November 13, 2015

Harley-Davidson's Struggle Continues

November 11, 2015 - San Diego, CA

Harley-Davidson's Struggle Continues: How H-D Can Reverse It's Slump
After another disappointing quarterly report, slumps in domestic and international sales, and now the departure of Chief Marketing Officer Mark-Hans Richer, Harley-Davidson is in the news for all the wrong reasons lately. The legendary Motor Company needs to make some changes to compete in this tough market - but what are they?

2015 has been a rough year for Harley-Davidson. Several consecutive disappointing earnings reports, big drops in global sales, and recently announced job cuts in Milwaukee are all hammering away at The Motor Company's reputation at once, and it is taking it's toll – HOG stock plummeted 15% to a two-year low after it's most recent earnings report.

But if all of that wasn't bad enough, now Harley-Davidson has a big internal shake-up to deal with – the resignation of long-time Senior Vice President and Chief Marketing Office, Mark-Hans Richer.

Interestingly, Richer's departure comes after a recent announcement by the Motor Company that it was going to be making a large investment in 2016 to increase it's marketing efforts. Richer, at the helm of the company's marketing efforts for the last eight years, concentrated his efforts on recruiting new demographics to the brand - such as Millennials, African-Americans and Latinos, and female riders - while taking care to keep Harley's core customer happy. Campaigns such as the Project Rushmore release, product placement in Sons of Anarchy, and a huge advertising partnership with UFC were all orchestrated by his team. As a force of marketing, Harley-Davidson is undeniably a powerhouse, and Richer was it's strategy's chief architect for nearly a decade.

But marketing isn't really where the Motor Company is struggling – it's everywhere else that Harley is having problems. Polaris has been a juggernaut this year, and has taken a big bite out of the market for big American cruisers with its successful relaunch of the Indian brand. On the domestic front, a strong dollar has allowed import brands to slash prices while retaining margins - but Harley has refused to lower prices, citing a need to "protect the premium nature of the brand" (as infamously stated by H-D CEO Mark Levatich earlier this year.) But at the same time, it has struggled against recalls that, in the first 9 months of this year, have cost more than the previous 3 years combined – a staggering $32 million.

But in typical Harley-Davidson fashion, the company's solution to this string of business woes is, ironically, spending even more money on "customer-facing marketing." And I have to say, I think Harley's leadership is very misguided on this one.

The fact is, Harley's marketing is among the best in any business. It is one of the few companies in the world that has managed to transcend selling it's products, and actually sells an entire lifestyle. Their brand awareness is second-to-none – I'd wager there is scarcely a person in the entire country that wouldn't recognize a Harley-Davidson if they saw one. Harley-Davidson is an iconic brand that has truly permeated American culture. As far as marketing goes, you really can't be in a better position than that.

Where Harley-Davidson is falling short is, unfortunately, in the quality and value of its products. The value simply isn't there, and that's the real and very simple reason that less people are buying them.

Outside of Harley-Davidsons fanatical core customer base, Harleys have a reputation among the motorcycle riding community that is very well known. They are too heavy. They are too slow. Their brakes and suspensions generally suck. And they are overpriced. Even recent attempts by the company to introduce new models to recruit new customers, like the Street 500 ad 750, have not served to defeat that reputation, but instead have actually reinforced it.

The simple fact is that consumers know they can get more for their money elsewhere, and that's what they are doing. And is not an idea specific to one generation or another. Harley has put years of effort into recruiting younger riders while retaining the old core, but in recent years, it has been losing both, and that's because it simply isn't delivering value.

At the low end, younger riders might be lured to riding by Harley's sexy advertising, but when it comes down buying, many of them are realizing they can get a lot more for their money from a Yamaha Bolt or a Ducati Scrambler than from a Sportster or a Street. At the other end of the food chain, Harley's motorcycles typically appeal to well-heeled Boomers who can afford a car-sized budget for a motorcycle - but this doesn't mean they aren't researching sexy new alternatives from Victory, Indian and others. There's a reason Polaris is seeing record-breaking sales while Harley sales decline, and it's simple. American cruiser riders are switching brands.

The bottom line is that, regardless of age, budget, ethnicity, or anything else, we all want quality and value for our dollar - and that, unfortunately, is where Harley is falling short.

Harley-Davidson's marketing is excellent. That's not the problem. The problem is their bikes. I actually like Harleys. My first bike was a Harley, a 2005 Dyna Super Glide that I remember fondly. What I remember not so fondly was how shocked I was when I started riding other bikes, and realized how heavy, slow, and under-engineered my Harley really was.

I want to want a Harley. What I don't want is to spend $10-15K or more on one knowing full well I could have gotten a lot more bike from a different brand. There are more Harley alternatives than ever before on the market; and they are getting better, not worse, while Harley seemingly stays the same.

I am not a famous marketing guru or the CEO of a multi-national brand – just a lowly, average motorcycle rider. But I know a lot of other lowly, average motorcycle riders, and what we all want regardless of brand or riding style, is quality, performance, and value for our money. That is a constant. I think Harley-Davidson would go a lot farther taking that $35 million they plan to spend on more marketing an image, and put it into product R&D instead.

This is my advice to Harley-Davidson: give us a bike that actually performs. A ground-up redesign of a Sportster, perhaps, one that is true to its name: something traditional-looking, but light and powerful, with a kickass suspension, grabby brakes, and a frame size that won't make it the "girl Harley." Something that can take on the imports in magazine tests – and win. Something that looks good, but doesn't just look good. Custom bike builders have been doing Sportsters like this for years, and H-D would be wise to take some cues from them.

A bike like that would do a lot more to sell me a Harley than all the videos, magazine ads, and product placements you could ever shove in front of me. Spend the money on developing a bike that I don't have to make excuses for. I already know you exist, Harley-Davidson; just give me the quality, performance, and value I need, and you won't have to convince me to buy your bikes. I'll convince myself. If you want to "protect the premium nature of the brand" then do it with a premium bike, not a premium price tag. Stop selling me the sizzle, Harley, and give me the steak.

Because if you don't, I bet you that Polaris will.

By Aaron Cortez with Bike Bandit