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BITW-HelmetAs I write this I’m reminded that I was flying home from Barcelona, Spain about this time last year after a long work week at an industry event and that every year in business is different.

A few years are easy, some are hard, and most are somewhere in between. Each year you face a different set of circumstances: changing economic, political, social and what’s cool in the billet industry.

We know from the Discovery Channel which scripted a mini-series project about the history of Harley-Davidson, that in the early years the company really struggled to survive. From month to month, they worked hard to keep from getting further behind and sinking further into debt.  There were the AMF years and then came the housing bubble.  Those of you who have tried or are establishing a little business of your own know that success is much harder than you envisioned it should be. Many folks think there must be “one big thing” they are missing that if discovered and remedied would turn things around and put them on the path to major prosperity.

Clearly, that isn’t the case, and over the course of a few startup years often you learn that rather than “one big thing,” there are many functions throughout the business that had to get established in good working order for the business to really succeed.

After 114 years, this still holds true for Harley-Davidson. There are no guarantees or shortcuts to success. There is only doing the hard work that needs to be done, doing it to the highest standards, and identifying the next area to establish or improve in order to build the next generation of Harley-Davidson rides and riders to control their destiny.

All of this became acute over the last week when Harley announced their Q4 and full-year 2016 financial results (HERE).

Words like “intense competition, flat market, soft sales, and earnings miss” ruled the day.

These are just words.  I’m of the viewpoint that how well any company performs is a key factor in how well they succeed compared to their competition.  Since we’re a few days before Super Bowl — a sports analogy is in order — how well a team executes ALL aspects of their game has everything to do with whether they win or lose.

Obviously taste in motorcycle brands, styles, or in paint schemes, is subjective. Some in the press have beaten down the overall market with reports that seem to indicate the riding “fad” has ended. Granted there’s been negative publicity with Polaris shutting down the Victory Motorcycle brand and overall motorcycle industry earnings not being great, but there are many very nice motorcycles being made, and WE the riding enthusiasts/public have lots of choices.

Why do I bring this up?

I’ve notice in my travels that many successful companies have a sense that they are masters of their own fate; their success is within their control. They know it’s a myriad of little things done well that add up to their success. And no matter what their size, they realize that a company always has the resources at hand to take their next step. Isn’t that really the “art” of it: to creatively employ existing resources to advance the ride, the employees and the company?

Most of us know the answer to a problem is rarely found outside the company; it usually comes from within.  I’m confident that Harley-Davidson will find the answers and simply function better as an organization.  I predict they will do a more thorough job of performing the functions a successful motorcycle company needs to and roll out compelling new products that will be industry hits.

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screen-shot-2017-01-09-at-11-15-09-amPolaris, the MN-based maker of motorcycles and all-terrain vehicles announced today that it’s winding down the Victory brand effective immediately to concentrate on its better-performing Indian Motorcycles business.

Polaris said it will assist dealerships in liquidating inventory and will supply parts for another 10 years and honor warranties in place.  Victory motorcycles are primarily manufactured in Spirit Lake, Iowa.

The first Victory motorcycles rolled out in 1998, yet never took much market share from Harley-Davidson Inc., in the cruiser-bike category. Indian Motorcycles, which Polaris relaunched after a 2011 acquisition, has performed better, however Harley’s market share remains at 48 percent to Indian’s 3 percent.

Polaris Industries Chairman and CEO Scott Wine stated, “This decision will improve the profitability of Polaris and our global motorcycle business, and will materially improve our competitive stance in the industry. Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”

Photo courtesy of Victory/Polaris.

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Screen Shot 2016-08-10 at 11.42.14 AMI’m a bit late getting this information out, but you can read the company press release HERE.

From my experience you know it’s going to be a long day when the financial perspective includes statements about how we’re in challenging times…  “Political, economic and cultural forces working against the confidence and security for people everywhere in the world” — whoa, roll the eerie and scary sound effects!

Here is a quick synopsis:

The Bad:

  • Worldwide sales for the quarter were down due to significant declines in the U.S. industry which was a surprise and far weaker than expected. Worldwide retail sales of new Harley-Davidson motorcycles in Q2 were down 1.9%.  U.S. retail sales were lower than expected on surprisingly weak industry results.  Q2 retail sales in the U.S. were down 5.2% versus prior year, behind weak U.S. industry sales.
  • U.S. retail inventory was up at the end of the second quarter.
  • Manufacturing expenses were higher than expected, driven by startup costs related to the implementation of a new ERP system in Kansas City, and costs associated with plant retooling.  In addition, plant efficiencies were lower than expected due to lower production given soft sales in Q2.  This is an overly simple statement because in reality it’s complex planning and execution, including numerous down days, inventory bridges and careful new model ramp plans.
  • The motor company stated they are taking steps to lower expected 2016 shipments which is largely due to continued pressure on industry growth in the U.S.  Third quarter shipments are expected to be approximately flat to down 9% versus 2015 third quarter.

The Good:

  • Revenue was up slightly.  Net income was $280.4 million on consolidated revenue of $1.86 billion compared to net income of $299.8 million on consolidated revenue of $1.82 billion in last year’s second quarter.
  • Q2 market share of 49.5% in the U.S., was up a strong 2.0 percentage points. The gains came in all segments, Touring, Cruisers and the Street/Sportster segment size of motorcycles. And it came from all seven sales regions in the U.S. The market share gains were over double the nearest competitor and came largely at the expense of Japanese competitors.
  • Retail sales in international markets were up in Q2 in all regions except Latin America (Brazil).
  • The company added six new international dealerships in the second quarter and has a goal to add 150+ international dealers over the next 4 years.

Given this current environment one could wonder if Harley-Davidson is positioned appropriately for the flat/declining industry which seemed to surprise them in Q2 — management states they are prepared.

Full Disclosure:  I have NO personal stock holdings in HOG or plans to procure any.

Some parts of the above text are attributable to the Seeking Alpha transcript on July 28, 2016.  Photo courtesy of Harley-Davidson.

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Screen Shot 2014-06-04 at 2.35.53 PMDo you agree with the adage — “You are what you ride?”

While I don’t claim the axiom is foolproof, there are many observable examples that support the concept — from the successful lawyer driving to the office in a tire-shredding German sedan and then rides a chopped and stripped down Forty Eight on the weekends, to the general contractor who most days is in a tool-ridden F-250, but prefers to ride a CVO Limited, the grand American cruiser for the long road trips.

I fell hard for Harley-Davidson (over 20 years ago now) and it took me more than three models later to acquire the current riding spirit of the Road Glide.

I’ll admit it.  I enjoy the attention that comes with owning motorcycles of the Harley-Davidson caliber — parking lot discussions and drive-by salutations from strangers.  Sure it sounds pretentious, but I’ve spent way too much time behind the handle bars of a Honda and Yamaha to resist metaphorically blowing my own horn.

Right or wrong, many of us place a great deal of importance on what we ride. Critiquing others freely, we are likewise judged by the sheet metal of our ride.  Because, like it or not, motorcycles are a reflection of ourselves — a view into our wind in the face wandering soul.

Think about it.

We often purchase what fits our current character and life status. Everything from the color to the style and model is carefully and deliberately selected.  Much of our riding and our life for that matter, is spent developing this ride persona — and it evolves as we do.  Our environment may change from year to year where a mortgage or a kid in college influences what sits in the garage — as would the line of work, the economy, the community and our circle of friends.  Whether we currently own the motorcycle of our dreams does not mean the statement is any more or less true.

As we know, not everyone can live with a Harley-Davidson status symbol — whether they intended to or not. Just go to any dealer and look at the low-mileage castaways in the used area. Those owners moved on to a more practical ride or abandoned the entire motorcycle “lifestyle.”  An association with a Harley-Davidson motorcycle is an extension of ourselves and a natural consequence of the freedom of the road culture. Like clothing, we dress in leather, steel and rubber, the same as we do with cotton or silk. Color, texture, design and shape — we’re being seen in public with our best “outfits.”

But, there is one great equalizer for all this pomp and circumstance activity — the gas station!  It’s the one place where we gather like creatures in the desert at the waterhole, replenishing empty tanks. The perfect spot to critique both motorcycle and rider while staring through polarized shades at the others from a distance.  I might dismount and swipe a credit card at the pump as fellow bikers draw conclusions based on my re-fueling habits.  I’m not bothered by that — after all, I’m doing precisely the same thing they did just minutes earlier.

Vanity comes in many forms, and even the modest will present their motorcycle with some defiance — like wearing blue jeans to a formal event.  It’s just a different perspective.

You may deceive society by how you look and the way you dress, your manner of speech and education, the neighborhood you live in or the reach of your bank account, but none of this really matters in a material world.  Because in that moment of judgement, you are inevitably what you ride.

Photos courtesy of H-D
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Sturgis Rally 2016 -- 76th

Sturgis Rally 2016 — 76th Year

Life is about choices. What to wear, what to eat, where to ride… And if you pondered each one in advance, trying to get it exactly right, you’d be left far behind and barely make it out of your house.

There’s something unique about touring by motorcycle whether it be spontaneous or calculated.  Some riders want a state-by-state listing of the best motorcycle roads with in-depth descriptions of each highway and ratings for the road’s scenery, surface quality, and a description of the best greasy food stops.  They obtain motorcycle maps, get motorcycle trip tips, reviews, suggestions, and more.  Others are just fine to point the front wheel in a direction with back roads, freeways and cornfields without ever looking at a map.

I’m having some personal restlessness and feeling a bit starved for rides this year. I was aiming for Laughlin, Sharkweek/Sturgis and Reno, but circumstances eliminated the first two.  I don’t need to worry about Reno, yet. Although, when I last looked, I see all the local hotels have already raised their rates for those dates.  Then I remind myself that the best rides I take are never the trips to any of the big rallies anyway.

And speaking of the heightened motorcycle adventure called Sturgis (August 6-13th) — prep is in full swing for the 76th Rally celebration which starts in a couple weeks.

Last year Harley-Davidson announced that the motor company is now the “official motorcycle” of the annual Black Hills Rally in Sturgis, South Dakota (through the year 2090!). And until November 2015, nobody had ever successfully trademarked the name of a city, but Sturgis Motorcycle Rally, Inc. is the official sponsor of the Sturgis Rally and it has trademarked “Sturgis,” “Sturgis Motorcycle Rally,” “Sturgis Rally & Races,” “Take The Ride To Sturgis” and “Sturgis Bike Week.” The corporation has also trademarked the official Sturgis rally logotype or picture mark. The oldest of these trademarks dates to 1997 and the most recent was registered in 2011, just before their suit was filed.  The Sturgis Motorcycle Rally, Inc., won that trademark infringement case against Walmart.

But, I’ve moved off topic where every American should try at least once the Legendary Steak Tip Dinner at the Loud American Roadhouse (no colors policy strictly enforced).

Harley-Davidson dropped a press release to outline all their plans at the 76th Sturgis Rally (HERE).  A quick re-cap is:
  • The Harley-Davidson Rally Point is a their permanent year-round space in Sturgis that will feature events and live music daily from the stage.
  • Kick-off Party for the 76th Sturgis Motorcycle Rally, Friday, Aug. 5, at 3 p.m.
  • Rides:
    • Mayor’s Ride featuring Grand Marshal Ben Bostrom, Monday, Aug. 8.
    • Harley-Davidson Editor’s Choice Bike Show, Tuesday, Aug. 9- Registration 8 a.m./Awards 4 p.m.
    • First Ever Angel’s Ride, Friday, Aug. 12 – The number of women riders is on the rise.
    • Free Motorcycle Demo Rides on the 2016 line-up.  Staging for demo rides takes place in the parking lot behind the Community Center
  • The Project RUSHMORE Experience is a behind-the-scenes and hands-on look at H-D’s latest touring motorcycle technology
  • H-D Fit Shop and Genuine Motor Parts & Accessories area is new this year will have a “Quick Install” area for 30-minute or less installations of selected accessories for your motorcycle.
  • Better than a selfie stick!  Pro Bike photos taken of you/your bike to post on social media and an option to purchase the photo as a keepsake.
  • Hollywood Harley Bikes from the movies Captain America and Avengers will be on display including Steve Rogers and the hero bike from FX’s Sons of Anarchy TV show will be located on a red carpet area

In addition, there are many, many other “not-to-be-missed” activities around town, in the camp grounds and at various music venues.

Whether you are spontaneously twisting throttles to South Dakota or making a road trip that is highly calculated — Enjoy!

@HarleyDavidson social media is providing wall-to-wall coverage at #LiveYourLegend.  The official H-D Sturgis App, is at:  www.h-d.com/sturgis.

Photo courtesy of H-D.
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A Marketing Staff Meeting at H-D?

Reflection of a Marketing staff meeting at H-D?

I don’t know who the people in “People” are and candidly I don’t care.  I use to have some casual interest, but as I’ve aged, I realized that promoting faux stars is how an industry makes itself feel good about itself.

 
I grew up in a different time.  Yes, I’m getting older, put me down for it, as some readers do, but unlike some of you I’m wise and experienced. And when I grew up, hard work, a bit of skill and insight would not only get you a house in a reasonable neighborhood, but the ability to support your family and go on vacation. Now, most people can’t even pay their bills.

When you think of “aging boomers,” what comes to mind?  Accelerating retirements, workforce skill shortages, stagnant incomes, or runaway health care spending?  It’s unlikely you think about aging as an economic drag on Harley-Davidson, right?
H-D History

H-D History

Down the road from my place, in the rolling farmlands north of Sunset Highway (U.S. 26), is a greasy burger joint called Helvetia Tavern … a place I’ve been known to frequent a little more often than my doctor might recommend, but the burgers are oh so good!  If you stop there on any given summer weekend, you might see a dozen or more bikers parked in the lot, who are talking bikes and showing off their blacked-out or chrome-laden Harleys.  And nearly all of them are over the age of 45. Many are over 50.

This isn’t a coincidence.  Harley-Davidson is a brand whose sales depend disproportionately — almost exclusively, in fact — on middle-aged males. There have been business case studies written and stock investment analysis looking at the H-D demographics while espousing doom and gloom for the company.  The fact is that motor company has been working hard to try and capture a younger, more diverse set of riders, including women and are trying to appeal to the less experienced and younger riders who want cheaper alternatives.

Blackline Appeal

Blackline Appeal

I would submit that riders younger than 30 generally lack the time, interest or the bankroll to buy a Harley for touring. And by the time they get into their 50s or older, riding with the wind in the face loses it’s allure.  It’s the noise, it’s the traffic, it’s the increased dangers, it’s the joint pain of long rides, it’s hot, it’s cold, it’s raining, it’s… always something.

I know that many of you are riding into your late 60s, but my observation is you’re doing it less frequently and you’re not buying a new bike as often as you might have in your 40’s.  That means Harley has a growth problem with the boomer demographic that will not go away.  Even with a robust economy which we are not experiencing.

But, this is all well documented and debatably old news (“Living High on the Hog” (WSJ: February 5, 2007).

Looking at the challenges...

Looking at the H-D boomer challenges…

The challenge for Harley-Davidson, in my view, is how they will continue to tap into the enormous resource that older Americans can provide?  Boomers are generally healthier and more educated than prior generations.  They are the largest group starting new businesses both in Oregon and nationally.  And many economic projections about aging are misguided because they are based on outdated notions about retirement and what it means to grow older.

I can speak with some authority on this aging topic and it’s debatable whether Harley-Davidson can grow if boomers decide to quit riding in mass.  I wanted to offer up some observations:

  • Boomers are bombarded by media.  In an attention overload society it’s very hard for the message to get noticed because it’s noisy out there and hype is more prevalent than ever.
  • Boomers believe everything they’re into should last forever, but it doesn’t, just like them.
  • Have all the latest gadgets but barely know how to use them.
  • Boomers know the lyrics of “Hotel California.”
  • The boomers can’t square looking good with feeling bad. All the hogwash about 50 being the new 30 and 60 being the new 40 has convinced them that they’re breaking the laws of science, but the truth is people break down, everybody does.
  • Want to be anti TV, but talk about doing Netflix marathons.
  • Were into the Great Society, but now don’t want to pay taxes, especially if the benefits don’t flow to them.
  • Believed boil-able vegetable bags by the Green Giant were the future only to find out fresh and local was truly “in.”
  • Thought college was where you grew up and learned something as opposed to overpaying for an entry ticket to a job.
  • Still believe in government, and that their voice and vote counts.
  • Know that you work ever harder for less money.
  • Remember when companies were loyal.
  • Remember when you fixed stuff, now you just throw it out and buy a new one.
  • Want manufacturing to come back to the U.S., but still want very cheap electronics.
  • Boomers talk about their health. The pills they take, the conditions they have, it comes up in conversation, and it doesn’t bug them, it’s akin to discussing bands when they were younger.
  • Realize opportunity has slipped through their fingers. But are still dreamers nonetheless.
  • Baseball, motorcycles and big block automobiles are so twentieth century.  Baby boomers don’t stop talking about them, but their kids shrug their shoulders and lust for the latest mobile device.

Sure some of these observations are broad generalities and I’m painting a large group with a wide brush here, but I’m sure something resonated, right?   Once upon a time the baby boomers were the younger generation, champing at the bit to replace our parents. But now we’re fading off into the sunset, just like Letterman.  So long the era of the baby boomers. They were the largest segment of the population, who pushed and pulled and help change the world.

But, let’s face it, aging isn’t so much about the fact that we are getting older.  It’s about how the motor company is always going after the young buyer and often denigrates or discounts the older demographic.  They make an assumption that today’s Americans will behave in much the same way as prior cohorts did.  I don’t know about you, but boomers in general have reshaped every element of society as they’ve aged.  And, I would submit that Harley-Davidson is placing a disproportionate amount of focus and customer feedback on the youth lifestyle.  Sean Cummings, H-D senior vice president of global demand reinforced this by stating:  “We’re targeting the 55 million Generation X’ers to get them back out and riding.”  In doing so, it makes it harder for Harley to keep a finger on the pulse of the aging motorcyclist.

It might be someone else’s time (looking at you Millennials and GenX), but what is not fixed is how affluent boomers respond to Harley-Davidson motorcycle changes.  You have to give boomers motorcycles/features they can get excited about and you can’t be too catering to old age.  No one likes to admit they’re getting older and at the other end of the spectrum you’ll alienate the entire boomer group if you cater to youth.

Power, sex and youth have long been used to sell motorcycles, so anything that suggests older buyers might not be as virile and agile as they were could backfire and only serve to fulfill the “Silver Tsunami.”

Photos courtesy of marketoonist.com and H-D.
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2015 Sturgis Rally Stats

2015 Sturgis Rally Stats

Stat pushers.

Not a day goes by that we’re not confronted with or overwhelmed with statistics or key metrics and the 75th Sturgis Rally is no exception.

But, what’s the one item we didn’t see at Sturgis this year?  Nada.  Not one.  Tickets issued for ape-hangers!  Thank South Dakota ABATE.

Starting July 1st, there are no longer regulations about where to hang your hands!  Ape-hangers are now legal in South Dakota and the $20 fine for riding with your hands too high was wiped off the books as governor Dennis Daugaard signed Senate Bill 85, effectively abolishing South Dakota law that prohibited such handlebars.

In previous years it was a petty offense in South Dakota if you rode a motorcycle on a public street or highway with the handlebar grips positioned at or above shoulder height.  For law enforcement it was almost an automatic excuse to pull over a motorcyclist.

sturgis_infographic_2_0And then there were the daily public safety reports.  The number of people in attendance, the number of vendor permits, the tons of garbage recycled, the number of arrests, the number of accidents, the number of DUI’s and the motorcycle deaths.  An endless parade of daily stats.  Some of it confusing as the stats didn’t match day-to-day in the media given the spaghetti architecture that makes up the western South Dakota tracking system.

Maybe the City of Sturgis can contract with Booz Allen who recently won the healthcare.gov contract to coordinate and manage the various agency’s reporting data.  How about an infographic at the conclusion of the event so that we can all tweet and share on social media!

It turns out that in previous years, the State Police counted arrests and traffic crashes in and near Sturgis, as well as in the Rapid City Patrol district which is most of western South Dakota, beginning the Saturday before the Rally’s official start on Monday and going through early Sunday morning, on the final day.

That made for eight days of data.

However, this year because it was the 75th anniversary, the Patrol began counting on Tuesday, July 28. So the totals reported each day for DUI arrests and injury accidents didn’t compare exactly, with previous years’ reporting.  They release a special comparative statistics for Saturday Aug. 1 through Saturday Aug. 8, – actually until 6 a.m. Sunday – to compare with previous years.

That means instead of 220 DUI arrests this year as previously reported, the eight-day total was 195 DUI arrests for the Rapid City district, which includes Sturgis and most of western South Dakota.  Even the Puddle of Mudd singer (Wes Scantlin) was charged with DUI.  City managers can now point to the report and state that stats were well below the 244 DUI arrests related to the Sturgis rally last year for the same eight days.

Felony drug arrests this year were at 80 during the eight days, compared with 90 for the same period in 2014. The 12-day total previously reported was 99 felony drug arrests this year, if counted from July 28.  But who’s counting?

Sadly, the traffic fatalities remain well above last year independent of which metric (8 day vs. 12 day period) used.  The total of 12 this year for the eight days; previously the Patrol had been reporting 13 fatalities connected to the Sturgis rally this year, counting from July 28.

Why?  More people, more crashes seems to be the prevailing answer.  That answer seems too simplistic and certainly doesn’t root cause how to have a fatality-free rally.

The Department of Transportation counted vehicles entering Sturgis, as it has been done since 1990.  Final numbers weren’t available, but is projected to be in the 500,000 and 600,000 range.  More than the previous two years, but not as many as the record year of 2000.

Harley-Davidson motorcycles dominate the rally, but was a lot of other breaking news this year.  For example, the underwear world record attempt, failed.  Given all these side shows being reported by the media, the opening of an Indian Dealer in Sturgis and lots of foreign motorcycles in attendance the Harley dominance might be reduced.

Photo courtesy of South Dakota State News  |  Infographic courtesy of Lancetdatasciences.com 

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