Posts Tagged ‘marketing strategy’

Airbus vs. Boeing: or a tale of the marketing of delays and engine problems

November 26, 2010

For large, complex, expensive, high-technology products (airplanes, turbines, power plants or ships for example) it is usually not worth indulging in too much negative marketing based on a competitor’s technical difficulties. Early technical difficulties and “teething” problems are common and when a competitor has difficulties it usually leads to some feeling of satisfaction but it is tempered by the knowledge that one could easily suffer similar difficulties. So when GE experiences some problem with its gas turbines or Areva has delays in its nuclear plants there will never be an overt, negative marketing campaign by Siemens against GE or by Westinghouse against Areva.

File:Airbus A380.jpg

A380: image wikipedia

And this is the current situation between the Airbus A380 and Boeing’s 787 Dreamliner. The A380 had its share of delays and was over 2 years late in coming into service. Right now the troubles that Rolls Royce are having with their Trent 900 engines is not helping the A380 image. (There are only two engines available for the A380 but it is noteworthy that the General Electric / Pratt & Whitney Alliance which manufacture the GP7200 engine which competes with the Trent 900 are not indulging in any overt negative marketing). The “Rolls Royce effect” for Airbus is currently negative because of the Trent 900 issues but it is indirectly mitigated by the reports of delays in developing the Trent 1000 which is one of the engines for Boeing’s 787.

File:Boeing 787first flight.jpg

B787 First flight: image Wikipedia

As Airbus fights to get airlines to accept the A380 their “best friend” strangely is the delays to the B787 Dreamliner program. The Dreamliner has been further delayed by an electrical system fault which caused a fire on a test flight in early November. For an airline the decision of choosing between Boeing and Airbus has become not one of comparing the advantages each has to offer but instead one of judging the risk exposure that a choice may bring. It becomes a comparison of potential “downsides” and risk mitigation possibilities rather than selecting between potential “upsides”.

For Airbus and Boeing, their sales processes now have to emphasise the risk mitigation available with their products rather than promoting all the advantages their products have to offer. This is unusual for a “sales process” but nothing new in the history of marketing of technologically new products. But it is not so easy for corporations, their salesmen and for sales processes to shift from promoting advantages to the much more difficult task of showing that the risks (whether of delay or of technical difficulties) they pose are less than that of the competitor. Even in terms of financing, the usual offers of financing and leasing packages for the customer must now additionally address the mitigation of financial and consequential exposures in the event that a risk materialises. When a single A380 costs around $320 million, a Boeing 747-400 about $250 million and a Dreamliner has a price tag of $150 -200 million, then downtime and delays have enormous financial consequences for the customer. Marketing strategy for new products in the face of heightened risk perceptions is quite different to the marketing of “tried and tested” products. But this is a fascinating marketing challenge!

The latest reports of delays to the Dreamliner has led to harsh words about Boeing from a potential customer. CityAM reports:

QATAR Airways has threatened to hand extra business to European aircraft giant Airbus after attacking Boeing over problems with its new 787 Dreamliner. Chief executive Akbar Al Baker said the airline was considering increasing its order for five Airbus A380 super-jumbo planes and might order a re-engined version of the A320 single-aisle jetliner. He did not say how many more A380s it might order.

Qatar has expanded its fleet from four to 94 aircraft in 13 years and has orders for 200 more from Airbus and its US rival Boeing worth $40bn, including 30 Dreamliners. Al Baker said Boeing had “failed” in developing its 787 Dreamliner, which is expected to suffer further delays following a fire on a test flight.

Boeing’s development of the carbon-composite 787 is running around three years late and brokers expect a further delay as it addresses the cause of a fire which led to the test flight being grounded two weeks ago.

But I would expect that there is a strong element of price negotiation in Qatar Airways’ statement!


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