings like hundreds of on-demand movies, television programs and video games, but need regular upgrading as technology improves? Or do other carriers concentrate mostly on improving inflight WIFI and power supply for those passengers who prefer to use their own hardware? If so, do the airlines try to sell them licensed content like movies and video games…?” (Sharkey, 2012).

There are over a dozen IFE equipment makers (Panasonic, Thales, Rockwell Collins or digEcor). Nonetheless a disruption in IFE has not taken place yet. “Reading airplane industry news these days reminds me a lot of the smartphone business before Apple stunned everyone with the iPhone in 2007. That is: A few companies getting by with minor updates to their products, letting a few big customers dictate their roadmap, without any major breakthroughs, like the types of changes Nokia and Palm were making to their smartphones in 2006: A 20% improvement in thickness or a 10% decrease in wholesale price, without any sort of revolution. And the way Boeing and Airbus seem to work, it sounds like they’re going to make their design decisions just to make the big airlines happy without really thinking about what’s next. In mobile phones, it took Apple to really flip the industry upside down. As an avid airplane observer and flier, that’s the kind of thing I’d love to see happen to the plan industry - whether it’s by Boeing, Airbus or someone out there on the field. (Frommer, 2012).

So, why has no player flipped the industry upside down yet? The phenomenon of people carrying their personal devices such as smartphone and tablets into work, travel or vacation is called consumerisation. We are in an era in which personal technology is living up to its name. “Consumerisation is rapidly changing how people live and work, as consumers are becoming increasingly reliant on consumer technology for both work and non-work purposes” (Hong, 2012).

“It used to be that the best IT experiences people had was in the office. Now technology has been democratised” (Economist, 2010).

Subsequently, I am asking if a democratisation of technology is happening in the air cabin too? How are the expectations of passenger nowadays when they all carry personal smart devices? Does the majority believe built-in IFE systems are becoming redundant? Or is it the other way round; do people expect airlines to offer a consumer technology similar to the devices in their pockets? Regardless of what exactly the expectations are, I wonder if the current IFE industry in Europe is ready to meet them? Comparing it repeatedly to the smartphones market, both Google and Apple were not entertainment companies but with the invention of smartphone applications and app stores they created a new way of distributing entertainment content to consumers. The same is valid for Amazon - it was not a company specialised in manufacturing books - what they initially sold - but in the way they were distributed. Hence, Amazon revolutionized the high street distribution in the nineties (Lutz, 2013).

All of these brands disrupted the business model in gridlocked industries thanks to new technology. So, how strong are the signs that something similar is about to happen in IFE industry?

1.2. Goal And Research Questions

Re-capping the previous paragraph, the research questions (RQ) of this FMP are:

- RQ: What do passengers expect from an IFE system today?
- RQ: And how strongly influenced are these expectations by today’s personal consumer technology?
- RQ: Do expectations diverge among passenger depending on the tech gadgets people carry onto a plane (personal smartphones, tables)?
- RQ: Are European* airlines on the right track to meet these expectations? Are their goals and directions the right ones to meet passenger expectations?
- RQ: How would an IFE offer look like that meets expectations of today’s passengers’?

*Focus is on Europe only, see next chapter

Thus, the overall goal of this FMP is to define an IFE approach that is according to expectations of today’s passengers, in particular because passengers often carry electronic personal devices on a plane. I applied two strategies to answer the research questions. For number 1, the consumer opinion, I run an online consumer survey that was representative for Europe. The methodology chosen for this - and the reasons for choosing a particular methodology - are outlined in chapter 3 about research. For question 2 I concluded desktop research and conducted interviews with three experts having worked at an IFE department of an airline. Reasoning and methodology of the latter are as well sketched out in chapter 3. Answers to the third research question are outlined in chapter 6.

2. LIMITATIONS

2.1. Focus Commercial And Cultural Barrier

One essential outcome of the Project Proposal preceding this FMP was the identification of four barriers for airlines to enter a more modern era of IFE: Technical, legal, commercial and cultural.

Technical

This barrier is about how to offer WIFI in the air, especially across oceans. To date, a handful of vendors are equipping airplanes with WIFI. There is GoGo, the top provider in the U.S. - American Airlines and Delta are GoGo customers - which has built a ground-based network that provides capacity up to planes, as opposed to beaming signals from a satellite, and then there are the players Row44, Inmarsat, Panasonic Aviation and ViaSat that provide WIFI via satellite bandwidths.

Legal

The Airline industry has very strict safety rules. It takes 12-24 months to get new equipment for a plane approved by authorities, which makes it almost impossible for Airlines to offer the latest technology on board (P.E. of Swiss Airlines, 2012).

Commercial

“It reportedly costs an Airline about $2 million to $5 million per plane for seatback LCD monitors and an embedded IFE system” (Ramsey, 2010).

Moreover, it appeared some Airlines were offering on-board WIFI at a loss. On one hand, because of the still low take-up rate of 5% - 20% would be needed for break-even on the US market - but also because of the high investment into the WIFI equipment itself (Boehmer, 2012).

“While home WIFI might only need a $50 wireless router, equipping a single plane with air-to-ground WIFI capability can easily cost $100,000. Satellite-based systems, such as those offered by Row 44, can cost double that. It is also costly and time-consuming to take a plane out of service to retrofit it with WIFI equipment. Facing fuel that soared in price and now accounts for between 40% and 50% of their expenses, airlines are very careful about making any kind of major capital investment”. Tim Farrar, a satellite analyst, estimates that it costs GoGo roughly $0.20 to deliver a megabyte of data on a plane. That’s about $200 for a gigabyte, which makes AT&T’s and Verizon’s $10 per gigabyte charges for wireless data look reasonable by comparison (Karp, 2012).

Looking at the razor-thin margins in this industry helps put the latter even more into perspective. Airlines in 2012 generated revenues averaging a little over $228 per passenger after paying tax and debt interest, net profits per passenger were just $2.56. It would not take much of a rise in costs, government tax or demand shock to eliminate such a thin level of profit (Pearce, 2013).

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Table 1: Marginal profit airline industry Source: Pearce (IATA), 2013

IATA: The International Air Transport Association. It is the trade association for the world’s airlines, representing some 240 airlines or 84% of total air traffic. It supports many areas of aviation activity and helps formulate industry policy on critical aviation issues (IATA, 2013)

For this report IATA analysed 71 Airlines worldwide, which represented 80-90% of regional revenues in 2011, except for the Middle East & Africa where the sample represented 50-60%. To calculate sector aggregates for economic profits the sample was scaled up using its proportion of total sector revenues - estimated at $597 billion in 2011

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Table 2: Return on invested capital (ROIC), airline industry at bottom Source: Pearce (IATA), 2013

Cultural

What I call the cultural barrier is the fact that technology on board, in particular WIFI, is a polarising topic. Tech firm FirstSource asked 2,000 UK adults whether they would like to have inflight Internet if it was free or at a reasonable cost. Exactly half of the respondents said they would like access on flights, with only 32% of over-55s giving the idea a thumbs-up. Of the 13% that scoffed at the idea, two-thirds said they did not want to be disturbed by emails or be expected to respond when they are travelling by air (May, 2012).

Whilst not being representative but voices of consumers, the following comments by readers of a CNN article about WIFI on board show that not everybody embraces the idea of Internet above the clouds (Tomkins, 2012):

- “I travel a lot for business and I have used inflight WIFI maybe twice in the last five years. Why?
The connection is usually terrible, there isn't enough room on the tray table to safely hold a laptop and finally... I take the time to be unplugged for at least a few hours.”
- “I make one flight a year most of the time: a trans-pacific one. Not having internet on those flights is a real bummer, and I'd pay pretty much anything below $100 for the luxury of connectivity over that 11-13-hour period, provided I also had a place to plug in my laptop.”

The aim of this this paper is not to suggest ways to overcome the technical or legal barriers. Each of those topics would require a profound research by itself. The focus is on finding out what the majority passengers want from IFE - how to overcome the cultural barrier - and consequently how the offer by airlines should be compiled to meet these requirements - how to overcome the commercial barrier.

2.2. Focus Europe

This project is not only limited by the areas considered - cultural and commercial - but also by geography. The following paragraphs explain the rationale behind this restriction.

WIFI in US’ skies but not in Europe’s

As of September 2012, 31% of US domestic flights came equipped with inflight WIFI (Asay, 2013).

This number is high compared to intercontinental flights in Europe where WIFI is still rare. Europe lags behind when it comes to IFE, compared to both the US and Asia. The four largest airlines in terms of passenger volume in the USA are American Airlines, United Airlines (United), Delta Airlines (Delta) and Southwest (about.com, 2010). All four offer inflight WIFI on domestic flights, in all cabins, so including the economy cabin. United Airlines as first US carrier even offers WIFI on some international routes via satellites (American Airlines, United Airlines, Delta Airlines, Southwest, 2013).

Terrestrial WIFI provider GoGo by December 2012 had equipped 1500 planes with its technology to date. This represented half of the fleet of its two big customers Delta and American Airlines (GoGo, 2012).

The three largest European Airlines in terms of passenger volume are Air France-KLM (KLM) and British Airways (BA) and Lufthansa (Reuters, 2008). The first two are running some trials in offering WIFI in their first or business classes, Lufthansa meanwhile is exploring WIFI in all cabin classes on a few routes (Air France-KLM, British Airways, Lufthansa, 2013).

No prizes for European IFE

Further, no European airline has won a global prize by the two world-known and recognised organisations Skytrax1 or Apex2 that get consumers to rate IFE of airlines and award prizes in several categories every year. Apex focuses on inflight offering, from entertainment to food and the security video, whereas Skytrax lets people rate the overall experience with the airline, from booking, to lounges, check-in and inflight experience. Both elect a global winner, which is the higher recognised prize in the industry, and regional (per continent) winners. None of the big US airlines has won either of the global prizes the past four years (Skytrax, Apex, 2013).

However, smaller US airline Virgin America has won the global Apex prize for the best inflight experience for airlines with a fleet up to 50 aircrafts in the past three years. The global winner for airlines with a fleet greater than 50 in this period was Emirates - the airline company headquartered in United Arab Emirates (Apex, 2013).

The latter also won the prize of best airline globally by Skytrax in 2013 and figured in the top ten the precedent four years. Qatar Airways won it in 2012 and 2011, scored third in 2010 and second in 2013. Other than Turkish Airlines no European airline has made it into the Skytrax top ten of IFE the past five years. The top ten was filled with either Asian or Middle Eastern airlines (Skytrax, 2013).

IFE of these Middle Eastern airlines comprises of a vast of content. Emirates declared that they offer more than 300 on-demand movies and other content that required 2 terabytes of data storage per plane (Emirates, 2012).

Also the new flagship, an aircraft Boeing 777-300, of American Airlines (AA) comes up with massive content. The managing director of onboard products revealed that customers could enjoy 250 movies, 180 television shows and 350 audio programs aboard. She also detailed that theoretically one could fly around the globe 15 times without having to consume the same content twice (Maxon, 2013).

Lufthansa for example only offers 30 movies and 30 music channels within their current IFE (Lufthansa, 2013).

Moreover, both Emirates and Qatar Airways have installed touch screens that are on par with those of smartphones when it comes to usability and that are remarkably larger than traditional in-seat screens.

At the world travel show ITB in Berlin in 2012 Qatar Airways unveiled its new Boeing 787 stating: “A striking feature of every seat throughout the aircraft will be the award-winning touch screen Android technology control units. Passengers will be able to navigate through a truly interactive system, offering more than 1,000 movie, TV programmes, music and gaming entertainment options in a sophisticated and user friendly way, just like the latest smart phones. The touch-screen control unit has a unique dual screen interface allowing passengers to play games on their handheld device while enjoying a movie on their personal screen” (Emirates, Qatar Airways, 2012).

Hence, not only the hardware is best in class, also the system, being powered by Android, Google’s operating system for all sorts of gadgets, mainly known as smartphone operating system. This is particularly interesting because it could mean that soon a seamless experience between one’s personal smart device and the airline’s IFE is possible.

No live TV and mobilephone usage in Europe’s heights

In addition, both Emirates and Qatar Airways, but also other airlines like Oman Air, offer the usage of mobilephones just like on the ground, on many routes. Passengers can be fully connected through WIFI and GSM telephony, sending both text and MMS messages. Voice calls, although possible, will be disabled by Qatar Airways to guarantee no passenger disruption. All of the latter also offer live TV via satellites across most of the globe. That is like watching TV at home - watching what is on right now, zapping through the program. Also three of the four major US airlines offer live TV.

“We operate nearly 700 aircraft, and we have made large-scale investments throughout our fleet. This includes our onboard products … United became the first US-based international carrier to offer satellite-based Wi-Fi on some long-haul overseas routes. We also feature live TV on 200 aircraft providing customers with more live television access than any other airline in the world” (United Airlines, 2012).

Southwest launched a first by getting a sponsor of their live TV on board, US TV network provider Dish, and offering the service to all passengers for free (Maxon, 2013)

Comparative Overview

To sum up the previous paragraphs but also to visualise that Europe lags behind with IFE, I created the following overview. It compares the largest European airlines to the largest US airlines and to the two globally most successful airlines respectively to IFE, Emirates and Qatar Airways.

Green marked fields denote that an airline provides a particular service fully, a yellow field means that it offers it partially or in an old-fashioned manner, and orange stands for the lack of a service. By just looking at the colours the delay of Europe becomes palpable.

Table 3: IFE offering airlines comparison

Sources: Websites of Air France-KLM, British Airways, Lufthansa, American Airlines, United Airlines, Delta Airlines, Southwest, Emirates, Qatar Airways, 2013

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Some of the reasons that in particular the IFE situation in the US is different to Europe are that both the technical and legal barriers are lower. Flying within the US - one country, and not divided by oceans - means WIFI can continuously be operated through a terrestrial signal and with a single operator, but also following a sole law (C.R. from Swiss, 2013).

The availability of WIFI on planes has attracted Internet companies to experiment with their presence on board of US planes. So has Google sponsored GoGo for a while (Ostro, 2010). Another example is that Amazon is the only non-Delta website that is accessible at no charge with Delta Airlines’ inflight WIFI (Delta, 2012). No such models have been deployed in Europe yet.

Due to the different stages of the regions I did not want to write about Inflight Entertainment globally but regionally. With IFE in Europe there is currently more room for the exploration of new technology and business models. Thus, I limited this paper and the research to Europe.

3. RESEARCH

The overarching target of the quantitative survey was to find out what consumers in Europe nowadays expect from an Inflight Entertainment system. Based on the research questions defined and limitations described the following paragraphs explain methodology and sample size of this survey as well as how the questionnaire was composed. The chapter ends with a brief section on the qualitative research.

3.1. Quantitative Survey

I analysed three methods that measure customer happiness with the aim to find the right one to understand the satisfaction of Europeans with IFE.

The three methodologies are frequently used to solve marketing problems. Those problems often involve multi-attribute stimuli, or, the need to rank or value attributes of a product or service because marketing decisions frequently comprise of interdependent variables, i.e. to offer more of one product attribute often means to offer less of another attribute (Fenwick, 1978).

Conjoint Analysis: Not suitable for research question

The underlying thought in Conjoint Analysis is that a single brand can rarely combine all desired characteristics and that it is insufficient to know merely which product attributes are preferred but that it is rather more important to understand how consumers trade-off between attributes. It asks; how much of one product quality are consumers prepared to sacrifice in order to gain a higher level of another quality? (Fenwick, 1978)

To make this statement more tangible let’s look at the example of creating a new golf ball. This product has three alternatives, each with three attributes:

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From the demand side, the ideal golf ball would drive 275 yards, live for 54 holes and cost only $ 1.25. From a supply side it would drive 225 yards, live only 18 holes but cost $ 1.75. The most viable product is somewhere in-between, but where? Conjoint analysis makes researchers find where (Curry, 1996).

However, looking at Conjoint in context - to use it for this analysis about IFE- the methodology does not fit because the goal of this research is not to find an ideal combination of IFE attributes but to find which alternatives are how relevant to travellers. This then sets the ground for thinking of appropriate and contemporary models of IFE. Conjoint is too restrictive in this context as it compares the ideal combination of attributes of alternatives, so, how far can you stretch each alternative (latest movie releases versus old ones, cheap versus expensive ones etc.) rather than how important alternatives, or elements, such as movies, power or WIFI are. Conjoint neither offers displaying alternatives against each other, it displays attributes within alternatives.

“The Kano model is particularly useful as a precursor to choice exercises, such as conjoint analysis, when developing a product or brand communication strategy. Conjoint allows the researcher to explore more fully the interaction of various levels or attributes, whereas Kano analysis is largely onedimensional. However, Kano is far more simple to administer and can be used to winnow out insignificant attributes” (Liebermann, 2008).

AHP Methodology: Too cumbersome for users

Another method looked at was The Analytic Hierarchy Process (AHP) that got developed by Thomas Saaty in the 1970s and that is a decision support system, derived from decision-making theory. The goal of the AHP is to find the appropriate alternative out of a range of given alternatives in order to solve a decision problem. Through pair-wise comparisons of alternatives an objective ranking of those should be reached (Lütters, 2004).

An example for Inflight Entertainment could be to ask people to choose which alternative is more important in each of the following pairs:

- Movies vs. TV-Series
- TV-Series vs. Radio
- Radio vs. Movies

If to a person movies are more important than TV, and TV is more important than Radio, and movies are more important than radio, the ranking that results is: 1. Movies, 2. TV and 3. Radio. If movies are more important than TV, and TV more important than radio but radio more important than movies, the ranking is: 1. Radio, 2. Movies and 3. TV.

In theory the AHP methodology matched my research questions. It could have been a useful tool to obtain answers, because what ultimately results from an AHP research is an importance ranking. Therefore I outlined in the proposal preceding this project, the AHP as a viable tool to get an importance ranking of IFE elements, in addition, or as part of the Kano methodology. Although I had access to an online tool, Questfox, which makes such research for both the conductor and participant simpler, I came to the conclusion that in practice the AH process is cumbersome. The eventual questionnaire comprised of eight IFE alternatives (Movies, TV, Music, Audio Books, Games, Books, WIFI, Power, Duty Free) representing the current offer of the three major European airlines. Based on that, participants had to answer 16 check-the-box-questions. Had I applied the AHP tool, participants would have had to answer 42 questions, or pitching 84 attribute pairs against each other. My concern was that this kind of exercise would put off participants and I subsequently decided to drop the AHP method and seek another approach to construct a Kano matrix.

Kano Methodology: Suitable and simple to execute

The last method analysed was the Kano model. It is aimed at capturing the voice of the customer for requirements to products or services (Goodpasture, 2004).

A Kano analysis in essence is measuring the importance of features to the customer and for the performance of the business. Kano, in 1984, identified four basic types of product features relating to customer need: must-be, one-dimensional, attractive and indifferent. Further, Kano defined his model as a theory that captured the nonlinear relationship between product performance and customer satisfaction (Liebermann, 2008).

A newer approach identifies not four but six product quality categories, each with a different impact on customer satisfaction. Since customers perceive product features in different ways firms are supposed to allocate resources in building and managing product features primarily on the following three kinds of requirements (Hueiju, 2012):

- Must-be requirements: They are basic criteria of a product that customers take for granted. Without these requirements, customers will be extremely dissatisfied.
- One-dimensional requirements: These are requirements of a product to which customer satisfaction is proportional to the degree of their fulfilment. So, if available they represent satisfiers, if lacking they are dissatisfiers.
- Attractive requirements: These are the product requirements that will definitely incur customer satisfaction if they are fulfilled. They are strategic features that firms may use as weapons to attract potential customers. However, unlike the must-be requirement, customer dissatisfaction will not be sensed when these requirement are absent. Therefore, these requirements can be discarded if cost considerations demand so.
- Questionable: Only the case if customers dislike the fact of the availability and dislike the fact of the absence of a feature.
- Reverse: This comes into play if customers like that an attributed is not fulfilled but dislike if it is fulfilled. None of the attributes in the survey, conducted and explained later in this paper, scored as “questionable” or “reverse”. Yet, I can imagine examples being: very loud music in fashion shops or restaurants. It could be that part of the customer group appreciates no music.
- Indifferent: These are requirements for which people are neutral or can live with them either way, if offered as features or if not.

(Hueiju, 2012)

Decision for a methodology: rating

The previous paragraphs described the positive and negative sides of the different approaches. To decide which one to apply, I merged all these arguments into a rating. More specific, I rated how well each of the methodologies met the three key requirements of the research planned, which are:

- Easy participation. In order to get at least 65 valid answers (see sample size calculation later) the survey had to be simple and quick for participants, especially considering an average response rate of only 10% of people reached out to (Surveymonkey, 2013).
- Simple visualisation of the results, such as a matrix that demonstrated the results at once glance, in order to focus on the content and not on explaining the outcome.
- Suiting the topic, meaning resulting in data that was indicative of a future IFE business model rather than just tweaking the current IFE offering.

Table 4: Decision quantitative methodology

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I rated each of the three requirements for each methodology on a scale from one to five with five being best. As a result the Kano approach scored highest with 14 points. Thus, I applied the Kano method. However, there are a variety of modifications to the Kano approach. Subsequently, I studied several and decided to go with the original traditional Kano approach. The reasoning behind this choice can be found from the following paragraphs.

3.1.1. Kano Methodology

There are different theoretical and practical strengths and weaknesses of the Kano techniques. Some provide better guidance for future research and managerial practice. The following was an evaluation of these five techniques in terms of their validity and reliability: Penalty-reward Contrast Analysis, Importance Grid, Qualitative Data Methods, Direct Classification and Kano’s Method. The evaluation was not empirical but rather a comparative critique derived from extensive review of literature and researches conducted with the different approaches. Three issues were addressed in particular:

- The validity and reliability of the approaches (in terms of their theoretical foundations)
- The informational value of the results provided by each approach (in terms of what exactly is being assessed)
- The technical strengths and weaknesses of the approaches (in terms of their methodologies)

The findings of this study were meant to have practical application in assisting researchers to choose the most appropriate approach and to interpret the results obtained through the various methodologies (Mikulic et al., 2011).

As follows I recapped the analysis by Mikulic et al. for each approach, to make clear why I picked a particular one.

Kano’s Method

A question pair asks about the consumer’s feelings in the case of fulfilment of an attribute (“functional question”) and the other question asks about feelings in the case of non-fulfilment of an attribute (“dysfunctional question”). The table illustrates how these question pairs translate into a Kano matrix (Mikulic et al., 2011).

Table 5: Example of composing a Kano matrix. Source: Mikulic et al., 2011

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The rationale of the Kano method is logically valid for the assessment of customer feelings regarding a particular product or service attribute if the fulfilment (or non-fulfilment) of that attribute is clearly defined. However, a significant problem can emerge if the definitions of “fulfilment” and “non- fulfilment” are imprecise. To demonstrate this, the researchers run a small indicative survey using the example of a mobile banking service as a feature of a new bank account. Two sets of questions were asked in this indicative survey of 129 students. The first set of questions referred to the provision/non- provision of this feature:

- Q1a: functional: “When opening a new bank account, how would you feel if you were provided with a mobile banking service?”
- Q2a: dysfunctional: “When opening a new bank account, how would you feel if you were not provided with a mobile banking service?”

The second set of questions referred to the performance/non-performance of the feature:

- Q1b: functional: “When opening a new bank account, how would you feel if you were provided with a mobile banking service that works very well?”
- Q2b: dysfunctional: “When opening a new bank account, how would you feel if you were provided with a mobile banking service that works very poorly?”

It is apparent from this illuminating example that the classification of the attribute varied significantly - depending on how “fulfilment” was defined. When “fulfilment” was understood in terms of provision of the attribute, the mobile banking service was classified as an “attractive” element, whereas when it was understood in terms of performance, it was classified as a “must-be” element. It is obvious that the two sets of questions presented quite different situations to the respondents - in that the first implied that the proposed new attribute would perform well, whereas the second explicitly allowed for the possibility that it might perform well or poorly. To overcome this challenge it should be recognised that the key issue that determines the Kano category of an attribute is not the performance of that attribute; rather, it is actually the existence (or non-existence) of a more or less expected benefit. Using the Kano method with performance-based operationalisation of “fulfilment” and “non-fulfilment” could make assessments of the different Kano-categories unreliable. To further increase the reliability of attribute categorisations, Kano’s method should refer to the provision (or non-provision) of the benefits to be expected through the provision of an attribute rather than the provision of the attribute itself. Using the example of the mobile banking service, the questions should therefore be formulated:

- Q1c: functional: “When opening a new bank account, how would you feel if you were provided with the possibility of managing your bank transactions via your mobile phone?”
- Q2c: dysfunctional: “When opening a new bank account, how would you feel if you were not provided with the possibility of managing your bank transactions via your mobile phone?”

Questions expressed in this way would provide a valid and reliable tool for assessing customer feelings regarding the provision (or non-provision) of a given attribute and the benefits provided through it. However, a disadvantage of the technique is that it does not provide insights into the potential of that attribute to influence overall customer satisfaction, as opposed to satisfaction with the attribute itself.

For example, this technique might reveal that the mobile banking service has greater potential to create satisfaction than dissatisfaction (that is, it is an “attractive” quality attribute), but the technique does not reveal how important this attribute is in the customer’s overall judgment of the bank account, nor how it relates to other attributes in this regard. This is a disadvantage of that technique because such information can be important for effective decision-making when designing or improving products and services. Nevertheless, Kano’s method retains certain advantages over other approaches. First, it does not require the customer to have had experience with the attributes that are being classified. Second, the Kano method has no technical limitations regarding the number of attributes that can be analysed (Mikulic et al., 2011).

Penalty-Reward Contrast Analysis

This technique analyses the impact of very high and very low attribute performance on overall satisfaction using regression analysis. It is a highly mathematical method for which numerous mathematical critiques can be made. One neglected technical issue is for example the widespread use of a standardised regression coefficient. This is despite evidence that such variables skew the information held in the original unstandardised variables (Mikulic et al., 2011).

Importance Grid (IG)

This scheme compares explicit and implicit “attribute importance” in order to classify attributes. Explicit attribute importance is obtained directly from the customer (through direct ratings or rankings), whereas implicit attribute importance is statistically derived by regressing or correlating attribute performance against a global performance measure (Mikulic et al., 2011).

In other words, one determines the inferred importance by testing the effect of variable performance measurements against a dependent variable. The dependent variable could be one of several commonly measured, such as “overall satisfaction,” “likelihood to return to the establishment,” or “likelihood to recommend service/product x” (Liebermann, 2008).

The validity of the IG technique has been questioned because there is no theory that explains why the different Kano factors can be identified by comparing explicit with implicit attribute importance. Precisely, the implicit assumption that the different Kano categories can be identified by comparing the relative grid positions of attributes means that the categorisation of any given attribute is dependent on all the other attributes as reference points. This brings a logical consequence: The IG will always yield a classification of attributes into all of the various Kano categories (“must-be”, “attractive”, and “one- dimensional”) whenever there are any differences in explicit and implicit attribute importance (which is usually the case). Yet, is questionable whether each set of analysed attributes always covers every Kano category (Mikulic et al., 2011).

Qualitative Data Methods

There are several forms of this method. However, the “two-factor theory” of satisfaction and dissatisfaction, and the critical incident technique behind all of them have been explored to the notion that there are attributes that are primarily satisfying and attributes that are primarily dissatisfying in various goods or services. The basic assumption is that quality attributes can be categorised by comparing how often customers list an attribute in a positive context or a negative context. In essence the thought is that it can be derived that “must-be” attributes prevail in negative contexts because they have greater potential to cause dissatisfaction than satisfaction, whereas “attractive” elements prevail in positive contexts because they have a greater potential to cause satisfaction. However, in reality, a weighty limitation of these methods is that they do not allow researchers to determine which attributes are to be categorised because the attributes for consideration emerge only from customer comments (Mikulic et al., 2011).

Direct Classification

A simple method proposed by Emery and Tian in 2002, who said that the theory of attractive quality should be explained to respondents who would then classify attributes into the various Kano categories. Such direct classification is the only approach that does not rely on an indirect assessment of the various Kano categories on the basis of implicit assumptions. Advantages of direct classification are that it can be used to classify both existing and non-existing attributes and that it has no technical limitations regarding the number of attributes that can be analysed. However, the practical disadvantages of the direct-classification approach are that explaining the theory to respondents can be time-consuming and it can be difficult for some respondents to understand it (Mikulic et al., 2011).

Conclusions

Importance Grid is the method the researchers recommend least- for the reasons outlined in the respective paragraph. The method they judge to be best is the original Kano method itself for the reasons that it is particularly useful in the design stage of a product/service because it facilitates categorisation of both existing and non-existing product/service attributes according to their potential to elicit satisfaction/delight and dissatisfaction/frustration. However, when using the Kano method, it is strongly recommended that a reasonable level of performance of the analysed attributes should be presumed, and that the customers’ feelings should be assessed in the case of provision and non- provision of the benefits provided through the attributes under consideration. A shortcoming of the Kano method, however, is that it does not reveal the relative importance of various attributes in the customer’s overall evaluation of the product/service, and/or how the analysed attributes relate to each other in this regard. The researchers recommend performing a penalty-reward contrast analysis to get this information (Mikulic et al., 2011).

I decided to apply the classical, original, Kano approach and to add a series of questions about price sensitivity related to attributes. The willingness, or lack of willingness, to pay for IFE attributes is an indicator of their importance and therefore makes up for this shortcoming of the Kano method.

Kano matrix template of this survey

As called out earlier, the traditional Kano method uses a question pair asking about the consumer’s feelings in the case of fulfilment of an element, or attribute, (a so-called “functional question”) and about feelings in the case of non-fulfilment of an element (“dysfunctional question”). If matching the answers of both questions about an attribute one gets the scores within the traditional Kano matrix of this attribute.

[...]


1 Skytrax is a privately owned company based in London. If offers Rating and Reviews for over 681 airlines and 725 airports. Skytrax Airline Rating is recognised as rating system for airlines. Skytrax’ annual World Airline Awards and World Airport Awards are based on the largest air travel customer surveys, with results respected and used by the air transport industry, media and customers alike (Skytrax, 2013).

2 APEX is The Association of businesses and professionals who create, deliver, and manage the airline passenger experience. It runs an online survey every year to select the best airline in terms of inflight service in various categories (IFE, food, ambiance, friendliness of staff) that is called the “Passenger Choice Awards” (Apex, 2013).

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Details

Title
The future of inflight entertainment in Europe, according to passenger expectations
Subtitle
How the airline industry should embrace, and not fear, consumer technology.
College
Grenoble Ecole de Management
Course
MBA - Technology Marketing
Grade
19/20
Author
Year
2013
Pages
111
Catalog Number
V268876
ISBN (eBook)
9783656591030
ISBN (Book)
9783656591054
File size
5423 KB
Language
English
Tags
Airline, Technology, Inflight, Marketing, Kano, Consumerization, BYOD, Innovation, Disruption, Strategy
Quote paper
Jasmin Schawalder (Author), 2013, The future of inflight entertainment in Europe, according to passenger expectations, Munich, GRIN Verlag, https://www.grin.com/document/268876

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