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Aerospace Soars into CRM
With a complex selling process and highly customized, big-ticket products, the aerospace industry is finding CRM valuable for managing information and building long-term customer relationships.
Posted Apr 17, 2000
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Compared to most other manufacturing sectors, the aerospace industry provides a unique backdrop for CRM in many ways. Its unit volume of sales is low, its product complexity high, and this complexity is reflected in a demanding sales process.

Many aerospace products are engineered to customer specification, which places a unique burden on CRM systems. The sale, as well as subsequent product support, are heavily dependent upon knowledge and expertise. "These [aerospace] companies already know pretty much what customers are in their pipelines," explains Jim Wilson, product director for Cincom's iC Solutions group. "The critical bottleneck is not the size of your sales channel, but the level of expertise you can provide for the customer."

"In aerospace, there are so many different features and options that go beyond the basic product that you can get into things like spatial analysis and where things are going to fit," says Judy Andoloro, senior CRM analyst at AMR Research, a Boston-based market research company. "The sales process really becomes an engineering effort."

Wilson notes that aerospace also has a long and complex sales cycle, with many people involved in the development and consummation of the sale, including engineers and the back office as well as the sales organization. That requires coordination of information between many customer-facing touchpoints.

And the after-sale customer relationship is critically important. With consumer goods, a manufacturer's connection to a product often disappears once its warranty card is filled out. With the long life cycles of aerospace products, the product and the customer remain on the radar screen much longer. The sales cycle must be viewed as a project, not just the delivery of a piece of capital equipment.

Did Aerospace Come Late to Dinner?
Despite their high-tech orientation, aerospace companies were relatively late adopters of CRM. As the CRM market evolved, software vendors initially addressed high volume consumer goods sectors, and aerospace manufacturers did not have the need for the horsepower and volume capabilities of the traditional CRM package. However, Eric Carasquilla, senior product marketing manager at Clarify, points out that this doesn't mean they do not have customer relationship challenges. Carasquilla says, "No one is going to buy a Boeing 767 while they're in line at the grocery store. It's not an impulse purchase. It's all about building relationships and tracking them. I think, in terms of SFA and CRM, that aerospace is a great candidate. They just haven't utilized it that much."

Not only was CRM software initially not focused on the aerospace industry's needs, the industry had internal issues to resolve as well. For example, because of the high cost of manufacturing aerospace products, the aerospace industry initially focused on lowering manufacturing and related internal process costs with implementation of ERP systems.

Randy Clark, vice president of marketing at Enigma, a CRM software vendor with a number of aerospace customers, agrees that ERP was probably more important to aerospace than CRM. However, CRM becomes a real asset in a related segment of the aerospace market: aftermarket parts and services.

Power-by-the-Hour
John Mangan, director of product services at Cincom, explains that aerospace products can have a life cycle as long as 12 years, and many services are needed to keep the product going. He refers to a Harvard Business Review article citing tremendous margins obtainable from the aftermarket for large capital equipment manufacturers. One example in the study shows that the aftermarket for locomotives, a similar manufacturing model to jet engines or aircraft, has a total expenditure 21 times the cost of the product. "You can go from about 5 percent margins to 15 to 25 percent," Mangan says. "It's a lot more profitable business."

Because of the aftermarket margins, CRM solutions loom on the horizon as a must-have for aerospace companies emphasizing customer loyalty. "CRM addresses this in the long term," says Mangan. "If you want to keep your customer loyalty to get returned sales, what better way than to be in control of all their services."

The concept of selling a product and then maintaining and servicing it throughout its life cycle led to the term power-by-the-hour (PBTH) to signify that the aerospace company is selling not just a product but up-time. In aerospace, up-time is critical. Clark comments that with large capital equipment users, down-time is measured in the thousands of dollars a minute. "In an off-shore oil and gas rig, a company could realize $11 million a day for down-time. I think it's $10,000 dollars a minute for a locomotive not to be moving. And there are similar figures for aircraft."

Supplying PBTH becomes a competitive tool. Clark says, "There is a strategic first-mover advantage. The first company to do it [supply PBTH] gets recognized by the customer as probably being the lowest cost provider of higher valued services. If I can promise more power-by-the hour, you can't compete against that."

CRM Products Can Save the Day
The complexity of aerospace products requires that a strong knowledge base be built as a component in any solution. Wilson relates, "I know of a jet engine manufacturer where a significant proportion of the time spent is simply researching the material trying to determine which service bulletin applies to what."

Rob Lang, vice president customer care/commerce technology practice at eJiva, a systems integrator, says that one promising application of knowledge tools is for product configuration. "The sales person can go to a meeting and design the product the customer wants on the fly, and then send it back to corporate and place the order real time," Lang explains.

Cincom's iC Configurator is a knowledge management tool that can be applied to the life cycle management of a complex product. It is one of three components in a suite of tools, also including . iC Sales Solutions, a tool for the direct sales organization, and eChannel, which provides contact and opportunity management, product catalog and interactive selling over the Web with an interface for distributors, dealers, and resellers.

Litton Life Support, a producer of breathing supplies for military flight crews, uses the Cincom iC Solutions as a sales automation tool, generating up to 50 proposals at a time instead of one by one. According to Annette Bott, cost administration supervisor at Litton Life Support, "I can do that work now in about 45 minutes to an hour. If I were to do those 50 estimates individually, it would take a couple of days."

Other Aerospace CRM Solutions
Many variations of CRM packages can help meet aerospace manufacturers' needs. Publishing software can form a vital link between an aerospace product manufacturer and its customers. Enigma provides OEM publishing software for several aerospace companies. Enigma's product, INSIGHT, automates the production and distribution of complex Web site content for a customer's intranet that can link technical information with eIPCs (electronic illustrated parts catalogs) and ERP systems. Enigma also offers Xtend, a product that allows end-user organizations to incorporate custom content into OEM-supplied e-publications.

Enigma's Clark explains that many manufacturers with complex operations want to publish technical manuals and illustrated parts catalogs. Such products need to be functional from an end-user perspective and should include intelligent search, intuitive navigation, bookmarking, and annotation. At the same time, companies want to automate the publishing process. Clark says that, "not only do they want to deliver the information to help them do the maintenance, but they want it to help them drive spare parts business."

Clark states, "Basically, the users are maintenance people who don't wake up in the morning knowing that they need a fan blade. Having gone through the textual information or by performing some procedures, they see that the fan blades have had 20,000 cycles and need to be replaced. They want to be able to look that up in their inventory system that's the link back to ERP, and then if it's not there, actually purchase it."

Enigma's products are used at Rolls-Royce, where the EDS implemented an INSIGHT solution. Rolls-Royce formerly published 50,000 to 70,000 pages for each jet engine overhaul and maintenance manual. This material was updated manually which became time consuming and expensive. INSIGHT enabled the company to transform everything to an electronic version.

With INSIGHT, complex text and graphics are electronically published, with intelligent searching and navigation functionality and update capabilities, allowing customers to find the information they need through full-text and topic-specific searching. Bob Cole, the Rolls-Royce publications services manager states that, "we realized that our electronic publishing solution must support us into the next century."

The value of intelligent electronic documentation cannot be over emphasized. Clark comments that, "the studies that our customers have done show that on an average, 10 to 20 percent of the field maintenance people's time is spent looking for information.With these products, inventory costs go down, defect rates drop, incorrect orders are reduced, and customers are happier."

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