Opinion/Editorial

How to Save Harley-Davidson – Step 2: Shift Your Product Lineup into New Segments

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35 motorcycles, 7 model lines, 4 chassis, 3 motor families, & 1 market segment, that’s Harley-Davidson’s product line by the numbers. Where many large production motorcycle companies might have 30 or so motorcycles that span the entire gamut of motorcycling’s different sub-markets, Harley-Davidson has put all of its eggs in the heavy cruiser market. This singular pursuit of one market segment has not only been the cause for Harley’s success, but also a significant contributing factor to the company’s recent downfall, which has led to a recently rumored leveraged buyout.

As the old idiom goes, one should not put all their eggs in one basket, which is exactly the faux pas being committed here by Harley-Davidson in its product offering. Businesses, especially public ones, should always have an eye on sustained long-term growth, and a key element to that goal is a well-diversified position in their appropriate industry. Taking this lens and applying it to Harley-Davidson, one can immediately see a portfolio that has been extensively mismanaged by focusing on only one segment of the total motorcycle industry: the heavy cruiser market.

What this has effectively created is a motorcycle company that looks like Alfred Hitchcock’s take on Baskin Robins: 31 flavors, but they’re all Rocky Road.

In the first part of my series on “How to Save Harley-Davidson” I argued that the first step in saving Harley-Davidson was to reposition and redefine the Harley-Davidson brand. In order to move forward Harley-Davidson needs to continue to incorporate experiential components into its image while refraining from going back to the pigeonhole brand identities that have been overplayed in the company’s media communications as of late.

Taking these philosophies to heart here in Step 2, we are going to focus on what can be done with the Harley-Davidson product lineup once a rebranding effort has begun implementation. In particular we want to look at what can be accomplished with the Harley-Davidson brand itself once it has been repositioned. This is an important distinction from Harley-Davidson, Inc. the company behind Harley-Davidson the brand. We’ll get to what needs to be done with Harley-Davidson, Inc. in Step 3 of this series.

Product Development Should Come From Marketers Not Accountants

Harley-Davidson’s product line is perhaps the motorcycle industry’s take on one of the oldest feuds in business. Typically one can file a businessman/businesswoman into one of two groups: soft-skills oriented talent (Marketing, Communications, Advertising, etc) or hard-skills oriented talent (Finance, Supply-Chain, Accounting, etc). Harley is better known for its strength in the soft-skills category, but a close look at the company’s core products and you see the thought processes of a hard-nosed supply chain manager and financial guru at work. In the 35 or so motorcycles that make up Harley-Davidson’s lineup there is essentially only a few actual motorcycles that one can separate themselves with distinction from the rest of the group. The remaining motorcycles incorporate various changes and design elements found from these five or so core motorcycles.

Make no mistake, this business decision has smart advantages, and can also be seen in other companies, albeit to a lesser extent, in the motorcycle industry (Ducati being one of the better examples). Having a product line that consists of a series of motorcycles with a large common parts bin is the precursor to a formal modular motorcycle construction format. These large common parts bins allow manufacturers to assemble bikes in a manner that creates product differentiation, and helps to reel in costs on creating new models and product extensions. In plain English, it allows companies to lower production costs directly, while indirectly lowering costs by more effectively managing product inventory.

These factors, coupled with a large array of segment products, allow Harley-Davidson to offer a wide variety of products that better suit the diverse tastes of consumers, all while keeping production lines centralized and manufacturing costs low. For my hard-skills oriented professional colleagues, this reasoning sounds like a winning strategy. However when rolled out on a large scale in a single market segment, we get what I lovingly refer to as “The Rocky Road Effect”.

A lot of people like rocky road ice cream, it’s like chocolate only better. But you can only go through so many variations of nuts and marshmallows in chocolate ice cream before the flavors start overlapping, or in the case of Harley-Davidson you can only have so many Dyna Wide Super Glide Fat King Bob’s before the product line begins to feel too familiar.

Motorcycles are about identity and expression. Riders express themselves through their choice to ride a motorcycle in the first place, and further refine their image through what motorcycle they choose to ride on. To its credit, the marketing department at Harley-Davidson has gone to great lengths to try and differentiate these seemingly similar motorcycles with sub-brands in the form of motorcycle family and model names. This has however created about as many individual brands as there are motorcycles at Harley-Davidson, for instance the Softail family group consists of the following ambiguously named brands: Softail Custom, Fat Boy, Softail Deluxe, Heritage Softail Classic, Rocker C, Cross Bones, Fat Boy Lo.

To the Harley initiated, the differences in these products might consist of meaningful changes, but to those who are new to the brand (like a new rider), these motorcycles look like seven shades of different seats, wheels, and headlights that create a motorcycle that harkens back to the hard tail cruiser segment of old. When models begin to lose their own personal identity, they also begin to lose resonance with the rider. This is an intangible distinction that isn’t found on balance sheets and common parts bins. It takes the soft skill set of a marketer to truly understand how a product like a motorcycle connects with a rider, as such the product development must come from these kind of people, not the corporate bean counters.

Pare Down Cruiser Segments to Core Products with Meaningful Distinctions

Going hand-in-hand with Harley-Davidson’s needed brand restructuring is the need to eliminate these derivative motorcycles, whose overall aesthetic and market position could just as easily be achieved through aftermarket kits and parts. It should be noted that while each of these models likely brings profit to Harley-Davidson’s bottom line, the overarching structure of having a cruiser model to meet every whim of the customer is a part of the problem that is pigeonholing the Harley-Davidson brand to the heavy cruiser market.

Instead of trying to offer every iteration of cruiser under the sun, Harley-Davidson should take the Jack Welch approach to product lineups, and focus on the top-selling and strategic models in its lineup, supplementing the rest of the market through aftermarket options. For those not familiar with the strategy that made GE the industrial juggernaut that it is, this philosophy means taking a close look at your products. If they are not the #1 or #2 model in their model segment, serious questions need to be addressed as to why they remain in the product line up.

This strategy allows for two things to happen. First, the cruiser lineup can easily be reduced to 1/2 to 1/3 of its current size, allowing for individual model brands to have more meaning and recognition in the riding community (as well as on the showroom floor). Secondly, it allows for there to be room in the Harley-Davidson lineup for models that exist outside of the heavy cruiser segment, which can then be used to bring in new types of customers into motorcycling, and Harley-Davidson itself.

Expand Harley-Davidson Models to Include Bikes Outside of the Heavy Cruiser Segment, i.e. Build Café Racer and Scrambler Models

What we see currently in Harley-Davidson’s product lineup is the result of a hard-skills leaning perspective in the product development office. Instead of creating diverse and innovative product lineups, Harley-Davidson has found a way to make money by constantly reiterating products in the heavy cruiser market segment (e.g. the “all new” 2010 model lineup that featured the 2009 models with more chrome and different accessories). Through cost-saving measures and masterful supply chain management, the company has carved out a nice profitable (until recently) niche in this space; but with each “new” product the product-line itself shows its stagnation.

The core problem with this strategy is the fact that motorcycles have far more emotional baggage than your typical product, and in this realm, activity based costing approaches to product development are a sure ticket to long-term business declines. To truly sell motorcycles well, it takes more than just knowing how to build a line of motorcycles cheaply. Certainly that is a major concern, but for a company like Harley-Davidson more attention must be given to creating motorcycles that engage the rider (there is room for debate that Harley achieves this goal with its current customers, but the real failure is shown in the company’s inability to generate the same feeling with new customers), and it also means creating motorcycles that cater to a multifaceted array of riders (an item that Harley-Davidson is almost universally accepted as currently being unable to do).

This important yet missing component is required because tastes differ by generation, and more importantly there is a strong psychological motivation that sees generations attempting to differentiate themselves from previous generations in their identity related purchases (case in point: the choice of family people-haulers in the US through the generations). In the case of motorcycling, where individuals often use their motorcycle and motorcycling lifestyle choice as a means of social distinction, this last fact proves to be an ever more salient element in motorcycle purchases, and cannot be ignored by manufacturers.

Simply put, generations by in large as a group do not want to ride their father’s or grandfather’s motorcycle. Each generation defines how it wants to succeed and set itself apart from the generation before it. This phenomenon exists in all manners of life, but since we’re talking about motorcycles, the big take home message is that Harley-Davidson has essentially created its own death clock through the successful sole-marketing of the heavy-cruiser to the baby boomer generation with no other product roadmaps for other generations in the works. The Nintendo generation simply has no interest in setting itself apart from the status quo by imitating its fathers. The more the company succeeds in selling to the baby boomers, the further down the hill it places itself in its uphill struggle to engage generation X, and in an even greater extent, generation Y.

With a reduced product line of heavy cruisers, Harley-Davidson can begin to offer this generation a motorcycle model that truly meets its needs, and desire to set itself apart. Coupled with the necessary brand retooling, Harley-Davidson could easily engage younger riders with a café racer and/or scrambler series of motorcycle, and begin to shift its core demographic to include not only more youthful riders, but also new riders who can be the next generation of Harley-Davidson loyalists.

These models would need to be entirely new products, designed from the ground up and focused on the key performance and styling dimensions that are prevalent in these sub-segments of motorcycling. Café racers and scramblers are ideal fits in the Harley-Davidson product line, as they already play upon the existing heritage/vintage vein of motorcycling that is finding an increasing foothold in the 20-something hipster social group. These sentiments are already rampant in the Harley-Davidson brandscape, making theses models a bridge into new segments farther down the line, and the first necessary steps to shifting Harley-Davidson to meaning something other than a “Hog.”

Café racers and scramblers would likely serve as a second stepping-stone to the Harley-Davidson brand both in model segment and price. This adds another dimension to Harley-Davidson entry point, a position that once reserved solely for the Sportster line, which requires that interested purchasers already have a heavy-cruiser in mind for their first purchase. By easing the waters more thoroughly for new Harley-Davidson riders, the brand can ensure a wider audience appeal while still maintaining engrained image and brand perceptions that should remain with the Harley-Davidson name.

Closing Thoughts

True product development comes from those who can put themselves in the minds of the consumer, identify their needs, and build an affordable product to meet those needs. This sort of mindset should take lead in the development process, but should also be complimented with core skills in finance, supply chain management, and other hard-skill assets. By paring down Harley-Davidson’s cruiser offering to a smaller group of distinct and strong brands, and supplementing there brands with differentiated products, it allows Harley-Davidson to redefine itself as a brand capable of being more than a heavy cruiser producer.

This product line shift allows Harley to bring new models, like a scrambler or café racer, into the model lineup, which will in turn attract new riders that previously would have ignored the Harley-Davidson brand altogether. These models already fit into the Harley brandscape, and with the brand image retooling that I’ve already set out in Part 1 of this series, these products could effectively breathe new life into a brand that has hung its hat on staying the same over time. These types of vintage motorcycle segments play to the strengths already present in the Harley-Davidson brand, and lay the foundation for the brand to continue extending itself as it continues to redefine its value for a new generation of rider.

By offering an option that still plays to the vintage motif, but also allows a generation of motorcyclist to ride a Harley-Davidson motorcycle that is different from the generation before it, Harley can play to its strengths while expanding its business stability through its product line. The end result is a leaner and more effective cruiser line-up that has more value to the customers that purchase these motorcycles, and brand whose value extends beyond just one segment of the motorcycle industry.

You can read Part 1 of the How to Save Harley-Davidson series here.

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