This report is being compiled to describe an effective marketing plan for Boeing 777-LR; a twin aisle commercial airliner designed to cater the needs of modern day passengers.
Market demand sized, shaped and launched the newest member of the Boeing twin-aisle family, the 777. The airplane design offers features, innovations and approaches to airplane development that set the standard for delivering value to airlines. The airplane is larger than all other twinjet or tri jet airplanes and smaller than the 747. It brings the twin-engine economic advantage to medium- and long-range markets.
Boeing is the world's leading aerospace company and the largest combined manufacturer of commercial jetliners and military aircraft. With additional capabilities in rotorcraft, electronic and defense systems, missiles, rocket engines, satellites, launch vehicles and advanced information and communication systems, the company's reach extends to customers in 145 countries. In terms of sales, Boeing is one of the largest U.S. exporters.
As a part of this marketing plan, Pest analysis was conducted as a means of discovering the Political, Economic, Socio-cultural and Technological forces that affect the macro-environment which Boeing operates within.
These macro-environment analyses are followed by closer look at the market region, which I am targeting as a part of the marketing plan. The Boeing Current Market Outlook 2005 projects an annual growth for the Asia Pacific Air travel industry 4.4%, which is above the world average of 3.1% annually (Boeing Current Market Outlook, 2009). The biggest growth is predicted in the single aisle and twin aisle (like a 777-200LR). Further, the World Tourism Organization predicts Asia Pacific's tourist arrivals to increase from 81 million arrivals in 1995 to 195 million in 2010 and to 397 million in 2020.
This marketing strategy will be to both, leverage the twin aisle airplane segment growth rate as outlined in the Boeing market outlook 2009 and to position the 777-200LR as an economical alternative to the 747 airliner.
For effective implementation of marketing objectives, a two tier marketing strategy mix has been devised targeting the end-users (passengers) to create awareness about the technological marvel, which Boeing has achieved by the development of Boeing 777-200LR and the second tier of the marketing mix strategies will target the airline industry. A complete budget layout to execute this marketing mix has been also been incorporated as a part of this marketing plan.
The scope of this report spans from situational analysis of the market for Boeing 777-ER to marketing objectives and higher level marketing strategies for securing an effective market share in twin aisle commercial jetliner segment.
This report also includes a brief outlook of marketing mix strategies followed by an implementation plan; budget allocated for the implementation plan and different evaluation procedures, which will be observed to benchmark the effectiveness of the marketing plan.
Boeing 777 Program Background
Boeing launched a twin-aisle family, the 777. The airplane design offers features, innovations and approaches to airplane development that set the standard for delivering value to airlines.
The airplane is larger than all other twinjet or tri jet airplanes and smaller than the 747. It brings the twin-engine economic advantage to medium- and long-range markets.
The 777 currently is available in six models: 777-200, 777-200ER (extended range), 777-200LR (longer-range), 777-300 and the 777-300ER, and the 777 Freighter.
Boeing has a long tradition of aerospace leadership and innovation. The company continues to expand its product line and services to meet emerging customer needs. The broad range of capabilities includes creating new, more efficient members of its commercial airplane family; integrating military platforms, defense systems and the war fighter through network-centric operations; creating advanced technology solutions; providing broadband connectivity on moving platforms including airplanes; and arranging innovative customer-financing solutions.
Boeing is organized into five business units:
- Boeing Commercial Airplanes
- Boeing Integrated Defense Systems
- Boeing Capital Corporation and Connexion by Boeing(SM).
- Shared Services Group
- Boeing Technology
Business definition and scope
Boeing Mission statement(s)
"People working together as a global enterprise for aerospace leadership."
- Detailed customer knowledge & focus
- Large Scale Systems integration
External Environment - Near environment
Asia Pacific countries
The following countries make up the Asia Pacific region: China, Southwest Asia, Northwest Asia, South East Asia and Oceania.
The Boeing Current Market Outlook 2009- 2028 projects an annual growth for the Asia Pacific Air travel industry 4.4%, which is above the world average of 3.1% annually (Boeing Current Market Outlook, 2009). Also, Boeing expects the number of aircraft operating in the Asia Pacific market to increase with 8900 airplanes to a total of 11,170 airplanes. The biggest growth is predicted in the single aisle and twin aisle (like a 777-200LR).
In this paragraph, the companies and aircraft that are a direct competitor to the Boeing 777- ER are discussed.
Hooley, Saunders and Piercy (2004) identify three segments of competitors:
Airbus is Boeing's main competitor as they have access to comparable resources, both technically and financially, to outperform Boeing on all aspects of aircraft design.
Alongside the 777 -200LR model, older and / or similar aircraft specifications are still on offer. Even though the 777- 200LR has some distinctive features such as the fact it is able to reach all major cities of the world from a major airport without the need to refuel, airlines might not identify some unique 777- 200LR features as key determinants in choosing an aircraft specification.
The industry competition segment is comprised out of some major players such as BAE, General Dynamics and Lockheed Martin. Even though not all of these have the possibility to design and build an aircraft in the near future, strategic alliances with several powerful players can emerge with the capability to manufacture aircraft enabling them to compete on the long distance aircraft market.
New entrants or substitution
A vast amount of resources are needed for a new player to compete in the long distance aircraft segment, that this is a neglect able threat.
An upcoming segment in the travel industry is sea travelling. Cruise boats have become increasingly sophisticated and provide a good amount of comfort, space and service unmatchable by any aircraft.
As the 777-ER is production ready and new aircraft development has a multi year timeframe, it is beyond the purpose of this report to intensely discuss the industry competition and new entrants / subsidies segments: they are unlikely to form a major threat in the foreseeable future
The 777-200 LR will be marketed towards the Asia Pacific based members of the world's 50 largest airlines list published by the IATA World Air Transport Statistics, 2008.
The following South East Asian carriers are present on this list:
- Malaysia Airlines (22nd in international traffic, 25th in domestic traffic)
- Singapore Airlines (6th in international traffic, not present in the domestic top 50 )
- Thai Airways (8th place in international traffic, 39th in domestic traffic)
Not only are the world's top 50 airlines the biggest in terms of kilometers, they are also the biggest in revenue. These airlines have the largest amount of resources at their disposal and are able to acquire, maintain and operate a significant and modern air fleet.
Therefore, a state of the art aircraft as the 777-200LR is most likely to be a success when targeted towards airlines part of the world's top 50.
Boeing is highly dependent on the availability of essential materials such as aluminium and titanium (Boeing Annual report, 2009). Many components are procured on a sole-source basis and Boeing is highly reliant on these suppliers in terms of timely delivery and quality.
The Boeing 777-200LR makes extensive use of materials such as titanium and aluminium. When prices for these materials increase, Boeing would have to recalculate the cost price of a 777-200LR based on these new prices.
Critical Success Factors
- The long-term outlook for air travel is robust. World air travel has shown positive growth for 32 of the past 35 years. Only 1991 and 2001 through 2002 have experienced negative growth. In 2004, following double-digit increases, world air traffic reached a new historical high in 2009.
- The globalization of world economies and societies continues. Over the 20-year Outlook period, increasing numbers of people will travel to visit friends and relatives, to transact business, and to enjoy leisure and educational opportunities not available close to home. Deregulation and liberalization enhance airline competition, which in turn fosters lower fares, as well as the additional frequencies.
- Passengers want to reach their destinations quickly. Passengers will avoid itineraries that require several hub connections and numerous segments to complete a journey. Where possible, airlines will provide passengers point-to-point service on busy routes.
- Airlines' network development strategies influence their airplane acquisition decisions. Airlines take into account government regulations, airplane capabilities and economics, passenger requirements, competition from other airlines, alliances, and the maturity of an airline's existing network.
- Cost reductions and increasing efficiency play an ever-larger role in airline decisions. Although the proliferation of truly low-cost carriers will continue around the globe, almost every airline strives to cut costs and enhance productivity. The cost-containment mindset is now pervasive and will govern nearly every aspect of the industry for the foreseeable future.
- In short-term cycles, air travel demand can fluctuate widely. Consumer confidence and business profits can be strong influences on air travel demand during a business cycle. Travelers treat discretionary air travel as much as they treat more durable goods such as computers and automobiles.
- Various factors influence initial air travel share. Government regulation may limit air travel. Small countries with well-developed ground networks such as high-speed rail may offer alternatives to air travel.
- Infrastructure develops alongside air travel demand. History shows that, in specific markets, infrastructure supply and air travel demand are often not synchronized.
Situation Analysis - Internal capabilities
Boeing's legacy of leadership in commercial jets, joined with the lineage of Douglas airplanes, gives the company a combined 70-year heritage of leadership in commercial aviation. Also,
- Detailed customer knowledge and focus, where they seek to understand, anticipate and be responsive to customers' needs.
- Large-scale systems integration, where they continuously develop, advances, and protects the technical excellence that allows them to integrate effectively the systems they design and produce.
- Lean enterprise, where the entire enterprise will be a lean operation, characterized by the efficient use of assets, high inventory turns, excellent supplier management, short cycle times, high quality and low transaction costs.
Strategic Marketing Capabilities
Market sensing Capability Boeing has selected Mercer's Value-Driven Business Design process as the best method for new-business design. The value-driven design process addresses the importance of thoroughly understanding a marketplace and the factors that dictate customer decisions. (Source: Katherine Sopranos, "Grow down this road", http://www.boeing.com/news/frontiers/archive/2005/march/mainfeature2.html)
Functional Marketing Capabilities
Customer relationship management: at the heart of any commercial airplanes sales campaign is customer relationship. Equally important, is the sales team that must have a fundamental understanding of current economic and political environments within which customers operate.
Customer Access Capabilities: Boeing offers assistance wherever and whenever the customer needs it—from spare parts to training to creating fleet solutions. (Source: Kathleen Spicer, "Relationships crucial in multi-million-dollar sales campaigns", http://www.boeing.com/news/frontiers/archive/2003/february/i_ca1.html).
Product Management Capability:. Boeing believes every spoke on the sales team wheel was essential to make this campaign a win for Boeing. For instance, Product Marketing explains the advantages of the Boeing airplane over the competition's product; Customer Engineering helped the customer visualize the modifications; and Aviation Services Sales convince the customer, while also provide a spares-provisioning support package. In true Boeing spirit, it is a global team effort. (Source: KATHLEEN SPICER, "Relationships crucial in multi-million-dollar sales campaigns", http://www.boeing.com/news/frontiers/archive/2003/february/i_ca1.html).
Marketing Objectives and Higher Level Marketing Strategies
The marketing strategy will be to both leverage the twin aisle airplane segment growth rate as outlined in the Boeing market outlook 2009 and to position the 777-200LR as an economical alternative to the 747 airliner.
The Boeing market outlook report, 2009, defines the following aircraft segments:
In 2008, the company has sold 18,800 aircraft. The twin aisle segment will have a share of 23% of the aircraft market in 2028, compared to the 18% it has now.
The twin aisle segment today consists out of 3510 airplanes, which will increase to a number of 8080 by 2024 (130% increase). Although from the above tables it can be noted that the single isle segment is greater in number, but the twin isle segment is generates more revenue, which is why we will focus on this segment.
The aim is to sustain and achieve growth rates with the Boeing 777 series in line with these market trends: to increase the sales taking to annual sales of 115 planes (200% increase compared to current sales figures) 777 passenger aircraft by 2028.
The aim is to steadily increase Boeing 777 sales in the years towards 2028. The goal of selling 115 - '777s' in 2028 will be reached with yearly increases in sales. The difference between the current sales of 98 Boeing 777s for fiscal year 2008 to the targeted sales of 115 Boeing 777s for fiscal year 2028 will be achieved by an annual increase of sales by aircrafts, which will be implemented by cyclic rotations between Major and Smaller Segments.
The aim is to achieve 80% of these sales in the major market segments / continents and 20% in the smaller segments / continents. This will then be equally divided over the separate regions. Despite the fact that marketing efforts towards the airlines outlined in this report will focus around replacing existing 747s.
The sales target for the Asia Pacific region in 2010 is 6 aircraft. This will then increase to 9 aircraft for 2012, and 12 for 2014. In the year 2015, the marketing strategies and objectives will be reviewed on their success and changed accordingly.
Marketing Mix Strategies for Segments
Products/brands servicing this segment
There are three main competitors servicing this segment but these three types are further classified into different variants depending on their technical specifications designed to cater particular market need ranging from extended range to higher load capacity. Names of three main competitors are as follows;
- Boeing 767
- Airbus A340
- Airbus A330
Marketing Mix strategies for Boeing 777-200 LR has been designed to signify the following features in the mind of end users, creating an effective brand/product positioning. Key features are as follows;
- Advanced Technology
Segment 1- End Users (B2C)
Passengers don't have a direct role in the decision making process of an aircraft purchase but their preferences have a significant influence in the whole decision making process. Airlines want to provide preferred services and products to their customers. Therefore the marketing mix strategy for this segment will focus on and target the end users (passengers) and the key objective of this campaign is to create general awareness for Boeing 777-200 LR.
Segment 2- (B2B)
Airline Industry - devising a marketing mix strategy for the Airline Industry, which are the principal customers isn't as easy as devising a marketing mix strategy for the B2C market.
Certain important factors had to be considered before an effective marketing mix strategy was devised. These factors are;
- Cost reductions and increasing efficiency play an ever-larger role in airline decisions.
- Technology is improving the way airlines do business.
- Infrastructure developing alongside air travel demand.
Boeing operates in ten regions. These regions have been divided up into minor or major regions allocating 20% and 80% of the budget respectively. Minor regions include South West Asia, Africa, Oceania and Latin America. Major regions include the Middle East, Europe, South East Asia, China and North East Asia.
The average price for a 777-200LR aircraft is $221 million. Therefore, the revenue gained from the number of aircrafts sold (as a prediction) for 2009 is US$10.44 billion. If 5% of this figure is used towards marketing expenses, Boeing's total marketing budget will equal up to $522.2 million. This budget will remain constant for the first three years, and on the fourth year, the budget will be re-evaluated.
For the Asia Pacific region, being in the major region classification, $69.5million a year for a marketing budget has been allocated.
IMPLEMENTATION AND EVALUATION
Business to Business Operations
Boeing is dealing with the airline industry and the implementation of the marketing mix strategies for achieving the marketing objectives will be primarily based on personal selling. Depending on different airlines and their corporate strategies, sales of Boeing 777 - 200LR may vary. Therefore, there is no definition of hard line evaluation standards to establish effective evaluation of marketing mix implementation but every sale and promotional pitch delivered by the sales staff will be closely monitored by the senior marketing managers. Based on these evaluations, the effectiveness of that particular sales pitch will be analyzed. These sale pitches will be modified and refined after the analysis.
Business to Customers Operations
For the business to customer side of the operation, which has been incorporated as a part of the marketing mix strategies to create general awareness for Boeing 777 - 200 LR can be easily quantify. Standard evaluation methods to evaluate marketing operations will be used.
Advertising will take place across of number of different mediums including television, print and outdoor (Air Shows). A budget of US$14.5 million is provided for advertising and promotions the first year.
The Integrated Marketing Communication methodologies will be judged on their ability to create brand identity, develop brand awareness and they will be assessed throughout the year in order to change aspects which are not working towards fulfilling these aims.
- Aircraft info: adapted on 30th September www.aircraft-info.net
- Baack, Donald and Clow, Kenneth, "Integrated Advertising, Promotion, and Marketing Communication" - 2nd Edition
- Boeing Annual Report 2009
- Boeing, 2005. Current Market Outlook. Seattle, viewed 28 November 2009,<http://www.boeing.com/cmo_OutlookReport.pdf>
- n.d Boeing in Brief, viewed November 29, 2009 <http://www.boeing.com/companyoffices/aboutus/brief.html>
- n.d Boeing 777 Program Information, viewed November 28, 2009 <http://www.boeing.com/commercial/777family/background.html>
- Hooley, G. Saunders, J. Piercy, N. "Marketing Strategy and Competitive Positioning", Prentice Hall, Edinburgh, England, 2004.
- IATA world air transport statistics, 2009
- International Air Transport Association Annual Report, 2009
- Kathleen Spicer, "Relationships crucial in multi-million-dollar sales campaigns", adapted on Nov 22nd, 2009 http://www.boeing.com/news/frontiers/archive/2003/february/i_ca1.html.
- Katherine Sopranos, "Grow down this road", adapted on 22nd Nov, 2009, http://www.boeing.com/news/frontiers/archive/2005/march/mainfeature2.html
- Malaysian Airlines Annual report, 2004-2005
- Roskill "One of the worlds leading providers of information on raw material" adapted on November 21st 2009 , www.roskill.com
- Singapore Airlines Annual report 2004/2005 and 2008/2009
- Steve Hansen, September 26, 2005, The Future of the Commercial Airline Industry to Be Focus of Congressional Hearing, adapted from: http://www.house.gov/transportation/press/press2005/release103.html
- Thai Airways Annual report 2009
- Wikipedia: adapted on October 3rd , http://en.wikipedia.org/wiki/Airbus.
- World distances: adapted on October 3rd, http://www.wcrl.ars.usda.gov/cec/java/lat-long.htm
- World Tourism Organization
- The world's leading source for tourism data, adapted on November 28th 2009, http://www.world-tourism.org/facts/menu.html