Price Presentation Post: Making the Connexion

In May 2004, Boeing introduced Connexion to the aviation industry. Connexion allows passengers access to high speed data transfer for internet, intranet and e-mail services at “ground based pricing” while cruising at 35,000 feet. Even though there are other services available offering digital in-flight communication, Connexion is clearly the best solution.

Bob Brewin’s March 25, 2004 article reported the service at “$29.95 for unlimited use on long-haul flights of six hours or more. And it will charge $19.95 for flights lasting between three and six hours.” An alternative pricing option started at “$9.95 for 30 minutes and 20 cents a minute thereafter.” A quick visit to the Connexion pricing page confirmed that these prices are still current even today.

I believe that Boeing faced an interesting challenge when they developed the pricing for this service. Development and certification costs were no doubt costly; however, if a “Market Skimming Pricing” strategy (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 333) was selected because of the high technology and premium service that is offered, it is possible that passenger subscription would be lower than necessary to recover the costs associated with development. However, it seems that “Value-Based Pricing” (Pg. 322) was ultimately utilized. I was pleasantly surprised at the pricing; it’s an excellent value for the service that is being provided.

Also worth mentioning is that Boeing has two separate customer groups in this endeavor…the airline that equips their aircraft with the Connexion hardware and the passengers that use the in-flight service. Two different customers (airlines and passengers), two different products (Connexion hardware and Connexion service)…two different price strategies.

Because of the airline’s integral role in providing the service and the fact Boeing has developed a superior product, it will be difficult for competitors to emerge and challenge the Connexion market share in the near term; furthermore, they certainly seem to be fairly priced for the future as well.