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If you’re a numbers person there is plenty to analyze about the 2010 Sturgis Motorcycle Rally.

Even more so if you’re somehow impacted by the largest death tally in over 10 years.  These tragedies will reverberate throughout the tri-state area for months, and will undoubtedly affect future events.  My sympathies go out to the friends and families.   Even the Cowboy State (WY) has lawmakers reviewing the lack of a helmet law and are considering revisions based on this year’s tally which reversed a downward trend in that state.

Unknown Wedding Couple at Broken Spoke Saloon

Whether you have interest in the amount of tax revenue, the number of weddings, the number of drug arrests, the number of Regional Health System emergency department visits or the amount of trash the rally produced, there are stat’s for everyone.

First off is the tax revenue; the South Dakota Department of Revenue and Regulation stated that revenues at the 2010 Rally increased ($127,804) from last year. Sales and tourism taxes collected so far from temporary vendors totaled $989,911 in the northern Black Hills, which includes Sturgis and communities in Meade and Lawrence counties.  There were 1,207 vendors at the 2010 rally and the gross vendor sales totaled $13.6 MILLION in the Northern Hills, $1.7M more than last year. In the Southern Hills, which includes Pennington County and Rapid City, Custer, Hill City and Keystone, sales were $2.8 MILLION, up from last year’s $2.5M.  Another indicator of attendance came from the city of Sturgis public works director, Randy Nohava, who stated that the rally generated nearly 9-tons of trash per day!

But, there is one stat we won’t get and that is the exact number of law enforcement agents who worked the rally or the costs.  It’s double-top secret.  However, law enforcement is quick to point to the: 1,442 citations issued, including 209 arrests for driving under the influence; 46 felony drug arrests and 183 misdemeanor drug arrests as a result of their extensive presence.

And while I’m on the law enforcement topic, there is one statistic which was very odd. The arrival of a Blackhawk helicopter, courtesy of the U.S. Immigration and Customs Enforcement along with their extensive support team. Supposedly the Blackhawk was there to provide additional surveillance of criminals and better mobility for ICE agents.  There has been NO word yet on how many illegal immigrants were apprehended at the 2010 rally.  It turns out that the Blackhawk support was never requested according to local law enforcement and in fact their arrival created almost as much controversy as the May 2010 incident where 3-Blackhawks from the Colorado National Guard descended over Wounded Knee and touch off a flurry of protests.

In terms of attendance, the methodology suggests that estimates are always inflated.  In fact, an article in the Rapid City Journal stated that 2009 numbers were rounded down to 477,000 and that the early estimate number for 2010 is 450,000.  The exact number doesn’t really matter as the bean counters really focus on the tax revenue data as a key indicator.

There were some other interesting capitalism mass-marketing stats.  Ford used the Rally to launch its new 2011 H-D “bling” filled F-150 truck and the U.S. Postal Service unveiled the “American Motorcycles” commemorative set of four stamps featuring classic motorcycles and a 1970’s era chopper.  And there are statistics for a good cause too; the 50-mile Legends Ride which raised $52,000, and was split by the Sky Ranch for Boys and the Sturgis Motorcycle Hall of Fame and Museum. And finally were the Hamsters MC, who helped raise more than $257,000 for therapies and services at the Rapid City Children’s Care Hospital for children who couldn’t otherwise afford treatment there.

Yep, the rally has lots of protestations and an industry trumpeting its success…

Statistics courtesy of Rapid City Journal.  Photos courtesy of Army/web.

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Auction Preview

“The sun is get’n ripe and the water’s get’n warmer”
“The days are get’n longer , them shorts are get’n shorter, you won’t hear me complain”
“It’s a summer thing”

It’s the lyrics from country’s new comer, Troy Olsen who sings a song which highlights friends, beverages and flotation devices on the water.

And speaking of flotation…it’s well known that most Harley buyers use financing from Harley-David Financial Services (HDFS) when they purchase a new ride.  Not so long ago, H-D applied logic to its loan portfolio that was eerily similar to the housing bust.  The company used its in-house finance unit to chase after subprime borrowers, making it easy for them to buy $20,000 chrome-sters with no money down.  The risky lending—which later forced Harley to take million dollar write-downs — along with rising default rates created major problems.  Customers with low credit scores weren’t the only issue for HDFS.  Turns out those “creditworthy customers” walked from those no-money-down financing offers and along came the delinquencies as repossessions reached new levels.

Silvio Perez (Manheim) - Starts The Auction

In steps Manheim — a worldwide leader in the sale of used vehicles.  Being reported as a first, Manheim Seattle helped execute a massive auction sale of Harley-Davidson motorcycles which were ‘rounded up’ from the various repossession parts of the U.S.  The auction occurred last week and we had a man on the inside watching some of the action.

Essentially two auctions took place over a two-day period.  The first day was exclusive to H-D dealers and the second was open to any type vehicle dealer.  Of the 60+ motorcycles on day #1 about 40 sold with the remainder falling short of the minimum required bid.  Tells you a little about where the dealers are in terms of inventory and price right now.  The GM from Downtown H-D picked up a great buy on a Springer Screamin Eagle.  The 20 or so unsold were added to the second day of bikes scheduled for auction to all vehicle dealers.  The second day motorcycle inventory list were older bikes vs. the first day.  However, most but not all sold.  Several stalled at the minimum required and the auctioneer prompted the lady from HDFS as to any movement on the minimum bid as she looked to be pulling her hair out with the fast action pace of the event.

Crowds Swarm the Auction Motorcycles

The motorcycle repossession/auction business is somewhat of a hidden market business which the general public knows little about. Given that the housing market remains stressed with foreclosures and short-sales being high we can expect motorcycle delinquencies to remain high and as a result firms like Manheim will continue to flourish.

Photos courtesy of John (aka.“Burn-Out”) and Manheim.

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Practicing the piano for 10-years does not make you creative.  It just allows you to replicate what’s been done before.

I’m not sure who coined that phrase, but for some reason I’m reminded of Harley-Davidson and the debut of their 2011 models.

I can neither confirm or deny that I’ve been busy testing a sample of the 2011 H-D motorcycles.  I cannot confirm or deny that I’ve signed a NDA/embargo agreement to not disclose, either in print or talk about what the good folks at Harley-Davidson have been up to until July 27, 2010 – the date that the company will roll out some new thunder.

The plant is filled with journeymen, skilled at their jobs, but the motorcycle models are not famous. Because to be famous you’ve got to make jaws drop, people have to forego crucial financial activities in order to invest in H-D motorcycle ownership, people have to want to tell others about your brand.  In order to succeed you’ve got to innovate.  It requires perspiration and it demands inspiration.  I’m talking about innovating in such a way that a large percentage of the motorcycle riding public cares.

We’re in a era of marketing.  Because it’s so easy.  Go online and tell your story.  Start a Facebook page, upload some stop-action videos and evangelize to the ADHD 20-somthings.  Tweet about anything and everything.  But, isn’t it interesting that as more motorcycle manufactures go online trying to sell, fewer motorcycles are moving…both sales-wise and emotionally.  The key isn’t about putting a motorcycle in front of people.   It’s about creating something so good that it builds its own audience.  It’s an incredible challenge.  To employ a classic art form, include pop references, but come up with something new.  So new that the new thing excites us, that not only makes our blood boil, but makes us want to tell everyone.  So good it gets inside your psyche and affects you…not like the lasting power of a popsicle.

For so long the basic tools have been ignored and Harley-Davidson has taken the easy way out.  It’s been about marketing an image or brand over product innovation and their spot in the firmament is at risk.  They’ve always been good about building relationships, but too much of the H-D model line-up can be denied.  You can play that “tune” for a friend and they just ignored it.

The 2011 models need to tap us on the shoulder lightly and then wrap itself around our heart.  In other words, be so good we can’t ignore you…

Photo courtesy of Deviantart.com

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Uh, that would be a NO.

No, I don’t have a man crush on Mark-Hans Richer the Harley-Davidson CMO.  But, we do have some things in common and that is we’re both motorcycle enthusiasts of double-digit years, and proud owners of H-D motorcycles.

Mark-Hans Richer is the “Billy Mays” of pitch men for H-D products, brand and lifestyle.  He pontificates about the rebellious nature.  He’s on the advertising speech circuit.  He is an opportunist.  He defends H-D founding fathers and their ideals.  He mixes up speeches with dramatic entrances.  He quotes the younger generation and the thanklessness of posterity.  He laments about young-rebels-with-tats ethos.  He slams “American Idol” and aligns product placements with fictional motorcycle gangs (“Sons of Anarchy”) through the use of attitude-enhanced advertisements, social media efforts, and lifestyle programs around counterculture happenings.

Mark-Hans Richer (H-D CMO) Dramatic Entrance

To say Richer is a marketer would be like describing Bill O’Reilly as just another news anchor.

Richer is a blow-hard motorcycle zealot to the core evangelizing and marketing a company strategy.  He would make Peter Drucker, the management guru of the 20th century PROUD.  It was Mr. Drucker who stated, “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation.”

So, what’s behind the man sticking it to the man, the chief marketer or H-D rock star?  Mr. Richer joined H-D in July 2007 as the Sr. VP and Global Chief Marketing Officer (CMO) with primary responsibility for overseeing all global marketing activities including promotions and advertising, motorcycle product planning, the H-D Museum, and the Harley Owners Group (H.O.G.).

Mark-Hans Richer (at Pontiac) Slammn'

Prior to joining H-D, Richer held marketing and advertising positions at General Motors’ defunct Pontiac brand. In November 2006 he was inducted into the American Advertising Federation’s Hall of Achievement for his career of high-impact, non-traditional marketing approaches. These include two Cannes Gold Lion-awarded marketing programs while at Pontiac, and prior successes helping lead advertising and promotions at GMC and Chevy Trucks. Richer also has previously won three Effies, the PMA Super Reggie, Promo Magazines’ interactive promotion of the year and a Kelly Award for best national print.

Harley-Davidson is lucky to have hired this motorcycle in every garage evangelist!  Richer has appeared on The Oprah Winfrey Show (remember the Pontiac Give Away?), The Apprentice III and V, The Big Idea with Donny Deutsch and CNBC. He has been on the cover of Promo magazine and Advertising Age’s Point. He and his team’s accomplishments have been covered by Advertising Age, Ad Week, Brandweek, Media Post, The Wall Street Journal, USA TODAY, NPR Radio, The New York Times, Chief Marketer Magazine, Business 2.0 and Fast Company among many others.

Have I blogged about H-D marketing tactics?  Yes.  Have I’ve been critical of some H-D marketing?  Yes.  But, how do you fault a guy whose job it is to find new ways to “stick it to the man” so to speak?!  In the Greek to New Jersey dictionary that translates to – ti na kanoume – whaddya gonna do?

Seeing this as a small hurdle, I decided to take a different angle and set out on a behind-the-scenes, unauthorized “tell-all” blog – everything Richer – and the icon behind the worldwide marketing empire at Harley-Davidson.  I did my best “Nixon Deep Throat” impersonation and was hopeful to uncovered it all…sham marriages, secret informants, shirtless outtakes in Cosmo, fear of flying, a celebrity-Melisa-Miller-addiction dysfunction, or personal hygiene habits that would make Michael Jackson blush, but I didn’t.  There is nothing worthy of TMZ.  Nadda.  Mark-Hans Richer is either squeegee clean boring or has a brilliant publicist who ran interference — always putting a good spin on whatever embarrassing predicament their boss found himself — like that time as the marketing head of Pontiac he jumped up on a conference room table in a Digitas meeting to shred a few tunes on Guitar Hero.

It turns out that Richer is the marketing real deal.  It reminds me of that saying “A marketer without the press is like a pencil without a sharpener: pointless”!  All he wants to do is sell Harley-Davidson, the brand, the motorcycles, the lifestyle and talk about the achievement of double-digit sales to young adults.  Look for a Richer “Fan Club” page coming to a Facebook near you…

Photo courtesy of H-D, WARC and SlyFox.com.

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First was a slam about H-D imitating and going down the General Motors path.  Then there were calls for a Lazarus-like resurrection!

Not my words, but direct from Mr. Keith E. Wandell (Harley-Davidson CEO and President) who states; “Look in a mirror – Harley was already so far down that same (GM) path it wasn’t even funny.” More talking point nuggets from his first in-depth press interview HERE and HERE.

I’m not sure about you, but I’ve never thought of my Harley as a “Chevy” and I own both!  Never mind that many GMs are made in Mexico or Canada.  The public perception of GM is that it stands for overlapping product lines with bland differences and the “bigger is better” mantra is followed to extreme, and then a crash diet when fuel prices soar.  This has lead to a sea of monstrosities as well as a few genuine moments of clarity and even a hint of brilliance.  But in total, the brand is most often marred with an indifferent quality perception and inexpensive or cheap label.

I don’t hang on Mr. Wandell’s every word, but his point above is an interesting way to send a condescending comment to the Harley-Davidson employees and buying public.  Does the Harley Chief really want his current customers to associate their recently purchased premium ride with GM?  It seems disingenuous to compare GM to the state-of-state at Harley-Davidson or use them as the poster child for everything wrong at H-D.  Wasn’t it just a little over a year ago that H-D management and the board approved what many would consider the equivalent of GM buying Ferrari (H-D acquires MV Augusta)?

Keith E. Wandell - CEO Harley-Davidson

The implication from the CEO interview is that H-D, like GM is a fading American industrial might, one that offered up a motorcycle to feed every market segment which has since degraded into exuding minimal coolness from contrived models.  Many others with little identity and somehow you’ve been duped into paying a premium price for indifferent quality.  This doesn’t seem intellectually honest or make for good PR!

The mind-set reminds me of an article in yesterday’s Wall Street Journal about plastic corks and how they’ve made major inroads into the 400 year-old world of wine-corks.  One quote rang especially true and reminded me of the Harley motorcycle business.

“By the 1990’s, retailers and wineries were clamoring for a solution to wine taint, but the cork industry didn’t respond.  No industry with 90% market share is going to see its propensity to listen increase – and that’s what happened to us,” stated Mr. Carlos de Jesus (Head of Marketing, Amorim Group (largest cork producer in Portugal)).

The bottom line is corks didn’t work that well and wine ended up contaminated/bad because of cork deficiencies.  No cork manufacture believed there was a problem and didn’t see the opening for an entrepreneur.  In less than 10 years, plastic corks account for about 20% of the bottle stopper market.  They changed the way winemakers think about making and closing wine.

Lessons for Harley?

  1. Never lose focus on your core mission.  Which is bringing great quality motorcycles to the public.  Some motorcycle manufactures have tumbled into the abyss because it became more about hip-hop star alignment, brand marketing, finding a tiny niche and filling it, oblivious to the point most of your market just doesn’t care.  Oldsters and hipsters are both confused.
  2. Don’t be inured to nostalgia or old technology.  The public is more open to innovation than the supplier.  People are not married to the old ways, they’ll embrace new ideas even if not every innovation triumphs.
  3. Success breeds complacencyAll most innovation in the motorcycle business is by the independents or custom shops doing it outside of the system.  To say you need a major motorcycle company to triumph is to say plastic cork suppliers can’t win unless they align with real cork suppliers in Portugal, who after all are fluent in distribution and have pre-existing relationships with wineries.  But, the plastic cork guys went it alone.
  4. Efficiencies and price. We’re not talking virtual here, corks are physical whether real or plastic.  The future is lower priced motorcycles and the cycle time for new models can’t be like harvesting cork from a tree every 9-to-10 years.  The fundamental measurement of lean manufacturing is cycle time.  It doesn’t matter how many “Kaizen” events or “six sigma” projects a company holds. Cycle time is to lean what weight is to a dieter.  You can get all the bean counters to measure inches lost or reductions in calorie intake, but at the end of the day the bottom line is determined when you step on the scales.
  5. Multiple answers. There is always more than one answer which can take hold.  Screw caps are triumphant ‘down under’ in Australia and New Zealand.  Who will develop the next “screw cap” for the motorcycle industry?

The point is not to be weighted down by your presuppositions.  Don’t think that you’re operating in a world of immutable laws.  And to realize that trying to hold back the future is a losing proposition.  The only way to maintain your share is to improve what you’ve got. Concentrate research dollars on fewer models, pack them with the latest features and technologies, manufacture them in low-cost, U.S. factories (non-union?) and update them relentlessly on rapid fire engineering design cycles.

Schematic photo taken at H-D Museum; Keith Wandell photo courtesy of Tom Lynn/JSOnline.

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Neil Young sang the song “Long May You Run“.

“We’ve been through
Some things together”

Last August, specifically on the 8th I was returning home from a week long ride in the Canadian Rockies and spent a night in Kennewick, WA (Tri-Cities) where I stopped at the local Harley-Davidson dealer.  Nice place and the dealership is owned by Shumate Motorsports or more importantly the owners are John Michial Shumate and his wife, Jennifer Shumate.

Interestingly on this day they were having a mother of all sales.  Strangely not on motorcycles, but on EVERYTHING else.  It looked like a going out of business sale and when I ask the sales clerk what it was all about she responded with something about needing to make room for all the new products so they were unloading inventory.  Sounded fishy.

Turns out that my inner voice was correct.  Just a couple of weeks later (September 2009) the owners filed for bankruptcy.  In court documents the Tri-City couple stated they’d racked up more than $10 million of debt for Shumate Tri-City LLC, Shumate Inc. and Shumate Spokane LLC.  Their first motorcycle shop was in Kennewick.  Then in 2004 the couple took over Spokane’s sole Harley-Davidson dealership, at 6815 E. Trent Ave. They also owned stores in Walla Walla and Lewiston, ID.

Sure these dealers are just locations on a map, but they also represent what life is about, experiences as you travel across the country making new friends and I’ve been to all of them over the years traveling around the pacific northwest.

According to reports, the Shumate’s filed an adversary proceeding in October 2009, accusing the motor company and affiliate companies of violating the Washington State Consumer Protection Act and of breaching a good-faith obligation.  Specifically the Shumates stated that Harley-Davidson disrupted their ability to carry on normal dealership operations by obtaining a temporary restraining order in August prohibiting them from selling motorcycles, parts, accessories and clothing that constitute collateral to which Harley-Davidson Credit Corp. claims it’s entitled. They contend Harley-Davidson then used that temporary inability of the Shumate dealerships to operate normally as the basis for the issuance of letters announcing the manufacturer’s plans to terminate its dealer contracts and franchises with them.  This maneuvering occurred when at the same time the motor company approved a new posh and competing dealership in upscale Coeur d’Alene, ID.

I don’t have visibility into all the internal workings or choices made at Shumate Motorsports, but one can’t help but have empathy.  If you believe Harley-Davidson advertising we’re supposed to have one part “stick-it-to-the-man” and one part sympathy for H-D, after all, they are losing millions bringing us these premium-priced motorcycles and the lifestyle.  Ain’t that America, where the public is beholden to corporations who pay little tax yet demand sympathy, as their lobbyists keep the government’s hands off of them and they wine and dine luxuriously in private while walking around in public with their pockets turned out?

At any rate, the latest update is a bankruptcy judge in Spokane will next week set a date for selling Spokane’s only Harley-Davidson dealership, plus the three other stores.  The Shumate Motorsport attorney (Barry W. Davidson of Spokane – see the irony?!) stated that it was Shumate’s intent to close his Spokane and Idaho operations but they were going to try and keep his Tri-City and Walla Walla stores open.  It’s not clear they will be successful in that effort.

Long may you run…

Photo courtesy of Boston.com

Previous posts on H-D closures HERE, HERE and HERE

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About 40 years ago, a social movement arose to destroy the establishment.  People wanted to take on the man and return power to the people, upend the elites and lead a revolution.   Some would argue that today we have a similar movement with the people loosely called the “tea partiers” who today are motivated by runaway federal spending vs. the war during the Woodstock days.

Taking it to “The Man” refers to the government, leaders of large corporations and other authority figures in general.  Sprinkle in an array of conspiracy theories involving the Fed, the big banks and black helicopters and you’ve got Harley-Davidson investing heavily over the last year in what I call taking it to “The Man” advertising.  It’s advertising which appeals to the man who is born free, but he is everywhere in chains…

You see these advertising movements are built by marketing people who hope consumers will put their faith in unrestrained passion and zealotry to buy motorcycles.  The assumption is that the people are pure and virtuous, and that evil is introduced into society by corrupt elites and rotten authority structures so let’s stick it to ‘em.  But, what happens when Harley-Davidson (the motor company) becomes the manipulator and shadowy corporation or the ‘elite and rotten authority figure?’

So it is according to AMC H-D in Albany, OR.  Based on their most recent communiqué, the Milwaukee Motor Company decided that starting in March there would be a policy change which prevents dealers from advertising any sales storewide.  So, taking a page from H-D’s own corporate marketing campaigns and doing their own mini-version of “Stick it to the Man” type of advertising…AMC H-D created their own tea party movement and broadcast there plans to have a 20% off sale (excluding motorcycles) all year long!  If the item you need isn’t in stock then you’ll get a 15% reduction when you place the order.

Talk about counter-establishment.  Pure advertising genius!

So what’s in play here.  First and foremost is a job-less recovery is making it darn hard for any motorcycle dealer.  Second, H-D would like to continue to be viewed as the premium brand or “exclusive” product and thus does not want to be attached to a “sale” image with their brand.  Lastly, the dealers who prefer to operate in the higher margin “dealer markup” mode are likely pressuring H-D to stop the undercutting from lower margin dealers who have yet to succumb to the mega/bistro/resort level expense in renovating a dealership.  Remember Timpanogo?

We all know that if you want service after the sale, knowledgeable and friendly staff, a quality product, and pancakes on Sundays, you’re gonna pay for it!  The question is just how much more.

Photo courtesy of AMC H-D.

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