It?s One Thing for People to Buy Your Product or Service, but It?s Another for Them to Tattoo Your

Home
>
Motorcycle
>
It?s One Thing for People to Buy Your Product or Service, but It?s Another for Them to Tattoo Your

It?s One Thing for People to Buy Your Product or Service, but It?s Another for Them to Tattoo Your

William Harley and Arthur Davidson, both in their early twenties, built their first motorcycle in 1903. During their first year, the company's entire output was only 1 motorbike; however, by 1910, the company had sold 3,200. Movies such as Easy Rider made Harleys a cultural icon and soon the company attracted people who loved its bad-boy mystique, powerfulness, rumbling voice, distinctive roar, and toughness. It sounded like nothing else on the road, and even Elvis Presley and Steve McQueen longed to ride one.

The Harley-Davidson Motor Company has had its ups and downs, and at times, the downs seemed as if they would end in bankruptcy. In the sixties, Honda, Kawasaki, and Yamaha invaded the American market, and when sales at Harley-Davidson dropped drastically due to decreasing quality and increasing competition, the company began to look for buyers and was finally sold. However, the new owners of Harley Davidson knew little about how to restore profitability. The quality became so bad that dealers had to place cardboard under bikes in the showroom to absorb the oil leaking.

Daniel Gross, in Forbes Greatest Business Stories of all Times, recounts how in 1981, with the aid of Citibank, a team of former Harley-Davidson executives began negotiations to reacquire the company and rescue it from bankruptcy. Among these executives was William Davidson, the grandson of the founder Arthur Davidson. In a classic leveraged buyout, they pooled $1 million in equity and borrowed $80 million from a consortium of banks lead by Citibank.

Harley's rescue team of loyal executives knew that the Japanese motorbike manufacturers were far ahead in regard to quality management, and they made a bold decision to tour a nearby Honda plant. Paradoxically, the Japanese had learned Total Quality Management from the Americans, Edwards Deming and Joseph Juran. The new business concept outlined by these two pioneers was a new management approach that, interestingly enough, had been rejected by American manufacturers. As a result, they offered this approach to Japanese manufactures that were eager to learn and implement it. Therefore, soon after their tour of the Honda plant, the Harley Davidson Motor Company decided to put into practice this originally rejected approach.

After implementing just-in-time inventory (JIT) and employee involvement, costs at Harley had dropped significantly; this meant that the company only needed to sell 35,000 bikes instead of 53,000 in order to break even. Their lobbying at Washington also helped, and import tariffs were raised temporarily from 4 to 40 percent on Japanese bikes. This extra breathing space was something that the U.S. motorbike company desperately needed for its recovery.

The combination of visiting a Japanese motorbike manufacturing plant and lobbying in Washington for import tariffs was a daring move on behalf of Harley's executives in their attempt to bring back profitability and growth to the company. Another important strategic move was the company's unique marketing and branding campaigns. Studies showed that about 75 % of Harley customers made repeat purchases, and executives quickly recognized a pattern that refocused the company's overall strategy. Simply put, they needed to find a way to appeal to the extraordinary loyalty of customers, which they found in creating a community that valued the experience of riding a Harley more than the product itself.

The sponsorship of a "Harley Owners' Group" has been one of the most creative and innovative strategies that has helped create the experience of this product. Without realizing it, Harley executives had pioneered a new paradigm that would be increasingly embraced by other industries in their quest to increase profitability by converting their product into an experience. The company started to organize rallies to strengthen the relationship between its members, dealers, and employees, while also promoting the Harley experience to potential customers. The Harley Owners' Groups became immensely popular; it allowed motorcycle owners to feel as if they belonged to one big family. In 1987, there were 73,000 registered members, and Harley now boasts to have no less than 450,000 members.

In 1983, the company launched a marketing campaign called SuperRide, which authorized over 600 dealerships to invite people to test-drive Harleys. Over 40,000 potential new customers accepted the invitation, and from then on, many customers were not just buying a motorcycle when they bought a Harley; instead, they were buying "the Harley Experience."

Harley-Davidson offered its customers a free one-year membership to a local riding group, motorcycle publications, private receptions at motorcycle events, insurance, emergency roadside service, rental arrangements on vacation, and a host of other member benefits. Branding the experience, not just the product, has allowed the company to expand how it captures value, including a line of clothing, a parts and accessories business, and Harley-Davidson Visa card.

If you were to scan the list of companies that delivered the greatest returns on investment during the 1990s, you would discover Harley-Davidson. Only a few companies have been successful in inventing entirely new business models, or profoundly reinventing existing ones. Harley-Davidson went from supplying motorcycles to antisocial raiders to selling a lifestyle to the aging bad boy wannabes caught in their midlife crises. Traditionally, Harley-Davidson bike owners came from the working and middle classes, but as quality and prices of the bad-boy-bikes rose, and with energetic marketing, the company soon attracted a different class of buyers-currently one third of Harley buyers are professionals or managers, and 60% are college graduates. The new customer segments of Harley are the Rolex Riders or the Rich Urban Bikers. Hell's Angels do not run in the same group anymore. Now there are groups of accountants, lawyers and doctors. Women also account for a significant portion of the new riders, and there are women-only riders clubs spreading all over the globe.

The future looks bright for the U.S. motorbike company. According to The Economist, overall U.S. sales increased over 20% in 2000, and more than 650,000 new motorcycles were sold in the U.S. in the same year, up from 539,000 the year before. Bike buyers spent an estimated $5.45 billion on new bikes in 2000.

Stay alert and get it early. The new branding paradigm is to sell a lifestyle, a personality and it is also about appealing to emotions of your customers. Increasingly, it will be more and more about creating an experience around the product. Brand managers and executives will need a new set of lenses. The rules have changed as well as the opportunities to maximize profitability and create value in the process. Nonetheless, the majority of companies continue to follow traditional ad campaigns and they seem to ignore the fact that the media has fragmented into hundreds of cable channels, thousands of magazine titles and millions of Internet pages.

Consumers are no longer sitting ducks for commercials; they are looking for new experiences. Whether it is the bad-boy-aura of the Harley riding experience, the exquisite coffee experience in Starbucks cafés, or the active participation in Net communities, more and more companies will need to follow these early new branding pioneers. They will need to look into the dynamics of their relationships with customers and the nature of their interaction. They will need to ask themselves some serious "out-of-the-box" questions if they want to move with the shifting value that is the result of constantly changing market conditions.

Branding has changed and so have marketing and advertising campaigns. New variability, heterogeneity where there was once homogeneity, newly emerging stratifications of wealth, new preferences, and new life styles are all characteristics of the 21st century customer that are here to stay. We better get used to it, at lease until the next paradigm is discovered. Remember, the companies that are creating new wealth are not just getting better; they are becoming different-mind-bogglingly different!

Bibliography:
Barker, Joel. Paradigms. Harper Business, 1993.

Bedbury, Scott. A New Brand World: Eight Principles for Achieving Brand Leadership in the 21st Century, Viking Press, 2002.

Gross, Daniel: Forbes Greatest Business Stories of All Time, John Wiley & Sons, 1997.

Hamel, Gary. "Innovation Now," in Fast Company (http://www.fastcompany.com/online/65/innovation.html), December 2002

Kotter, John P., Leading Change, Harvard Business School Press, 1996, pp. 4 ? 14.

Teerlink, Rich, and Ozley, Lee: More Than a Motorcycle: The Leadership Journey at Harley-Davidson, Harvard Business School Press, 2000. Young, James Webb. Technique for Producing Ideas, McGraw-Hill, p. 14.

Josef Schinwald is consultant in Performance Measurement and professor in Business Strategy at the University of Belgrano, Buenos Aires, Argentina, and his didactic material must not be replicated without the given permission to do so. Copyright © 2003-2005 Business Design Innovation. Josef is also owner of ValueQuest, LLC, a e-commerce business, and you can visit his sites at My Motorcycle Leather http://www.my-motorcycle-leather.com and Stylish Wedding Favors http://www.stylish-wedding-favors.com.

In The News:

Yahoo! News: Top Stories

Georgia Sen. Chambliss wins re-election in runoff (AP)

AP - Georgia Republican Sen. Saxby Chambliss handed the GOP a firewall against Democrats eager to flex their newfound political muscle in Washington, winning a bruising runoff battle Tuesday night that had captured the national limelight.

Rice arrives in India in wake of Mumbai attacks (AP)

AP - U.S. Secretary of State Condoleezza Rice arrived in New Delhi on Wednesday in Washington's effort to ease tensions in the region after a three-day terrorist attack that left 171 people dead in Mumbai.

Gates: Military looks to accelerate Iraq pullout (AP)

AP - Defense Secretary Robert Gates signaled a willingness Tuesday to forge ahead with two key priorities for the incoming Obama administration: accelerating the U.S. withdrawal from Iraq and shutting down the Guantanamo Bay detention center.

Auditors fault Treasury oversight of bailout funds (AP)

AP - The government must toughen its monitoring of the $700 billion financial bailout to ensure that banking institutions limit their top executives' pay and comply with other restrictions, federal auditors said Tuesday in the first comprehensive review of the rescue package.

2 arrested in alleged torture of teen, who escaped (AP)

AP - A Girl Scout leader and her husband were arrested after an emaciated, terrified and nearly naked 17-year-old showed up at a gym with a chain locked to his ankle, saying he had just fled his captors, authorities said Tuesday.

Divorce rate increases in Marine Corps, Army (AP)

AP - The divorce rate among soldiers and Marines increased last year as military marriages suffered continuing stress from America's two ongoing wars. There were an estimated 10,200 failed marriages in the active duty Army and 3,077 among Marines, according to figures obtained by The Associated Press for the budget year ended Sept. 30.

Newly released Nixon-era memo shows aides dishing dirt on critics (AP)

AP - In Richard Nixon's time, all the president's men fretted about threats on every front: disquiet out on the streets, disloyalty inside the administration and trouble from political opponents who had to be discredited at any cost.

Study flunks 49 states in college affordability (AP)

AP - An independent report on American higher education flunks all but one state when it comes to affordability Â— an embarrassing verdict that is unlikely to improve as the economy contracts.

Beyonce to perform at Essence Fest in New Orleans (AP)

AP - Beyonce is the first artist lined up for next year's Essence Music Festival in New Orleans.

Murphy's tip in lifts Pacers over Lakers, 118-117 (AP)

AP - Danny Granger scored 32 points and led Indiana back from a 15-point fourth-quarter deficit, and Troy Murphy tipped in a missed shot at the buzzer to complete an improbable 118-117 victory over the Los Angeles Lakers on Tuesday night.

Rice arrives in India to ease tension with Pakistan (Reuters)

Reuters - Secretary of State Condoleezza Rice arrived in New Delhi on Wednesday as part of urgent U.S. efforts to ease tension between India and Pakistan that has surged over the Mumbai attacks.

South Korea steps up crisis fight (Reuters)

Reuters - South Korea moved on Wednesday to help local banks through a cash crunch gripping the global financial system as central banks around the world were expected to cut interest rates again to support their fast flagging economies.

Automakers' desperate bailout plea gaining support (Reuters)

Reuters - A top lawmaker predicted Washington would approve a bailout for U.S. automakers after they submitted survival plans, and General Motors Corp and Chrysler LLC said they needed an immediate infusion of cash to avoid failures.

Obama wrapping up cabinet picks with Richardson (Reuters)

Reuters - President-elect Barack Obama moved swiftly toward wrapping up his cabinet appointments on Wednesday with the selection of rival-turned-supporter Bill Richardson as secretary of commerce.

Republicans win crucial Georgia Senate seat (Reuters)

Reuters - Republican Sen. Saxby Chambliss easily won a run-off election in Georgia on Tuesday, denying Democrats the chance for a 60-seat "super majority" in the Senate that would have enabled them to pass legislation virtually at will.

Pentagon chief Gates backs Obama Iraq policy (Reuters)

Reuters - U.S. Defense Secretary Robert Gates, who will stay on under Barack Obama, said on Tuesday he supported the president-elect's Iraq policy but declined to back his proposed timetable for the withdrawal of U.S. forces.

Clinton for a Clinton? Senate guessing game begins (Reuters)

Reuters - New York Gov. David Paterson has famous names to choose from in picking a replacement for Sen. Hillary Clinton, including a Kennedy, a Cuomo and even another Clinton, as in the former president of the United States.

NATO agrees cautious re-warming of Russia ties (Reuters)

Reuters - NATO agreed on Tuesday to gradually resume contacts with Russia suspended after Moscow's intervention in Georgia, and put off a decision on putting Ukraine and Georgia on formal membership tracks.

Thai protesters abandon airports as flights due in (AFP)

AFP - Hundreds of anti-government protesters packed up and left Bangkok's airports on Wednesday after a crippling siege, as authorities assured angry tourists that flights would resume within 24 hours.

Rice arrives in India after Mumbai attacks (AFP)

AFP - US Secretary of State Condoleezza Rice arrived in New Delhi Wednesday to try and ease India-Pakistan tensions over the Mumbai attacks, as US intelligence blamed a Pakistan-based militant group.

It?s One Thing for People to Buy Your Product or Service, but It?s Another for Them to Tattoo Your

Motorcycle Motorcycle