According to an article by @bob_tita in the Wall Street Journal (WSJ – Paywall), Harley-Davidson plans to reopen its factories this week at lower production rates and stated it will be sending dealers an attenuated range of new motorcycles — meaning, time for a COVID-19 course correction.
You may recall that Harley’s U.S. assembly plants and most of its dealers closed in March as part of a nationwide effort to slow the spread of COVID-19. Currently, as many of the company’s 698 U.S. dealers make plans to reopen, Harley’s director of product sales, Beth Truett, stated in a memo, which was viewed by the WSJ, that about 70% of them likely wouldn’t receive any additional new motorcycles in 2020.
The motor company is pivoting from the “More Roads” plan to now focus efforts and energy to appeal to customers of premium-priced brands with limited availability.
Speaking of availability… By definition, excellence is scarce. Harley-Davidson has leveraged “scarcity” previously. Underproduce motorcycles and limit distribution, which creates long waiting lists that in turn create an exclusivity mystique. Will it work again?
And speaking of premium positioning…
Harley-Davidson Eau de Toilette – Example of brand dilution!
Price alone won’t make a brand premium and few companies can thrive on limited market coverage and low volumes by commanding premium prices in a particular niche. One thing is sure: motorcycle customers are price-sensitive, even if they are ready to pay a premium price for a … Harley lifestyle.
This means Harley-Davidson has to be able to truly earn the added value.
Data supports what we already know to be true about premium brands: people with lots of money buy nice things. Whether you’re talking apparel (i.e. Phat Farm, Polo, Timberland and Tommy Hilfiger), Tequila, hand bags (i.e. Gucci, Fendi, Louis Vuitton and Prada), restaurants or footwear, it’s easy to recognize the pattern that the nicest, most expensive brands are favored by consumers with the highest household income. What is less obvious, are the fewer instances when wealthy people opt for the less-expensive, or when average-income people make deep trade-offs to purchase really pricey things. There are a whole lot more average-income people than there are excessively wealthy ones.
Strong brands have a strong identity. Mediocrity doesn’t captivate or win the motorcycle sales race. There is a rule of thumb that says that a company ought to be able to explain its brand identity in seven words, give or take a couple.
The clock is ticking Harley-Davidson!
So, what is it about “premium-ness” brands that are able to inspire consumers to say “no” to some things so they can say “yes” to a brand that’s often or slightly out of financial reach? That’s the Harley-Davidson opportunity. Finding the nooks and crannies to up-sell consumers on “premium-ness” choices—especially a candy coated brand in the top tier of the motorcycle pack.
The Harley downside risk is the “Porsche Effect“… becoming known as an SUV manufacturer that also produces a few sports car models rather than the premier sports car brand that also makes SUVs.
I’d like to better understand how Harley-Davidson can retain a premium brand identity if combustion engines, once the top tier of American motorcycle engineering, are being replaced by e-motors (LiveWire) that can be built by almost anyone, and if motorcycles feel and act like smartphones that you no longer even have to own? It’s likely that the V-Twin motors of the future will no longer be a distinguishing brand characteristic.
New competitors are knocking on the Milwaukee door and customers are better informed, have tougher requirements and are able to interactively rate and influence companies and their products.
In the end, what Harley-Davidson claims about it’s premium brand doesn’t matter. What matters is whether or not consumers believe it enough to pay more for it.
Photos courtesy of Twitter Bob Tita/WSJ and Harley-Davidson.
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