Boeing 787 Dreamliner: A Marketing Plan

Executive Summary Boeing has long enjoyed its many successes of its mid-size aircraft, the 737. Many airlines are faced with aging 737s in their fleets and with the advent of many low cost carriers (LCCs) and their associated point-to-point systems; the hub-and-spoke method is believed to be a thing of the past. With this vision in mind, Boeing set its sights and efforts on an aircraft that would revolutionize the point-to-point system and tailored its marketing strategies in what was believed to be a flawless method. According to Boeings marketing department, the three fundamental areas demanded in its targeted customer market were: speed not size, decreasing demand in first class, and low cost carriers. The Boeing 787s design and anticipated technology aimed to align with these ideals and be the home run needed to regain its market share from its rival Airbus. With an order backlog in excess of 800 aircraft, the success enjoyed by Boeings 787 and the rate of orders broke all records made the Dreamliner Boeings fastest-selling airliner (Kingsley-Jones, 2012). However, Boeings marketing of the 787 failed because the implementation stage of its marketing strategy was flawed from the start. Each step of its marketing strategy was impractical because accountability was lacking. Strategy implementation is not only more significant than the strategy itself, but the accountability needed to ensure each step is carried out properly is required. Companies fall prone to not upholding accountability when it comes to their executives, managers, and employees. Responsibility for completing each stage of the execution phase of the companys marketing plan often gets left behind and in Boeings situation, this is exactly what happened. When dealing with a multi-faceted company such as Boeing, one must analyze the

strengths, weaknesses, opportunities, and threats using SWOT analysis to effectively break down each phase and identify the missing or broken component. Analysis Based on the lack of accountability, failure to execute what Boeing marketed, and after in depth studying of SWOT analysis for Boeings 787 Dreamliner, there are some changes that must be made to the marketing strategy in order for success to be realized. Boeing has already differentiated their product and positioned them to be unique in the aviation industry and market segment while still focusing on particular dimensions that customers value. The Boeing 787 Dreamliner is the youngest family from Boeing; it is an important project for Boeings attempt in regaining its dominant market position with its major manufacturing competitor Airbus (WikiJournal, 2010). The goal of this marketing plan is to introduce proposed changes to Boeings marketing plan that must be made in the wake Boeings troubles with the initial production run of the 787. This should reinvigorate their desire to fly on the most advanced airplane in the commercial aviation market. Strengths Boeings largest strength is that its one of the largest and most well-known aircraft manufacturers in the world. They have worked diligently to create a solid reputation for themselves while developing cutting edge aircraft for the commercial air travel industry as well as the military. Boeing is known as an industry leader, consistently making technical advancements with the aircraft they are producing, which is an attractive factor to the people that purchase, as well as travel on these aircraft. The 787 aimed to increase the pressure and humidity in the cabin of the airplane, through the use of materials other than the traditional aluminum in

the construction (Denning, 2013, p. 37). Through the design of the cabin, the airplane would also cost less to operate, due to fuel savings, which is a huge attractive factor to operators. Weaknesses However, Boeing repeatedly manages to experience coordination costs well above budget. Key stakeholders were integrated into the design and manufacturing teams for the 777, the predecessor of the 787, making the process much more costly and overcomplicated. There were more than forty people attending status meetings, which proved to be more than the number required. Boeing also went overboard on their propulsion engineers, almost doubling the amount that was working on the project within the engine manufacturers operation already (Sorscher, 2013). The 787 program was designed to skip the steps described above, which should have resulted in a more streamlined process, but instead created problems. Apart from the late delivery, the Dreamliner has also failed to offer as much as they had promised with the new aircraft making technologies. It appeared that the major reason of delay was because the aircraft had difficulty achieving its weight target and increased efficiency did not make a significant difference (WikiJournal, 2010). Coordination issues were also to blame for the poor decision making that occurred during the manufacturing and design of the 787, as well as not knowing what other stakeholders were doing regarding the program (Sorscher, 2013). This was also complicated by the heavy outsourcing of the project, leaving some of the decision making with the companies involved with the supply chain (Sorscher, 2013). Opportunities With the use of the 787, many airlines announced new routes, connecting cities that had not been connected previously. Seeking to capitalize on opportunities presented in the aviation

market, Boeing realized this framework was not possible with the current aircraft that airlines operated, but would be more than achievable with the new 787. The Dreamliner was also planned to employ new technology with the electrical system, as well as the external design of the airframe (Denning, 2013, p. 37), which gave Boeing the opportunity to increase their market share through their continued leaps in technology. Threats Boeing was threatened by the success of the Airbus A380, which was created to directly compete with the 787. Since its creation, the A380 has been successfully produced and put into service. This continues to be a major threat to Boeing, since the 787 has had numerous problems since its entry into air service. The Federal Aviation Administration (FAA) has stepped in, to make things worse for Boeing, and grounded the 787 until the safety issues that it has encountered are addressed adequately (Sorscher, 2013). The 787 has developed a reputation for catching fire in the back of the aircraft, due to a battery issue, and the FAA is not allowing the airplane to fly until that problem is remedied. Boeing has also lost a few of its suppliers for the 787, Vought and Global Aeronautics, when they decided that the program was not working for them, sold their facilities to Boeing and walked away from the program (Sorscher, 2013). This could send a message to other suppliers, some of which might be reluctant to work with Boeing in the future because of this development further providing weakness to the company and threatening the overall success of the 787. Differentiation The 787 is the first airliner in the world to use composite materials as the primary construction material (Norris, Thomas, Wagner, & Forbes Smith, 2005). The 787 was not designed in direct competition with another companys aircraft, but rather as an improvement to

the 767 and 747 designs, in which orders had slowed (Gunter, 2002). This gave Boeing the freedom to design the features that would make the airplane meet their own goals, rather than to out-do a competitors airplane. This led to industry leading developments, with the composite airplane design, allowing the aircraft to be more fuel efficient. Positioning The advancements that the 787 had were a major draw to the airlines, garnering 237 aircraft orders by the end of 2004 (Marsh, 2010). Boeing was able to position its product favorably in the minds of customers relative to competitive products. These advancements over the previous versions of Boeings commercial aircraft created an impression of a large leap in technology, and made the 787 very desirable to airlines that could benefit from the improved fuel savings that were offered. Since the 787 was a new design, there was no immediate competition with other companies. That changed when Airbus developed the A350, in response to the 787. Airbus was playing catch-up at that point, so Boeing still held the markets attention as the innovator. Marketing Strategy The Product Boeing is the leading aerospace and defense manufacturer earning the highest revenues over any other company (PwC, 2012). Boeings global market expands to 150 countries (Boeing, 2013). With such a large market, narrowing the target market for the 787 is of extreme importance to ensure success. This section will discuss marketing the 787 to the target market, the best places to target, the recommended promotion and ensuring competitive pricing. The 787s definition as a product is a passenger-carrying, mid-sized, wide-body, longrange aircraft. Defining the 787 with such characteristics greatly reduces the target market to

passenger carrying airlines. Furthermore, the market is reduced to those airlines operating with long-haul flights ranging from 3,000 miles to a maximum of 8,500 miles (the max range of the 787-9) (Boeing, 2013). The number of non-stop, city pairs greater than 3,000 miles has doubled since 1990 providing a greater demand for mid-sized, long-range aircraft for which the 787 was designed for (Babej & Pollak, 2006). The 787 is unlike any airplane currently carrying passengers. The aircrafts composite structure, newly-designed wings, electric architecture, and powerful top-of-the-line engines make the 787 20% more fuel-efficient and produces 20% less fuel emissions than that of similar sized aircraft (Boeing, 2013). The 787 also offers 20-45% increase in cargo revenue (compared to competitors) for extra space built within the cargo holds of the aircraft (Boeing, 2013). As fuel prices increase and airlines looking to reduce operating costs and increase revenue, the 787 appears as the most viable option. Boeing has been building aircraft since 1915 and, as previously discussed, provides products and services to 150 countries. The Boeing brand name is known world-wide for creating reliable, high-quality aircraft. Just like the early aviation days, Boeing is one of few aircraft manufacturers who still name their aircraft. Usually, Boeing determines the name through a series of, naming workshops: however, they decided to let the public, the consumers, choose the name (Tinseth, 2011). The public chose Dreamliner over four other options. Allowing the general public to name the 787 can subconsciously create a bond with the public and the aircraft; aiding in the thought process that the 787 is their airplane. For Boeing to market the 787 appropriately, the aircraft must be classified and marketed as an organizational good. 787 sales and promotions must be geared toward the organization that will be using them. With the setback of the lithium-ion battery issues which grounded the aircraft

for some time, Boeing needs to promote the reduced operating costs, their service support for the aircraft, and the main selling point of organizations increasing revenue by using the 787 over the competitors. Also, there needs to be guarantees to the airlines that the new boxes created for the batteries are fail-proof. The airlines job in promoting their use of the 787 will fall under a different category; mainly promoting the passenger comfort and environmental considerations. The warranty options for the aircraft dont need to change from what is already in place. Per the existing warrant, the company must continue to replace the previous batteries and enclosures with the new batteries and enclosures that have many more safeguards in place. Boeing has the replacements ready and support in place with personnel and equipment to allow for expedited replacement of the possibly faulty parts (Sinnett, 2013). When disclosing the warranty with current or new customers, Boeing must emphasize the safeguards in place to prevent the 787 from being grounded for the battery and enclosure issues; subsequently placing the customer in a position where millions of dollars are lost in revenue. The product life cycle correlating to the Boeing 787 is similar to that of any aircraft. Innovations in technology and manufacturing will promote growth in engineering more efficient, cost effective aircraft. The 787 is the first of large commuter aircraft of its kind. Combining the composite structure, fuel-efficient engines, fly-by-wire electrical flight control system, interior comfort and design, and cost effectiveness, the 787 is the only aircraft having all these characteristics in one aircraft. Therefore, the 787 will lead the market until competitors (i.e. Airbus), introduce similar aircraft into the mix. Airbus plans to unveil the A350-800, the 787 equivalent, near the end of 2014 (Teresko, 2007), so in the meantime, Boeing owns the market for composite, passenger-carrying aircraft. Boeing must use this time to promote the aircraft and place as many orders as possible before competitors enter the market. Subsequently, Boeing

must also be working on innovations to the 787s to be able to offer variants that competitors will still not have once they have entered the market. The Place The ideal market exposure for the 787 exists for those airlines who operate long-haul flights; those consisting of non-stop distances between 3,000 to 8,000 miles. The number of cities that offer non-stop flights greater than 3,000 miles has doubled since 1990 which shows customers prefer more point-to-point flights (Babej & Pollak, 2006). Boeing can use its good standing service with its current market, comprising mostly of the U.S. and Europe to ensure 787 sales; however there are two other places, largely dominated by Airbus, which Boeing needs to penetrate their market. Two growing markets that make for ideal exposure for the 787 are Asia and the Middle East. Within the Asian market, 44% of scheduled flights using wide-body style passenger aircraft come from the region (Reuters, 2013). There are agreements in the works within Southeast Asia for allowing less regulation to aircraft operating within the region (Association of Southeast Asian Nations-ASEAN, 2013). Once the Open Skies policies take place, Asian aviation growth is expected to increase dramatically providing more routes within the region (Association of Southeast Asian Nations-ASEAN, 2013). By the year 2030, it is expected that Asia will add a minimum of 2.5 billion people to the middle classes which will lead to more people traveling (Asian Aviation: exponentional change and innovation with global impact, 2010-2012). The middle class will tend to travel more; however, they are still somewhat discerning of ticket prices. This is an advantage for the 787 and its cost effectiveness and overall efficiency within the Asian and Indian markets.

The second area that specifically needs to be targeted is the Middle Eastern Market. In the past 10 years, traffic to and from the Middle Eastern region has grown by 236% (Amin, 2013). Amin, further states that, traffic in the Middle East will increase by 6.2 percent annually over the next 20 years, with airline fleets expected to grow three times by 2031, (Amin, 2013). An increase of seven percent in passenger traffic over the next 20 years sets the stage for a requirement of over 800 twin-aisle aircraft and over 300 large transcontinental aircraft (Amin, 2013). These numbers indicate the booming market in the Middle East for aviation. Boeing must promote the 787 to a largely Airbus dominated region. As discussed, the main selling points are that, overall, everyone is looking to save money; that goes for the airlines who are buying the aircraft, to the passengers who are buying tickets to fly on them. The price advantage is where Boeing can potentially dominate the market. Promotion When it comes to promoting the B787, Boeing should focus on consumer promotions since that Boeing is selling directly to the consumer and not retailers. The consumer buying process for acquiring aircraft is a long and tedious process. Before there are any decisions made on the specific aircraft, consumers generally start with pre-acquisition decision making: should the aircraft be new or used, what is the specific mission of the aircraft, the analysis of the performance, cockpit and cabin, and budget of the aircraft, and market analysis (Aircraft Acquisition Process). The best way to promote the 787 to ensure it is the best option once the decision is made as to which aircraft to buy. In the first step of the aircraft acquisition process, the consumer must determine whether to buy a new aircraft versus a used aircraft (Aircraft Acquisition Process). Boeing must get the consumer to choose to buy a new 787. The way they can accomplish this is promote the warranty

on the aircraft, the products and services available for buying a brand new 787 (customer support), the latest state-of-the-art equipment and amenities on-board the aircraft, and the promotional standpoint for the company to get passengers to fly on-board the, latest and greatest, aircraft on the market (Aircraft Acquisition Process). In the next step, the 787 must meet the mission requirements for the airline (Aircraft Acquisition Process). The 787 is meant for those long-haul flights and the seller must be in a position where they are trying to fly longer distances, or replacing/upgrading to new equipment with long-haul routes already in place. Boeing must also be able to provide those services and support to regions outside the country along with training on maintenance and piloting. If the company has limited long-haul routes, there should be emphasis on growth and expansion possibilities by using the 787 to reach those further destinations. The 787 is a passenger-carrying aircraft. The mission requirements for this aircraft are narrow, so the amenities must be promoted. Those amenities include, but are not limited to, interior passenger comfort, increased cargo space for ancillary revenue, various seat numbers per the different variants, and the extra overhead baggage space (Aircraft Acquisition Process). Also, there must be analysis on the budget and whether the 787 will meet that requirement. Next, the consumer will analyze the aircraft in extreme detail. During this step, Boeing can promote the 787s performance. This is a key selling point for the 787 being the only aircraft made out of composites resulting in greater aerodynamics, improved fuel-efficiency, reduced maintenance costs, and fewer harmful emissions (Boeing, 2013). Also, Boeing can promote the range differences between the 787 variants to better suit the needs of the consumer (Aircraft Acquisition Process). If the aircraft has less time being down for maintenance, that means there is more time for it to be in the air providing revenue for the company.

Further analysis in the aircraft is the cockpit and cabin (Aircraft Acquisition Process). Primary selling points over competitors in this area are the luxurious cabin with the three different classes available for passengers. The 787 humidifies the air on-board the aircraft and has reduced the common cabin-pressure altitude during the flight by 2000; thus reducing headaches and general discomfort during flights (Boeing, 2013). Passengers frequently complain about the limited leg space, cabin height, and baggage space on-board most aircraft; therefore, using the new improvements the 787 offers to passenger comfort is a key to marketing the aircraft. In regards to cockpit innovations, not necessarily new, the fly-by-ethernet system on board that allows for reduced weight and components on-board the aircraft, and all new state-ofthe-art glass cockpit avionics (Boeing, 2013). The final part of aircraft analysis is probably the most important to consumers: the budget (Aircraft Acquisition Process). According to the Boeing website, the base price for the 787-8 (the cheapest variant) is $211.8M (2013). According to the Airbus website, the cheapest variant of the A350 (A350-800) is priced at $287.7M (2013). This is one leg up on the competitor by offering a cheaper price. This base price does not include multiple orders, orders for existing customers, or upgrading options. By giving discounts to existing customers and orders containing a certain amount of aircraft, Boeing will maintain their current consumer base, as well as, earn new clients in the process. Boeing must also advertise the reduced maintenance costs, which lower budgets, and total operating costs (Boeing, 2013). The final step before the aircraft is selected is market analysis (Aircraft Acquisition Process). As previously discussed, the increase in people flying on those long-haul flights, and the rise in the markets in Asia and the Middle East show that the market for the mission of the 787 is on the rise. The 787 will meet the needs of consumers as long as Boeing can deliver the

products promised: aircraft on time, support, training, and services. Analyzing all the components, the 787 is the most viable choice for airlines seeking to upgrade or introduce longhaul flights and the least amount of costs to the passenger and airline. Implementation and Control For implementation of the marketing plan, Boeing sales representatives will divide into the two regions previously listed: Southeast Asia and the Middle East. Each sales associate will obtain cultural training for each region to promote new partnerships and build upon existing partnerships with the perspective airlines. Once sales meetings are in place, prices can be negotiated on a specific range for the 787. The Southeast Asian region sales representatives will be divided by countries and acquire training on each perspective culture with a brief, overall region culture training. There will be two sales representatives per country. The countries will China, Malaysia, India, and Korea. Once the sales representative complete training, the pairs will contact the perspective airline(s) for the region. For China, the airlines targeted will be Air China, Cathay Pacific, China Eastern Airlines, and China Southern Airlines. The Malaysian airlines targeted will be AirAsia X, Malaysia Airlines, Thai Airways, and Singapore Airlines. The Korean airline targeted is Korean Air. The Middle Eastern Airlines sales representatives will also receive training on specific countries, be divided into pairs, and obtain brief training over the target region. The countries include Bahrain, Kuwait, Qatar, United Arab Emirates (UAE), Saudi Arabia, and Dubai. In Bahrain, the targeted airline is Gulf Air. Kuwaits target airline is Kuwait Airways. Qatars airline is Qatar Airways. UAEs targeted airlines are Etihad Airways and Air Arabia. Saudi

Arabias targeted airline is Saudi Arabian Airlines, also called Saudia. Finally, the airline for Dubai is Emirates. After training is complete, sales representatives will arrange meetings with their perspective air carriers. The goal is to establish 787 sale orders with long-term contracts to each airline. Air carriers placing orders for a minimum of 5 aircraft, and/or establishing contracts for a maximum of five years to obtain 10 or more aircraft can buy the aircraft at a base price of $116M. All others can be negotiated prices from $164M to $288M (listed price for 787-10) (Boeing, 2013). For added incentives on sales, sales groups (each respective pair) will be able to earn .1% commission on each aircraft sold, before taxes.

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