Boeing Frontiers
February 2003
Volume 01, Issue 09
Top Stories Inside Quick Takes Site Tools
Commercial Airplanes

Nose to Nose
Nose to Nose

Relationships crucial in multi-million-dollar sales campaigns


The last thing one might expect to see is two competing airplanes—a Boeing 737-800 and an Airbus A320—positioned nose-to-nose on a tarmac as if sizing up one another. Yet this is exactly what happened one warm October day at Sydney Airport in Australia.

It began in September 2001, just a few months after Rick Westmoreland, Boeing Commercial Airplanes vice president, Australia and Pacific Islands Sales, had agreed to direct Boeing's commercial airplane sales activity in Australia.

Boeing knew that Australian flag-carrier Qantas Airways would be anxious to fill a domestic-capacity void left by the recent collapse of Ansett Australia, the country's second-largest carrier. The Sept. 11 terrorist attacks in the United States also had just occurred, leaving U.S. airlines with excess capacity, fleet and airplanes on order. Understanding these environmental conditions, Boeing created a solution that would enable Qantas to gain market share rapidly and put more of the Australian traveling public back in the air quickly.

In the midst of this time-intensive, ambitious sales campaign, Qantas conducted a top-to-bottom, side-by-side comparison of the two models, including test flights.

Just four days before Qantas made its final decision, Airbus offered additional price discounts. Yet despite Airbus' deeper discounts—in a deal worth nearly a billion U.S. dollars—Qantas chose Boeing.

With such rigorous competition and precise, firsthand product analysis by the customer, how was Boeing able to win this campaign?

Nose to NoseRelationships key

"When it comes to sales campaigns in Commercial Airplanes, we have to know the customer better than they know themselves," said Doug Groseclose, Commercial Airplanes vice president of International Sales.

Simply put, at the heart of any commercial airplanes sales campaign is customer relationship. Equally important, a team must have a fundamental understanding of current economic and political environments within which customers operate. Together, these two key factors enable a Boeing sales team to anticipate and prepare for a customer's future needs.

"A sales team needs to intimately know the customer and their business—both what they are today and what they want to become tomorrow," Westmoreland said. "And, here's the thing: if you wait for the customer to tell you what they need, it's too late. The competition will have already prepared a solution," he said.

There is seldom a tangible beginning or end to the selling process. Although commercial airplane deals are not signed every day, sales directors located "in-country" are constantly working with customers and gathering information to determine an airline's current state of needs. Their job is to offer Boeing assistance wherever and whenever the customer needs it—from spare parts to training to creating fleet solutions. With more than 440 customers in 120 countries around the world, the strategy for each campaign is as different and individual as the people leading it.

For example, when putting together proposals for China, the sales director spends a lot of time coordinating government issues, in which case the Boeing Washington, D.C., office may lend assistance. In contrast, when Boeing is negotiating with a low-cost carrier, Government Relations may play a very small role, if any. There are also cases in which part of the deal includes the creation of jobs in the airline's country. Similarly, the campaign strategy for one of the big flag carriers, such as United Airlines, has its own unique challenges.

"It's like trying to come up with a DNA match," Westmoreland said. "There's a different strategy for each campaign. We anticipate what the customer needs—and work with as many people as it takes to provide a tailored solution."

Developing and maintaining relationships with customers involves working extensively and creatively with every part of the airline. Additionally, Boeing looks for social opportunities, such as air shows, industry meetings and other aviation-related events, to position the company as an airline's main connection to the airplanemanufacturing business.

"We work with every part of the airline—technical, engineering, service, operations—not just the CEO [Chief Executive Officer]," Groseclose said. "We try to serve as their advocate in the aviation world. If they have a need, we try to put together a solution."

Vice President of Commercial Airplanes Sales Toby Bright said being a sales director requires an around-the-clock commitment.

"It's a job where you get calls from customers literally seven days a week—24 hours a day—asking for help, and you need to be there," he said. "Some of my best sales trips consisted of spontaneously visiting customers and walking their hallways. I talked to everyone from the receptionist to the janitor to the CEO. That's how you learn about customers; that's how you develop relationships."

And these relationships pay great dividends. Ryanair, the Dublin, Ireland-based low-fare carrier, placed an order for a phenomenal 100 737s in early 2002. Why? "The 737 is one of the cornerstones for Southwest, the biggest and best low-fare in the world," said Michael O'Leary, Ryanair chief executive. "The other cornerstone is a long and deep partnership with Boeing. We are and will always be a Boeing customer."

The essence of creating value

Needless to say, the competition for airplane sales is intense and involves much more than offering the lowest price. Sales teams are always looking for product and service discriminators that distinguish Boeing from competitors. Discriminators are specific areas of a product or service within a particular campaign that benefit the customer more than the competition does. Discriminators can include product quality, maintenance services, training packages or post-delivery modifications.

"When putting together a proposal, the lowest price doesn't always win the contract. What wins a contract is the merit of the airplane and its advantages against the competition," Groseclose said. "Customers focus on the right balance of price, fleet solution and product performance in terms of reliability, safety and good economics."

As part of the negotiating process, the sales team creates a value analysis that highlights campaign product and service discriminators and their relationship to the airline's bottom line. The analysis also includes financial advantages in relation to the competition. For example, an analysis may reflect an advantage in seat revenue or fuel burn, or it may show financial gain in terms of flying farther. Based upon these factors, Boeing determines if it should offer price discounts. Furthermore, such marketing is instrumental in selling the value of the Boeing solution to customers.

Nose to NoseDuring the Qantas negotiations, timeliness played a significant role in the customer's decision-making process.

The Boeing solution delivered not only airplanes but operational capability to the customer within a 100-day time frame. The first part involved reengineering and modifying in-production 737-800 airplanes previously earmarked for American Airlines, which had postponed their delivery because of post-Sept. 11 financial concerns. The second part, within the same 100 days, was to provision spares and train flight and maintenance crews to support the introduction of Next-Generation airplanes into the Qantas fleet—a process that usually takes about two years.

"For the Qantas win, the discriminator was our ability to manufacture, modify and place into revenue service the first of 15 airplanes within 100 days," Westmoreland said. "The competition simply couldn't do that. It was a tremendous effort by everyone on our team to make this happen."

After Boeing and the customer team agree on a customer solution, the Boeing Contracts Department formalizes a proposal and presents Boeing's "best and final offer" to the customer. In most cases the airline will make a decision of this magnitude during a board meeting. If an airline decides to order Boeing airplanes, it will provide a Proposal Acceptance to document the transaction and will place money down on the contract. When both parties have agreed upon and finalized all factors, the customer and Contracts sign a Definitive Agreement. At this point, the airline may choose to announce its purchase. Boeing usually announces purchases after the customer does.

Brains behind the planes

Under the leadership of Bright, approximately 60 Boeing sales directors located in regions around the world lead customer teams through the sales process.

The sales world is divided into four primary geographic market segments: Asia/Pacific; Europe; the Americas; and South Asia/Pacific, Africa, the Middle East and Russia. Additional business segments under sales include Aircraft Trading and India/Nepal; Boeing Business Jets; and Government and Military Sales.

The sales team's performance is carefully measured primarily by orders and deliveries and then by market share. In 2002, the team acquired $18.6 billion worth of orders, including services. The team reviews performance measurements, composed of orders and placement charts and forecast-to-actual graphs, on a weekly basis. Similarly, it monitors market share constantly to evaluate the percentage of Boeing products placed worldwide and within specific market segments in relation to the competition.

Working together across the organization, the team is able to provide innovative, customer-focused fleet solutions.

"The Qantas campaign is a great example of how broadly we had to draw upon the expertise of several Boeing functions within Aviation Services, Airplane Programs and the sales team," Westmoreland said. "Moreover, we needed every spoke on the sales team wheel to make this campaign a win for Boeing."

Westmoreland felt the biggest challenge during the campaign was convincing Qantas that Boeing could follow through on its contract commitments.

"This is where the various players around the company came into play," Westmoreland said. "For instance, Product Marketing explained to the customer the advantages of the Boeing airplane over the competition's product; Customer Engineering helped the customer visualize the modifications; and Aviation Services Sales convinced the customer that we could reengineer and modify the American Airlines' airplanes in short order, while also providing a spares-provisioning support package."

In other efforts, 737 program staff provided an overall program production and modification schedule that ultimately convinced the customer that Boeing was willing to do everything possible to build exactly what the customer wanted and deliver it exactly when the customer needed it. In true Boeing spirit, it was a global team effort.

Motivated team, unremitting plans

In the big picture, the sales team focuses on creating value for customers. The team's philosophy is based upon developing and maintaining close customer relationships while operating with detailed customer and industry knowledge. Although their performance targets are challenging, their sales philosophy still holds true, even in post-Sept. 11 conditions.

"In the type of business environment that we're in right now, many deals are coming down to relationships and trust—trust in The Boeing Company and trust in the people you are dealing with," Bright said. "I can't emphasize enough about how relationships are the beginning and end of this business."

In the case of Qantas, Boeing lived up to its commitment, and consequently the relationship appears secure. The airline since has ordered eight additional 737-800 airplanes to join its initial 737-800 fleet of 15.

One may wonder after winning a contract, when does Boeing start pursuing the same customer with another campaign?

Groseclose responds confidently, "The very next day.”


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