marketing research on boeing

The Boeing CompanyOverview

PROBLEM DIFINITION

THE CUSTOMERS DID NOT RESPOND THE CUSTOMERS DID NOT RESPOND EFFECTIVELY TO THE SERVICE EFFECTIVELY TO THE SERVICE

PROVIDED BY BOEINGPROVIDED BY BOEING

The Boeing Company

OverviewOverview

How Boeing is OrganizedHow Boeing is Organized

Corporate functions:

Business Development and Strategy

Communications

Engineering, Operations and Technology

Finance/Shared Services Group/Boeing Capital Corp.

Human Resources/Administration

International

Law

Office of Internal Governance

Public Policy

World-class performance

Integrated Defense Systems

Commercial Airplanes

Two businesses supported by nine corporate functions

Company LeadershipCompany Leadership

Mission

To be the number one aerospace company in the

world and among the premier

industrial concerns in terms of quality,

profitability and growth

MISSION STATEMENTMISSION STATEMENT

CULTURE- VALUESCULTURE- VALUES

LEADERSHIP INTEGRITY QUALITY CUSTOMER SATISFACTION PEOPLE WORKING TOGETHER A DIVERSE AND INVOLVED TEAM GOOD CORPORATE CITIZENSHIP ENHANCING SHAREHOLDER VALUE

OBJECTIVESOBJECTIVES

CONTINUOUS IMPROVEMENTS IN QUALITY OF PRODUCTS AND PROCESSES

A HIGHLY SKILLED AND MOTIVATED WORKFORCE

CAPABLE AND FOCUSED MANAGEMENT TECHNICAL EXCELLENCE FINANCIAL STRENGTH COMMITMENT TO INTEGRITY

CORE COMPETENCIESCORE COMPETENCIES

Detailed customer knowledge and focusBoeing seek to understand, anticipate and be responsive to the customers' needs.

Large-scale systems integrationBoeing continuously develop, advance, and protect the technical excellence that allows us to integrate effectively the systems we design and produce.

Lean enterpriseBoeing’s 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.

CORE COMPETENCIESCORE COMPETENCIES

ACHIEVEMENTS & REWARDSACHIEVEMENTS & REWARDS

2005 Awards The US Environmental Protection Agency

(US EPA) named Boeing one of its Best Workplaces for Commuters (for company programs that encourage HOV participation.

Vista Fibers presented Boeing's San Antonio Aerospace Support Center with an outstanding achievement award for the center's recycling efforts (recycling more than 180 tons of paper in 2004).

2006 Awards The National Business Group on Health, a

national non-profit organization, named Boeing one of the Best Employers for Healthy Lifestyles.

ACHIEVEMENTS & REWARDSACHIEVEMENTS & REWARDS

SITUATION ANALYSISSITUATION ANALYSIS

PEST ANALYSIS

Political factor Economic factor Social factor Technological factor

SWOT ANALYSIS

Strengths

• Strong global network• Broad product line that covers most major market niches / R&D development


Weaknesses

• A hierarchical, ridged, and semi- autocratic management style, which is a product of its military heritage.• Labour problems.• Dependence on US government and WTO-incompatible subsidies.


Opportunities

• New aircraft to gain market share• Increase demand for point to point routes


Threats

• Slowdown in the commercial jet market• Uncertain airline industry environment


TOP COMPETITORSTOP COMPETITORS

1. Airbus

2. Lockheed Martin

3. Northrop Grumman

VS

COMPETITOR ANALYSISCOMPETITOR ANALYSIS

Extremely high capital requirements

High risks New product development

cost are high Long payback periods

Cyclical demand Only a few can

survive Swings through

boom and bust cycles

A. CHARACTERISTICS OF THE INDUSTRY

Know - how Capital costs Long time horizons

Risks High fixed costs

B. BARRIERS TO ENTRY

COMPETITOR ANALYSISCOMPETITOR ANALYSIS

MARKETING POLICYMARKETING POLICY

Segmentation Boeing uses Geography as its

segmentation tool. Short haul routes appear to reveal that Europe and North America is the more attractive segment.

Double-digit growth in revenue and earnings

INVESTOR RELATIONSINVESTOR RELATIONS

$18

$12

$6

$0

$14.7

$16.5

Revenue

Billions

2006Q3 2007Q3

$0.0

$1.0

$1.50

$0.5

$0.89

$1.44

EPS

+12%

+62%

2006Q3 2007Q3

Per share

Revenue and Earnings

INTRODUCTION TO RESEARCH INTRODUCTION TO RESEARCH AREAAREA

CONNEXIONCONNEXION

Overview Launched on May 17

2004 Connexion offered a

satellite-based internet connection

Connexion by Boeing pricing was designed to provide affordable Internet access

CONNEXIONCONNEXION

The Market Connexion by Boeing's real-time, high-

speed Internet and data communications service is designed to meet the needs of commercial airline operators and their passengers, as well as executive aircraft for business and government.

CONNEXIONCONNEXION

The Connexion by Boeing service is installed on more than 140 aircrafts. operated by Lufthansa, SAS (Scandinavian Airlines System), ANA, Japan Airlines, Singapore Airlines, China Airlines, Korean Air, Asiana Airlines, El Al Israel Airlines, and Etihad Airways.

CONNEXION-CONNEXION-Market

As part of its service evolution, Connexion by Boeing has expanded the availability of its live global television service, which features four channels of news, financial and sports news-related programming delivered directly to passengers’ laptop computers.

CONNEXION-CONNEXION-Market

ENABELING TECHNOLOGYENABELING TECHNOLOGY

Connexion by Boeing uses a worldwide network of geosynchronous satellites and ground-based receiving stations to relay data between aircraft and the global information network. An advanced-technology antenna designed and built by Mitsubishi Electric Co. enables aircraft to maintain high-quality connectivity, even at high latitudes.

CONNEXION-COSTCONNEXION-COST

COSTCOST Research results shows that Connexion's

system costs about $500,000 or more to install on an aircraft.

American, Delta and United, which initially wanted to invest in Connexion, pulled out in 2001 as potential partners. High cost resulting in large expenditures before getting a single paying customer

CONNEXION-EFFICIENCYCONNEXION-EFFICIENCY

Speed was 150-200kbps Boeing's Connexion

service won the "World's Leading High Speed Inflight Internet Service Provider" award from the World Travel Awards organization in London for 3 years running.

CONNEXION-PRICINGCONNEXION-PRICING

Pricing for In-Flight Internet

The prices varied from airline to airline, but were typically…

options duration price

Flat rate option (Unlimited access to the Internet)

Metered Pricing Option(with rates of $0.25 per

minute thereafter)

More than 6 hours- for long-haul flights

between three and six hours- medium-haul flights

flights less than three hours.

30-minute starter package

$29.95

$19.95

$14.95

$9.95

CONNEXION-PRICINGCONNEXION-PRICING

CONNEXION-USERSCONNEXION-USERS

Research results shows that users are very sensitive to price

FIELD WORKFIELD WORK

Data Collection process: Secondary Data External data

Governmental Sources Internet database

Bibliographic databases

E-mails Telephonic interviews

Secondary data used in our research project includes:

External dataExternal data General business dataGeneral business data Market Analysis GuideMarket Analysis Guide Government sourcesGovernment sources

FIELD WORKFIELD WORK

FIELD WORK-EVALUATIONFIELD WORK-EVALUATION

TIME AND COST

TIME: It took about 40 days

to gather the information needed, analyzing data, drawing statistical conclusions and to draw final findings & recommendations.

COST

Opportunity cost Energy Billings Personal activities Time spend on surfing

FIELD WORK-EVALUATIONFIELD WORK-EVALUATION

STATISTICAL ANALYSISSTATISTICAL ANALYSIS

Statistical analysis results conclude that in case of Boeing’s flight internet service price and consumer buying behaviour are closely related to each other

GRAPHICAL REPRESENTATIONGRAPHICAL REPRESENTATION

price vs buying behaviour

0

50

100

150

price

bu

yer

pre

fere

nce

10

15

25

30

10 60

15 100

25 38

GENERAL SURVEYGENERAL SURVEY

The survey also asked respondents about the kinds of activities done while connected with the Connexion by Boeing service

GENERAL SURVEY-GRAPHICALLYGENERAL SURVEY-GRAPHICALLY

work e-mail

personal e-mail

browsing

chat

90%

76%

41%

69%

FINDINGS & FINDINGS & RECOMMENDATIONSRECOMMENDATIONS

FINDINGS & RECOMMENDATIONSFINDINGS & RECOMMENDATIONS

MAJOR FINDINGS

Cost of system Connexion's system costs about $500,000 or

more to install on an aircraft Boeing's failed Connexion online service was

costly to install and operate, resulting in large expenditures before getting a single paying customer. An industrywide downturn triggered by the 2001 terrorist attacks made the system an even tougher sell to struggling airlines.

Boeing to End In-Flight Internet Service

Boeing to End In-Flight Internet Service Connexion suffered a major setback with

potential U.S. airlines after the 2001 terrorist attacks triggered an industry-wide downturn.

Boeing published a marketing survey report of airline passengers

FINDINGS & RECOMMENDATIONS-FINDINGSFINDINGS & RECOMMENDATIONS-FINDINGS

only a handful of people — in the “low single digits” — on each Connexion-equipped flight were actually using it


Marketing Stupidity Results in Colossal Failure of Boeing Connexion Service

According to data released by Boeing, "more than 20,000 passengers have used the Connexion by Boeing service during its first year of availability."

one person on every 3 flights using the service. Not such a stunning success anymore.


Revenue Assume that everyone

who used the service paid the top daily rate during that first year of $30. 20,000 paying customers at $30 each is a grand total of $600,000 revenue.


lets give a nice round number and say they had $500,000 in air-time revenue from end consumers. This for a technology that cost over $500,000 per plane to install (140 aircraft had been outfitted at the time)

Connexion had $25M in revenue, but also notes that over $1B was invested over 6 years.


Losses the losses due to Connexion were

approximately the $200M annually. To generate $200M in revenue and break even, Connexion needed 400x the usage

Or, instead of 1 person every 3 flights, an average of about 130 paying customers on each and every flight.


Counting the Marketing Mistakes "Extensive" market research by Boeing came

up with a definitive statement that "38% of frequent travelers are willing to pay at least $25 per flight for full, high-speed access to the Internet and their corporate network".

Clearly, Boeing believed that it they built it, the users would come, and had boxed themselves into a cost structure that embedded this assumption.


Survey Question Q: at this price level, how often would at this price level, how often would

you use the service?you use the service?


Other Factors affecting the service

Loss of sleep time Other activities competing for time. Scoble notes that most flights don't

have access to power. Desire to be off the grid


Lack of space. Poor promotion by airlines. Lack of uptake by US carriers. Lack of direct communication with end-

users.



Poor Marketing

Bottom Line…




RECOMMENDATIONS

What could they have done differently?

Ask smarter research survey questions Use a strategy more akin to the early

dotcom successes like Amazon and Yahoo and Google.

RECOMMENDATIONSRECOMMENDATIONS

What could they have done What could they have done differently?differently?


Understand that the airlines Understand that the airlines weren't really their customers, weren't really their customers, just gatekeepersjust gatekeepers

RECOMMENDATIONS

What could they have done differently?

Realize that there was a potential network effect to be gained by being first out of the blocks.

Accessibility.


RECOMMENDATIONS

Boeing should do the following to get fruitful results

-Make proper plan -use ground based system -market its service in a proper way -identify their real customers’ need -maintain separate account for this service


END OF SLIDE SHOWEND OF SLIDE SHOW

Prepared by Nazish Sohail