Panasonic and the Evolution of Airline/Vendor Relationships towards a “Business FOR Business” model

0

“As Peter Drucker said, well before the advent of the information age, the sole purpose of a business is to create a customer. It’s clear that brand building will only go so far.” Harvard Business Review – Marketing

If you have been asleep since 2007 or not directly involved in the marketing of a product in that time period, you might not be aware of the change in business relationship strategy in many product oriented companies, especially at the marketing level. This observation, and an intense Q&A with Panasonic after Aircraft Interiors Expo, taught us a few new lessons on the subject. In the Panasonic press briefing at AIX, Executive Marketing Director, Neil James presented a couple of these refocusing concepts that told IFExpress two things: 1. Panasonic Avionics’ marketing approach to airlines has changed to a “business for business” model, and 2. We had better study up on the new marketing analysis and processes involved to communicate them to our readers.

How does this process differ from the traditional approach to selling a product, you might ask? Panasonic no longer goes to the airline and says: “You need the next new widget we’ve built.” Instead they meet with the airline and ask questions like: “What are your business challenges, goals and objectives? What role can your IFEC strategy play in addressing these? Here is a process on how we can help you achieve your goals.” The process is a collaboration aimed at selecting the solution(s) that fits their goals and objectives… with the appropriate combination of Panasonic Avionics’ products. “The airlines know their passengers and their operating requirements better than we do. We ask them to tell us what they want IFEC to do for them, and then make a virtue of coming back with suggestions about different options for them to consider”, says Neil James.

The marketing world, as we said before, has changed at least in understanding the value of customer relationships. Due to the greater opportunity for direct relationships with customers via the web, there has been a progressive shift in value away from the brand (Brand Value) towards the value of the repeat customers themselves (Customer Value). Read the following article to get a better understanding of the timeline. Being able to understand the time-line of the relationship with customers means that the new ROI of marketing includes words like Impression, Perceptions, Opportunity, and Engagement. And yes, we are talking about new marketing measurement tools, some that focus on current monetization (Efficiency) and others that focus on the long term relationships (Effectiveness/Engagement).

The changes have been subtle, but they have been fundamental. We are speaking of the “new involvement” of businesses with their business customers, as well as the involvement of the airline customers with their travelers. Many successful businesses today have structured their customer relationships to begin by asking them (in this case, airlines) about their relationships with their own customers (passengers) to better help (the airlines) select products that will help them achieve their business goals. Got that? It could be better entertainment, it could be better connectivity to enhance customer communication, or it could be something as simple as more viewing choices on their PED’s. But, in the end, it is all about Panasonic’s understanding and enhancement of the airline’s business goals… with a built-in intent of delivering a better airline product – that is, a more goal-achieving one. In other words Panasonic is providing better Business FOR Business solutions.

That’s it in a nutshell but, as you well know, the airline marketing world is much bigger than that. Improving customer relationships brings more customers to the airline for their travel, which improves the airline’s bottom line and, with that, Panasonic’s. But the process of understanding airline objectives is not always easy. Obviously, it involves meeting with airlines, but sometimes a stated goal or product related influence involves understanding the perspective of different constituencies within the airline – operations, marketing and finance in particular. Working with airlines is key to understanding their goals and objectives and this is exactly what Panasonic Avionics has been doing. We have observed that the approach used attempts to fully determine what the airline/passenger relationship goals are, as well as how connectivity can improve operational efficiency. And since there is a process that makes this happen called PACE, we should talk about it next.

Panasonic Avionics defines their vision as being to: Delight Passengers and Enhance Airline Value. They have a roadmap to help achieve this vision; it is called PACE. It is an acronym that stands for Perspective, Analysis, Configurations, Evaluation, a four step process that they utilizes to understand and agree upon the specific airline customer goals and objectives.

PACE is about business outcomes. It is a structured, collaborative process to establish an optimal IFEC strategy, meeting each airline’s unique objectives, while taking into consideration the different IFEC configurations with their various functionalities and cost. It uses detailed modeling to establish the financial impact of the various configuration options to help the airline maximize their investment.

Let’s review the evidence for how this Business FOR Business (B4B) marketing process has been received by the airline industry by looking at the Panasonic Aero sales successes, as reported at AIX.

1. InFlight Entertainment
In 2014, Panasonic Aero won some 155 IFE programs equipping some 1,134 aircraft. We note that the average program size was 7 aircraft… which seems to dispel the myth that Panasonic only gets large program orders! They also installed hardware on 1,002 planes (a 10% improvement above 2013). Additionally, there were some 12 key innovations that included Next Generation IFEC, Companion Application, Developer Programs, HD Audio, PED Integration, JAZZ and Hailstone Seat integration, and more.

2. Global Communication Services
Today, there are 56 customers with the Panasonic Ku service and some 700 aircraft installed with the capability. eXPhone now has 293 aircraft with installations. Furthermore, 205 aircraft are now offering real-time TV, and some 2,600+ airplanes are committed for Panasonic service. Note the Panasonic airline market share for global communication services which ends up being a 46% market share. Global Coverage Growth Chart.

3. Panasonic Services
It is interesting to note that Panasonic has the world’s largest MRO (Maintenance, Repair, and Overhaul) capability as there are some 37,000 aircraft turned each month! (means that 37,000 aircraft are swept and repairs if needed are done each month. Work is performed in 64 locations by some 1,300 dedicated staff and partners.

4. Key Acquisitions
ITC Global – A provider of connectivity services for business critical communications that expands Panasonic’s connectivity capabilities.
Tactel – A leading provider of software, apps and consulting services that expands Panasonic’s capabilities in user interface design.

These acquisitions underscore the value of vertical integration that Panasonic displays with pride. The company relies almost totally for the manufacture of its products from inside the company. A good example of this is their Ku band antenna manufacturing and assembly in Lake Forest, California. The antenna plate elements require precision installation and rely on robots built by Panasonic in Japan. Panasonic firmly believes that vertical integration helps develop lower lead-times and consistent products. This is one of the key strategies Panasonic uses to deliver on-time, high quality products and services.

All in all, it is pretty clear that Panasonic Avionics has hit upon a marketing solution that has present and future value for the business objectives of its customers.

Comments are closed.