Marketing Strategies of Harley-Davidson

Case Details: Case Code Case Length Period Pub Date Teaching Note Organization Industry Countries Abstract: The case discusses the marketing strategies of the US-based motorcycle manufacturer Harley-Davidson Motor Company (H-D). It details the marketing mix elements of H-D including product, price, distribution and promotion strategies of the company. Notwithstanding the success of H-D's marketing strategies, some critics were of the opinion that H-D was not focusing on its core competency, i.e. motorcycles, and said that by putting its logo on several products, the company was diluting its brand. Analysts also criticized H-D's dealers, saying they still had a long way to go in maintaining good relationships with the company's customers. Issues: Understand the various marketing mix elements of H-D Critically analyze H-D's move to license several of its products and whether this will lead to its brand dilution or not Appreciate the importance of channel partners in maintaining good relationship with the customers Contents: Introduction Background Note The Problems The Marketing Mix The Road Ahead Exhibits Keywords: Harley-Davidson Motor Company, Marketing Mix, Product, Heavy-Weight Motorcycles, Pricing, Distribution, Dealership Evaluation Norms, Promotion, Advertising Strategy, Brand Image, Brand Dilution, Customer Relationship Management, Marketing Philosophy, Demographic Profile "Because our bikes are so visually and audibly compelling, you get a bunch of them together, whether by the dozen or the thousands, there's going to be excitement and curiosity. Add to that the fun associated with motorcycling and you've got natural word-of-mouth promotion. In a very real sense, our customers are the sales force, and the bikes, accessories and clothing serve as our calling cards." 1 - Ken Schmidt, Director of Communications, Harley-Davidson Motor Company. "All successful companies have the same challenge, it's crisis of success. Arrogance, greed and complacency: you have to avoid all three to remain successful."2 Richard F. Teerlink, Retired CEO, Harley-Davidson Motor Company. Page No. 1 2 3 4 9 11 : : : : : : : : MKTG174 19 Pages 1995-2007 2007 Not Available Harley-Davidson Automobile - Motorcycle US

Introduction On January 17, 2007, USRiderNews3 named Harley-Davidson Motor Company's (H-D's) 'Softail Custom' motorbike as the "Best New Nostalgic Bike of 2007".4 According to Scott Cochran, Editor of USRiderNews, "The new 2007 Softail Custom recalls the looks of those B-movie bikes of the 1960s. Ape hanger handlebars, heavily stepped king-and-queen seats, padded sissy bars and wide forks with 21-inch front wheels all speak volumes to the 'Easy Rider' set. But this outlaw comes in armed with Harley's most modern and powerful standard engine to date - the Twin Cam 96 plus the bonafide easy rider - Harley's 'Softail' chassis."5 Founded in the year 1903, H-D started its business as a manufacturer of heavyweight motorcycles, which had an engine displacement6 of 651cc or above. H-D also produced a full range of motorcycle parts, accessories, clothing, and general merchandise. The company focused on traditional styling, design, simplicity, durability, and quality. It launched new models regularly, customized according to the needs and requirements of customers. H-D's marketing campaign aimed at shifting the owners of the company's motorcycles to bigger and more expensive motorcycles. The distribution of H-D motorcycles was done mainly through dealerships and also through non-traditional outlets which were extensions of the main dealership. H-D's products were sold to retail customers primarily through dealer promotions, the company's website, customer events, and advertising through national television, print, radio, direct mailings, and through advertising on the Internet. However, despite the success that H-D had achieved over the decades, it came in for quite a bit of criticism from analysts. Some critics were of the opinion that H-D was moving from its core competency, i.e. motorcycles, and diluting its brand image. They also criticized H-D dealers, saying they still had a long way to go in maintaining good relationships with the company's customers Background Note In 1903, H-D was established by William S. Harley (William) and Arthur Davidson (Arthur) at Milwaukee in the US. William, who was born in Milwaukee on December 29, 1880, started working in a bicycle factory at the age of 15. Arthur, who was William's childhood friend, also started working at a young age. Both of them were mechanically inclined. They manufactured their first motorcycle in a 10x15 feet wooden shed with a hand-written sign on the door that read, 'Harley-Davidson Motorcycle Company'. The first product launched was a racer bike. The company's operations expanded rapidly and the two were later joined by Arthur's brother Walter. In 1906, H-D started a new 28x80 feet factory at Chestnut Street, which later came to be known as Juneau Avenue. By then, the company's employee strength had increased to six full-time employees. In the same year, the company also produced its first motorcycle catalog. On September 17, 1907, the name 'Harley-Davidson Motor Company' was incorporated.7 In 1908, H-D sold the first motorcycle for police duty to the Detroit Police Department in Michigan in the US. The V-twin powered motorcycle was introduced by the company in 1909 and for the first time, the company also started selling motorcycle spare parts. The V-twin powered motorcycle was the fastest motorcycle during those times and could travel at a speed of 60 miles per hour. The popular 'Bar & Shield' logo was used for the first time in 1910 (Refer to Exhibit I for a picture of this logo). It was trademarked at the US Patent office after a year. At the time of the First World War in 1917, there was an increased demand for American motorcycles overseas... Excerpts The Problems In the year 1969, H-D was taken over by the American Machine and Foundry (AMF). During this period, the production of motorcycles increased by more than 300 percent to 14,000 motorcycles per annum. However, the quality of the motorcycles was one aspect which was totally ignored. Adding to H-D's problems, Japanese manufacturers began

flooding the market with high-quality, low-priced light to medium-weight motorcycles in the 1970s at a time when H-D was manufacturing mainly heavy-weight motorcycles. The company earned a bad name for poor quality products. Coupled with the competition from the Japanese companies brought H-D to the verge of collapse... The Marketing Mix In order to overcome the problems that H-D faced in the early 1980s and help the company regain its market share, a restructuring plan was implemented. Teerlink developed an innovative system known as Circles of Management for bringing both workers and dealers together and involving them in taking key decisions relating to the company. A new marketing philosophy was developed based on the desires of the customers and H-D made efforts to position motorcycles as a lifestyle product... Product At the time when H-D was formed, it offered only grey colored motorcycle to its customers and provided three basic styles. However, the company realized that in order to survive, it had to offer its customers more choice... Pricing H-D realized that it would not be possible for it to compete with the Japanese manufacturers on the pricing front. This was because manufacturers like Honda not only manufactured a low-priced high-quality product, but also spent heavily on advertising their products... Distribution H-D started selling its motorcycles through its dealers in 1904. The company's first dealer was CH Lang of Chicago, Illinois (Refer to Exhibit IV for the number of H-D's full-line dealer outlets in the US). All the dealers were independent individuals with a business orientation... Promotion Over the decades, H-D had adopted several strategies to promote its motorcycle brand. The products of H-D were sold to retail customers mainly through dealer promotions, customer events, and advertising through national television, print, radio, direct mailings, and through advertising on the Internet... The Road Ahead Though H-D was able to successfully overcome the crisis which had confronted the company during the early 1980s, it came in for plenty of criticism in the process. Industry experts criticized the company's move to license several of its products. They opined that H-D should focus on its core competency i.e. motorcycles and said that by putting its logo on several products, the company was selling out and diluting its brand... Exhibits Exhibit I: The Famous 'Bar and Shield Logo' of H-D Exhibit II: Features of H-D Motorcycles Exhibit III: H-D's Suggested Retail Price-List of Motorcycles in the US Exhibit IV: Number of Full-Line Dealer/Dealer Outlets in the US Exhibit V: H-D - Dealership Evaluation Process/Norms Exhibit VI: H-D: Number of Alternative Retail Outlets and Secondary Retail Locations in the US Exhibit VII: H-D Print Ads in the Year 1999 Exhibit VIII: H-D Print Ads in the Year 2000 Exhibit IX: Demographic Profile of H-D Customers in the US