Harley-Davidson is facing an interesting business and marketing problem that’s worth your time and consideration because of the lessons we can glean from it.
As you know, the Milwaukee-based maker of iconic american motorcycles has enjoyed an enviable position in business as one of the world’s most powerful brands. People don’t love the Harley brand, they adore it and engage with it on a level seldom seen in the annals of business.
There’s an unmistakable mystique that comes with owning a Harley. The brand seems to have transcended mere talk of chrome, leather and cubic inches and managed to burrow deep into the hearts and habits of its fiercely loyal customers the world over. And though competitors have sought to replicate these products and the mystique that accompanies them, none has been successful to date.
I feel this everywhere I go with my big, bad, 1800 cc Honda VTX-R, a beast of a bike that makes people invariably say “Nice bike! Is it a Harley?”
“No, it’s a Honda,” I reply, but it just not the same.
But despite all this love and good fortune, Harley is in danger if not, endangered, for the times, they are a-changin’.
It’s not any sort of news flash to say that H-D has been living high off the hog catering to baby boomers. They are, after all, the wealthiest generation in history and a group of people who passionately endorse the themes of individualism, counter-culture and personal freedom, which permeate every aspect of the Harley brand, by design.
The problem stems from the simple fact that most baby boomers are in their 60s and 70s, and for many, riding big heavy bikes is a thing of the past. Even so, there’s enough of them still in their 50s, and robust enough to keep riding, to keep Harley going for another decade or so. After that, the market dries up considerably.
It is in fact, drying up already.
Market conditions are never static, they are dynamic and constantly in flux. One competitor, Polaris, has been working for nearly 20 years to take the fight to Harley like no competitor ever has, reviving a rivalry that goes back nearly a century.
Unlike the Japanese, who excel at creating technically excellent motorcycles that ultimately come off as bland facsimiles, Polaris is an American company from the heartland, and thus a legitimate claimant to an unfair share of the coveted mystique of H-D.
Polaris, a leading snow vehicle manufacturer, first entered the arena in 1998 with the launch of Victory motorcycles. Victory turned out to be a credible producer of respectable alternatives to Harley’s big, bad cruisers. Though Victory motorcycles feature bold designs, impressive engineering and are generally regarded as more reliable than Harleys, they have only been marginally successful in taking market share from H-D.
Having learned how to produce and distribute a quality product, however, Polaris raised the ante in 2011 with the acquisition of the Indian Motorcycle company, whose heritage predates H-D’s by a decade.
Indian motorcycles began production of its impressive Thunder Stroke engine and began putting it in critically-acclaimed motorcycles with historic names such as Chief, Chieftain and Scout.
Indian motorcycles not only harken back to the past, they embrace the future just as readily. With a powerful mill, advanced electronics and a classic look, they are arguably a little better, more reliable, and in some cases, less expensive than your average Harley.
What Polaris is saying to H-D is plain as day, “Be prepared to fight for every one of those baby boomers who are still steeped in your mystique. Indian has mystique, too, and arguably better bikes to boot. And did we mention that they’re also more accessible and better positioned to attract future consumers?”
As H-D is being dragged into a myopic, re-doubling of their efforts to maintain and grow their slipping market share, they risk putting too much emphasis on advertising and sales and too few resources into product development, quality control and pivoting towards the future of motorcycling, by which I mean reaching out to younger customers and embracing advanced technologies, which they have been slow to adopt.
Quality, in particular, seems to be re-emerging as a serious issue for H-D customers. Witness how product recalls have been climbing quickly and have reached alarming levels.
Innovation is another weak point. Project Rushmore, H-Ds meandering, multi-year program to update their motorcycles, has taken too long and has yielded beautiful bikes receiving simple upgrades that were years over due. If this is what H-D calls innovation, they are seriously in trouble. It looks more like a justification for exorbitant prices, than innovation.
This is a critical point, important because the world of motorcycles is changing dramatically. Gas powered bikes are slowly becoming a thing of the past, electric motorcycles are the future. Such bikes have made a quantum leap in terms of quality, ride-ability and battery life in just the last 5 years. One should think that in another 5 years electric bikes will be every bit as fast and capable of going every bit as long, and in fact, longer, than current gasoline-powered bikes. This is what younger consumers want.
H-D actually unveiled an electric motorcycle called the LiveWire in 2014. Unfortunately, it felt like a hollow exercise in PR, since only a handful of customers got to ride it and H-D said it will be a couple of years before it sees the showroom floors. Exactly when that will be, nobody knows. Meanwhile, Polaris is ready to sell you an electric motorcycle, it’s own Empulse R.
Innovation impacts companies in another way, the consumers perception of value. Now and in the future everyone will have to do more with less and people will be focused on value, not just on brand prestige and mystique. People may still pay $30,000 for a motorcycle, but boy, the perceived value had better be there or people will run for the hills.
Today, if you walk into any Harley-Davidson you will see a bazaar of ridiculously priced merchandize and two-wheeled vehicles. Tell me again why would I pay $24,000 for a bike that I know is technically inferior and less reliable than what I can get from Honda or Indian?
Because it’s a Harley?
That argument is running awful thin.
Even a simple t-shirt that you can find elsewhere for $9.99 will set you back $39.99, just because it bears the H-D logo. The same HJC helmet that costs $99 online will magically transforms itself into a $249 helmet when you slap an H-D sticker on it. And so on and so forth.
You can only get away with riding your brand like a Donkey for so long.
That’s where innovation comes in.
Lowering prices, the first thing everyone seems to recommend as a magic pill, is actually a fools errand.
It may be necessary, and made possible by creating more manufacturing efficiencies, but that’s ultimately not the solution.
By focusing on innovation, instead, H-D can pivot towards the future while maintaining a powerful sense of history and heritage. This is must for H-D since the demographic landscape is rapidly and radically changing.
But there’s the rub…
Products like the LiveWire don’t have much of a future if they’re being developed in the same ecosystem that produced current successes. Need I point out that it was Kodak that invented the digital camera? Where’s that venerable American company today?
Maybe the answer for H-D is to spin out the LiveWire and similar offerings geared towards younger consumers and let them stake a claim on the future of motorcycling, unencumbered by the heavy baggage of the past. Let them re-ivent what it means to have a Harley in the 21st century.
H-D doesn’t have to make a sucker’s choice of catering to boomers or millenials in a mutually-exclusive fashion, nor does it need to dilute itself by going after both at the same time, under the same structure and value proposition.
If your business model is dying, it should be you who put your own self out of business. Don’t let demographic shifts or competitors do it for you, leaving you without a bridge to, or stake in, the future.
I hope that Harley gets the memo.