The future of Inflight Entertainment in Europe, according to passenger expectations: Why Airlines should embrace Consumer Technology
©2014
Textbook
115 Pages
Summary
Consumerization - passengers toting their tablets, laptops, smartphones and e-readers on planes - has forced airlines to re-think. Should they continue to invest heavily into Inflight Entertainment (IFE) systems, or just concentrate on offering Wi-Fi and power in the cabin? The goal of this research was to define the IFE offer of the future. Four barriers that split the world into the three regions Europe, Asia and USA in terms of IFE development were identified: the cultural, the commercial, the technological and the legal barrier. This book focuses on Europe, which lags mostly behind with IFE out of these three regions. For example, as opposed to the US, no major European airline offers inflight Wi-Fi widely on its network, and in contrast to leading Middle Eastern airlines none offers inflight live TV or the usage of mobile phones without restriction, like on the ground. The target was to define IFE from a consumer perspective. To capture the latter the author evaluated consumer satisfaction methodologies and decided to go with the Kano approach, which categorizes alternatives of a product or service, in this case IFE, in must-be, attractive and indifferent elements. A representative online survey revealed movies and power to be must-be, TV and Wi-Fi 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 that they would pay for movies and Wi-Fi 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 themselves could get the content. Further, sub-groups were analysed - people within the sample with mutual characteristics like gender, travel frequency or ownership of smart devices. So was music on a plane a must for women and owners of iPhones were 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.
Excerpt
Table Of Contents
4
7. APPENDIX ... 78
7.1.
Sample Size Calculation Detail ... 78
7.2.
Quantitative Survey Detailed Results ... 81
7.2.1.
Part 1: Demographics And Habits ... 81
7.2.2.
Part 2: Kano Analysis ... 87
7.2.2.1. Whole Sample ... 87
7.2.2.2. Women vs. Men ... 89
7.2.2.3. 35+ years ... 90
7.2.2.4. Swiss Residents
... 91
7.2.2.5. Frequent Travellers
... 92
7.2.2.6. Short-haul Travellers
... 93
7.2.2.7. Business Class Travellers
... 94
7.2.2.8. Travellers for Business
... 95
7.2.2.9. Travellers for Leisure ... 96
7.2.2.10. iPhone
Owners
... 97
7.2.3.
Part 3: Willingness to Pay ... 98
7.2.3.1. Entertainment Elements
... 98
7.2.3.2. Wi-Fi and Power
... 98
7.3.
Qualitative Survey Interviews Detail ... 99
7.3.1.
Interview Avianca Airlines ... 99
7.3.2.
Interview Swiss Airlines ... 102
7.4.
Bibliography ... 105
5
TABLES
Table 1: Marginal profit of airline industry ... 11
Table 2: Return on invested capital (ROIC), airline industry at bottom ... 12
Table 3: IFE offering airlines comparison ... 17
Table 4: Decision quantitative methodology ... 23
Table 5: Example of composing a Kano matrix. ... 25
Table 6: Kano matrix template ... 30
Table 7: Questionnaire part 1: demographics ... 32
Table 8: Questionnaire part 1: flight habits ... 34
Table 9: Questionnaire part 1: smart devices ... 35
Table 10: Questionnaire part 2: Kano questions ... 35
Table 11: Questionnaire part 2: Kano question duty free ... 36
Table 12: Questionnaire part 3: willingness to pay ... 37
Table 13: Quant. survey: female/male ... 42
Table 14: Quant. survey: age distribution ... 43
Table 15: Quant. survey: flight frequency ... 44
Table 16: Quant. survey: travel reason ... 45
Table 17: Quant. survey: smart devices in the air ... 46
Table 18: Quant. survey: sub-groups overview ... 47
Table 19: Kano matrix template ... 49
Table 20: Kano matrix whole sample (n= 67) ... 50
Table 21: Kano matrix all sub-groups ... 52
Table 22: Percentage of people per sub-group that considered DF a like or a must ... 53
Table 23: Number of people that said they would pay for a service ... 57
Table 24: Percentage of people, that said they would pay for a service ... 58
Table 25: Willigness to pay of users and non-users of iPhone/iPad ... 60
Table 26: Accumulation of willingness to pay by sub-group ... 62
Table 27: Always on IFE Model ... 75
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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
carriers concentrate mostly on improving inflight Wi-Fi and power supply for those passengers who
prefer to use their own hardware? If so, do airlines try to sell them licensed content like movies and
video games...?" (Sharkey, 2012).
There are over a dozen IFE equipment makers like 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 plane
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
8
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? What
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 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 only sold - but in the way they books were distributed. Hence, Amazon revolutionised 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 the IFE industry?
9
1.2.
Research Questions
Re-capping the previous paragraph, the research questions (RQ) of this study are:
x 1. RQ: What do passengers expect from an IFE system nowadays?
o RQ: And how strongly influenced are these expectations by today's personal consumer
technology?
o RQ: Do expectations diverge among passengers, depending on the tech gadgets they carry
onto a plane (personal smartphones, tables)?
x 2. RQ: Are European* airlines on the right track to meet these expectations? Are their goals and
directions the right ones to meet passenger expectations?
x 3. 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 was 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 question one, the consumer opinion, I ran
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 two 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.
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2.
LIMITATIONS
2.1.
Focus Commercial And Cultural Barrier
A conclusion of the extensive desktop research preceding this book was the identification of four
barriers for airlines to enter a more modern era of IFE: Technical, legal, commercial and cultural.
Technical
The technical barrier is about how to offer Wi-Fi in the air, especially across oceans. To date, a handful
of vendors are equipping airplanes with Wi-Fi. 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 Wi-Fi 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 seat-back LCD monitors
and an embedded IFE system" (Ramsey, 2010).
Moreover, it appeared some Airlines were offering on-board Wi-Fi 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 Wi-Fi equipment itself (Boehmer, 2012).
"While home Wi-Fi might only need a $50 wireless router, equipping a single plane with air-to-ground
Wi-Fi 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
11
with Wi-Fi 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).
Table 1: Marginal profit of 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 its report IATA analyses 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
12
Table 2: Return on invested capital (ROIC), airline industry at bottom
Source: Pearce (IATA), 2013
13
Cultural
What I call the cultural barrier is the fact that technology on board, in particular Wi-Fi, is a polarising
topic. Tech firm FirstSource asked 2,000 UK adults whether they would like to consume inflight
Internet if it was free or at a reasonable cost. Exactly half of the respondents said they would like
access to the Internet 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 Wi-Fi on board show that not everybody embraces the idea of Internet in the clouds
(Tomkins, 2012):
x "I travel a lot for business and I have used inflight Wi-Fi 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."
x "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 research is not to find ways to overcome the technical or legal barrier. Each of
these topics would require a profound research by itself. The focus is on finding what the majority of
passengers demand from IFE (how to overcome the cultural barrier) and consequently what the offer
by airlines should be compiled of (how to overcome the commercial barrier).
14
2.2.
Focus Europe
This project was not only limited to the areas considered (cultural and commercial) but also to a certain
geography. The following explains the rationale behind this restriction.
Wi-Fi in American skies but not in European
As of September 2012, 31% of US domestic flights came equipped with inflight Wi-Fi (Asay, 2013).
This number is high compared to intercontinental flights in Europe where Wi-Fi 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 Wi-Fi on domestic flights, in all
cabins, so including the economy cabin. United Airlines as first US carrier even offers Wi-Fi on some
international routes via satellites (American Airlines, United Airlines, Delta Airlines, Southwest,
2013).
Terrestrial Wi-Fi 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), British
Airways (BA) and Lufthansa (Reuters, 2008). The first two are running some trials in offering Wi-Fi in
their first or business classes, Lufthansa meanwhile is exploring Wi-Fi in all cabin classes on a few
routes (Air France-KLM, British Airways, Lufthansa, 2013).
15
No prizes for European IFE
Besides the lag in offering inflight Wi-Fi, no European airline has ever won a global prize by the two
world-known and recognised organisations Skytrax
1
and Apex
2
. Both organisations get consumers to
rate the IFE of airlines and then award prizes in several categories year after 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 more 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
the 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 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).
1
Skytrax is a privately owned company based in London. If offers rating and reviews for over 681 airlines and 725
airports. 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), known as the "Passenger Choice Awards" (Apex, 2013).
16
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 Wi-
Fi 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)
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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
18
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 Wi-Fi 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 Wi-Fi 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
Wi-Fi (Delta, 2012). No such models have been deployed in Europe yet.
Due to the different stages of the regions this writing is not 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 book and the research to Europe.
19
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 research questions and limitations, the
following paragraphs explain methodology and sample size of this survey as well as the composition of
its questionnaire. 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)
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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:
Average Driving Distance
Average Ball Life
Price
275
yards
54
holes $1.25
250
yards
36
holes $1.50
225
yards
18
holes $1.75
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 did
not fit because the goal of this research was 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 Wi-Fi 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 one-
dimensional. However, Kano is far more simple to administer and can be used to winnow out
insignificant attributes" (Liebermann, 2008).
21
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:
x Movies vs. TV-Series
x TV-Series vs. Radio
x 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 the research questions in this book. It could have been a
useful tool to obtain answers, because what ultimately results from an AHP research is an importance
ranking. In the end though 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, Wi-Fi, 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 in the questionnaire that
was used. Had an AHP tool been applied, participants would have had to answer 42 questions, or
pitching 84 attribute pairs against each other. The concern was that this kind of exercise would put off
participants.
22
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):
x Must-be requirements: They are basic criteria of a product that customers take for granted. Without
these requirements, customers will be extremely dissatisfied.
x 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.
x 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.
x Questionable: Only the case if customers dislike the fact of the availability and dislike the fact of
the absence of a feature.
x 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 book, 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.
x 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)
23
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 one rating. More specific, I rated how
well each of the methodologies met the three key requirements of the research planned, which are:
x 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).
x 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.
x 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
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.
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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:
x The validity and reliability of the approaches (in terms of their theoretical foundations)
x The informational value of the results provided by each approach (in terms of what exactly is being
assessed)
x 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.
25
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
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:
26
x Q1a: functional: "When opening a new bank account, how would you feel if you were provided
with a mobile banking service?"
x 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:
x 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?"
x 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:
x 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?"
x 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.
27
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-
Details
- Pages
- Type of Edition
- Erstausgabe
- Publication Year
- 2014
- ISBN (eBook)
- 9783954897483
- ISBN (Softcover)
- 9783954892488
- File size
- 4.5 MB
- Language
- English
- Publication date
- 2014 (April)
- Keywords
- Marketing Consumer Technology Kano Airlines Innovation
- Product Safety
- Anchor Academic Publishing
