Company Case Notes

Boeing: Selling a Dream(liner) Synopsis Boeing has long been one of the largest corporations (and largest exporters) in the United States. While it has certainly had its share of ups and downs, this case begins by revealing Boeing on an uptick. Record revenue and profits set the stage for the introduction of perhaps its most innovative and ambitious project to date: the mid-sized Dreamliner jet. This case examines business-to-business markets by considering the many and complex factors that both company and customer have to consider in the buying and selling of major industrial products. For a product costing over $160 million, Boeing easily racks up order prices into the billions of dollars. Relative to consumer markets, Boeing has few customers, each of whom purchase few products. But the amount spent by each customer is gigantic. As far as serving the customer, there are an endless number of benefits sought. Not only do airline companies look for things like fuel efficiency and on-time delivery, but they seek to provide features that will ultimately please their customers. The repercussions of a failure of any of the sought-after features could be tremendous. This case takes a turn as setbacks and problems in the Dreamliner program are highlighted. The contrast of success and crisis provide a fertile landscape to discuss the issues of business markets and business buyer behavior.

Teaching Objectives The teaching objectives for this case are to: 1. Allow students to understand and appreciate the differences between consumer and business markets. 2. Help students understand the differences between consumer and business buyer behavior. 3. Provide an opportunity for students to analyze product features and benefits that result for commercial customers. 4. Allow students to make recommendations to Boeing as it attempts to manage an emerging negative customer situation. Discussion Questions 1. Discuss the nature of the market structure and demand for the Dreamliner. What are the implications of this for Boeing and its customers? Table 6.1 from the text provides the backdrop for discussing this question. The implications for any and all of these points may be discussed. Suggestions for the points that are most relevant to this case are given below.

Implications for Boeing Business markets contain There is a great deal of few but larger buyers. pressure on Boeing to maintain strong customer relationships and deliver on promises. Business buyer demand is It is essential that derived from final Boeing understand the customer. needs, wants, and desires of the end user, not just the corporation. Also, Boeing must keep an eye on sales trends in the consumption of airline travel. Demand is more inelastic. Coming up with the exact right price may not be as important as providing the right features and benefits to customers.

Implications for airline Airlines should understand how important they are to Boeing and take advantage of the sales force attention. It is essential that the airline understand its own customer in order to communicate customer requirements to Boeing.

The airline must accurate forecast the number of units that it needs. It should also maintain strong procurement resources in order to ensure that benefits are delivered as promised. Airlines need to consider means of spreading demand out in order to create a more level structure in terms of its own costs.

Demand fluctuates more Boeing needs to and more quickly. maintain flexibility in order to adjust to downturns and spikes in demand.

2. What examples of the major types of buying situations do you see in the case?

Because this case focuses on one specific product, most of the discussion is going to center around one particular type of buying situation. The big question is, for the airline customers involved, what type of purchase does the Boeing 787 represent? There may be some difference of opinion here. After all, the 787 is by Boeings own statements, an all-new product. Thus, there may be students who classify this purchase as a new-task. However, the definition of a new-task is one in which a company is buying a product or service for the first time. Whether or not the 787 represents a new purchase situation is questionable. Each airline mentioned in the case has certainly bought commercial jets before. They understand the implications of every small detail on their own business and on their own customers. We might even assume that these airlines have purchased from Boeing before. If not, they most certainly have purchased from Airbus. Thus, there are those students who will claim that this situation better fits the description of a modified rebuy. That is, each customer is buying planes just as it has before. But they are changing product specifications, prices, terms, or suppliers. There is greater support for this being a modified rebuy than a new-task. Regardless of the classification, the purchase of a Boeing 787 is no small undertaking. One of the things that customers will not have to worry about is dealing with a new vendor or having to hire expert personnel in order to fill a gap in its ability to manage account relations. However, beyond this, it is likely that customers will expend as much time, human resource, and capital as it would if this were a new-task. There isnt any direct discussion of any straight rebuys in this case. However, one might assume that the mention of current models such as the 737 represent situations in which some customers might engage in a straight rebuy. But even with such products, a straight rebuy would have to be one in which the same number of units was purchased at the same price as a previous order. This is not likely to be the case and this should be noted. Thus, in this case, we are probably witnessing a broad range of differences within the modified rebuy situation. 3. List the specific features of the Dreamliner. What customer benefits result from each? Light-weight the benefits of this include greater fuel efficiency and longer range. These benefit further translate into benefits of lower fuel costs and greater flexibility in managing routes. Multiple passenger configurations the jet can be used for both short and long-haul and eliminates the need to have more models in a fleet. Larger cargo space Safety features Provides peace-of-mind for both company and passenger. Technological maintenance features reduces maintenance time thus reducing departure delays and cancellations.

Cabin amenities (these can be delineated) provide greater comfort, less fatigue, and more enjoyment of the flight experience.

4. Discuss the customer buying process for a Boeing airplane. In what major ways does this process differ from the buying process a passenger might go through in choosing an airline? Based on points discussed in questions 1 and 2, it should already be apparent that this buying situation is very high as to the level of complexity. Therefore, it is important that students recognize that customers involved will go through a very extensive buying process. Not only are there more steps involved in the business buying process than there are in the consumer buying process, but for a complex modified rebuy, the customer is certainly going to go through each of these steps from a very analytical perspective. The purchase of an airline ticket by a consumer may be classified in a few different ways. For the customer who travels the same route regularly, this is a routine purchase that does not require a great deal of time or mental effort in arriving at the purchase decision. For the leisure traveler who is engaged in this purchase as a once-in-a-while extravagance, the purchase process would require considerably more time and effort. However, there is no question that in either case, there simply are not as many factors to consider as in the case of an airline buying a 787. In addition, the outcomes are more numerous and the stakes are much higher. 5. What marketing recommendations would you make to McNerny as he continues to try to resolve the problems with the 787 Dreamliner program? Student responses will vary.