The New York Times ran a great article this week about the challenges facing Harley-Davidson, both from the current economic depression, and more generally as the quintessential Harley rider gets older in age.
In summation, Harley-Davidson dealers around the US and overseas are seeing sales drop dramatically as people scale back their expensive purchases, and as the access to credit becomes increasingly difficult.
There’s no real surprise there, and any hardcore fan will be quick to tell you that Harley will be back on top once this financial turmoil is over. However, looking farther down the road at Harley-Davidson’s long-term business position, there is additional trouble brewing as well.
Baby boomers account for the majority of Harley sales, and they are getting older. The NY times ends there with its commentary, but we think there’s more to the story on Harley-Davidson and the American bike market in general.
The rise of Harley was seen simultaneously as the baby-boomer generation went through its “mid-life crisis”, as well as when this group started acquiring expendable capital, presumably as they were rising through the ranks of their corporate careers.
As these riders enter into their 60’s, they seem to be just as fanatical about the brand, and continue to purchase Harley-Davidson motorcycles (as well as BMW’s, etc).
Harley-Davidson feels that it can get at least another 15 years out of these riders, although presumably we can expect to see them tampering off much earlier than that timeline.
The big problem in all this for Harley is that these older riders are not being replaced by a fresh batch of younger riders. The median Harley rider is 49, up from 42 five years ago.
Instead of seeing sales centered and focused around a specific market segment, with new customers replacing older customers as their buying habits change, Harley is chasing its core demographic throughout their lifecycle.
When these customers get too old to ride, and if all things are held constant, no one will be left to ride Harley cruisers.
Compounding the problem, traditionally millenials (20-30 year olds) have shown a desire to differentiate themselves from their parents…meaning, the liklihood of them purchasing a big Harley cruiser when they’re 30 or 40 isn’t too good.
Harley is getting great reoccurring sales from its current customers, but isn’t gaining any new customers. When these reoccurring customers are too old to ride, who will ride the iconic brand?
To combat this, Harley-Davidson will have to leave its tried and true marketing techniques behind if it wishes to appeal to a younger audience, and replenish its purchasing ranks.
Speaking on this point, Gregory Carpenter, marketing professor at the Kellogg School of Management at Northwestern, says, “Harley understands the baby-boomer consumer incredibly well, in a holistic sense, but to grow and thrive, they must create a deep emotional connection with younger consumers.”
Looking at Harley’s portfolio of brands, there’s really only three avenues for new rider to be indoctrinated into the H-D house of brands: Harley-Davidson choppers, Buell sportbikes, and MV Agusta premium sportbikes.
Each one of these brands has its challenges. For instance, if Harley tries to infuse youth into its core brand, it risks alienating its loyal core riders, and attempts like the V-Rod have shown that these efforts don’t seem have the traction necessary to bring younger riders into the fold.
MV Agusta, has a similar problem. The premium sportbike is a luxury item for the rich and successful, to market it towards a younger crowd would be a departure from its core demographic as well, and would ruin the historic Italian name. This leaves Buell, the bastard-child of the sportbike segment.
Buell has marketed itself as the Harley-Davidson of the sportbike segment, employing air-cooled motors and American themes in its marketing campaigns.
For its efforts, Buell dealers have had a tough time selling their bikes, and as one dealer told us “couldn’t give a bike away if they wanted to.” It would take a radical departure from the current Buell image and marketing campaigns to compete against the Big Japanese 4.
This leaves Harley three choices: create a new brand that targets what the younger audience ACTUALLY wants, re-invent how Buell is positioned in the market, or collapse in on itself like a dying star.
The market has clearly asked for an American sportbike, and no one has yet to get it right, despite the work of Buell, Fischer, and now Roehr. With creditors eager to get their money out of their investments, we have no doubt some boardroom discussions are getting interesting in Milwaukee right now.
Source: New York Times