Making the Sale: How Airbus gambled with their product strategy to gain a foothold in the US Airline Market
Airbus had been founded with a clear mission statement: Challenge the traditional American stalwarts Boeing, Douglas, and to a lesser extent Lockheed, in the US Airliner market. This was the largest market in commercial aviation, and Airbus had done their research and crafted a winning product strategy to grab market share.
They had a great plane in the A300 — nearly as large as their rivals’ models, but more advanced, and more efficient.
But they also had a big problem in the 1970s — their order book was largely empty. By 1978, four brand new A300s sat unused outside the factory. No US airline was interested in the aircraft. Predictably protectionist lawmakers and domestic aircraft producers had united to keep Airbus out of the US market.
Without a foothold in the US, Airbus’ days were numbered. The senior executives knew they had to embark on an aggressive marketing campaign to educate the airliners on the advantages of the A300 and create buzz about the product.
So what did they do?
Elements of the Airbus Product Strategy
1) Product Events: Airbus took their prototype on a six-week goodwill tour across North and South America. Guests were invited to view and tour the aircraft at selected stopovers, and were treated to champagne with Airbus executives, test pilots, and engineers.
They didn’t secure any buyers during the tour, but they made sure to touch base with the largest US airlines.
2) Look to Other Segments to Build Sales Momentum: Since Airbus couldn’t get at their primary segment (the US market), they turned to their secondary markets — in this case Korea, India, and South Africa. While they only won a handful of orders it was proof positive they could sell the A300 outside of Europe.
3) Customize the Product to Make the Sale: Initially, the Koreans weren’t interested in the existing A300s. They wanted a plane that had longer range. Eager to make the sale, Airbus decided to offer them a longer range version to meet their needs. Their willingness to be flexible earned them a sale.
4) Develop a Value Proposition Relevant to the Business: Airbus knew their product was more advanced and efficient than the competition. But they needed to develop a consistent message for their marketing. The 1973 oil price shock had sent the cost of jet fuel through the roof. Combined with the pending de-regulation of the US Airline industry, airline executives were under pressure to get their costs in line.
Airbus focused on the efficiency of their aircraft, highlighting the fact that the A300’s operating costs were 20% lower per trip than their rivals. In addition, the A300 had only two engines compared to their rivals’ three. The economic advantage was clear, and the A300 became directly relevant as a solution to the challenges the airlines were facing.
5) An Interesting Take on Product Trial: Frank Borman, CEO of Eastern Airlines had been intrigued by what he had seen of the A300. As a former astronaut, Borman knew the ins and outs of aeronautics and aviation. He felt the A300 was something worth learning more about but his company was ailing and their ability to buy new aircraft, especially an unproven one, was limited.
Airbus knew an opportunity when they saw one. They sent their founder Roger Beteille to speak with Borman directly. Cognizant of Eastern’s shaky finances, he made Borman an unbelievable offer: Lease the four unused A300s for six months at no charge. If Eastern didn’t like them after the trial period they could return them no questions asked.
On the face of it, this seems like an incredible gamble on the part of Airbus. But even if they couldn’t meet Eastern’s needs with the A300, they were betting on the odds the airline’s competition would be eager to learn more about the plane and their experiences with it.
6) Salesmanship: Roger Beteille had done his homework on Frank Borman. Borman had enjoyed an illustrious career at NASA culminating with being the commander of the first crew to orbit the moon on Apollo 8. He had tremendous credibility amongst airline pilots. Now Airbus had the opportunity to secure the endorsement of a well respected figure in aviation and beyond.
To clinch the deal they offered Borman a chance to fly the A300 and put it through its paces. He loved the aircraft, and took up Airbus on their offer to lease the planes.
Six months later, he ordered 23 more, and gave Airbus the break they needed in the US Airline market. By the end of the 1970s, the company had delivered 81 A300s to 14 airlines. They were on their way to becoming a giant in the aviation industry.