Chris Creech 14/17/08

Harley-Davidson Strategy Report

The motorcycle market is a $21.5 billion industry, surpassing the sum of al other

powersports markets: watercraft ($1.5 billion), snowmobiles ($3 billion), utility vehicles

($1.1 billion), and ATVs ($7.7 billion). The industry has enjoyed 12 consecutive years of

growth, but with the softening U.S. economy, declining home prices, and a decline in

consumer confidence, U.S. motorcycle retail sales in the first quarter of 2008 declined

between 7 and 9 percent from a year ago.

Motorcycles are an iconic representation of freedom and individuality in

American culture. No brand has taken ownership of this image more than Harley-

Davidson has. “Harley is selling brand, image and lifestyle. They’re selling Americana,”

said Tim Conder, analyst at A.G. Edwards.

It is this image that helped Harley fight out of near-bankruptcy in 1985 when

Japanese rivals were taking over a large amount of U.S. motorcycle sales. Since that

point, Harley has overhauled its factories and focused on selling not the bikes (Harley

once had persistent quality problems), but the brand. Because of this, Harley was

profitable for 20 years following the low spot, and now even enjoys the largest market

share in Japan. Harley’s largest category, the big cruiser bike, has a 45% share in the

U.S., vs. Honda’s 23% share.

Harley is not just for those hard-core tattooed bikers with short tempers, though

that is the image that comes to the average American’s mind when they think of

motorcyclists. In actuality, the average Harley-Davidson rider is a 46-year-old male

making $78,000 annually, riding a $16,000 cruiser. Harley has captured the essence of

the baby-boomer lifestyle. These individuals have satisfied their 1960s rebelliousness

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with a motorcycle that attests to their 1990s success. They are using the money that they

have made to express their inner desires for individuality and freedom.

The problem is that Harley’s average customer keeps getting older. From 1994 to

2004, the average age of a Harley rider rose from 38 to 46 years old. For Harley to stay

among the top brands of motorcycles, they are going to have to start appealing to the next

generation.

According to Donald Brown, an industry consultant, the ideal age for motorcycle

customers is 35 to 44. These numbers have begun to decline, and they will continue to

do so through 2016.

This market naturally wants something different from what the older generation

rode. They are looking for more cool and sleek sport bikes. Harley has responded by

coming out with the V-Rod, a bike that they feel caters to the desires of this younger

market. They have also introduced more sport bikes to compete head-to-head to the

Japanese models that dominate that category. Now they need an advertising campaign to

go with this new dedication to youth without losing their older customers. "If they ever

do anything with that [roaring] sound, they've lost their customer base," says B.K. Ellis.

This is true, as 49% of Harley purchases in 2006 were by people who previously owned a

Harley-Davidson at some point during their lifetime.

Harley has adopted several new marketing objectives to target the younger market

with its new product line: expand its current market, diversify its product line, and

modify its marketing mix to target a younger demographic.

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To accomplish the goals that Harley has set for itself, they will need to install a

national multi-media campaign promoting this new idea and their new bikes to a new

market.

The targeted market, males ages 35-44 typically relate to action movies with a

strong leading male character. The Harley brand can also relate to these types of movies.

Movies that came out during the 70s and 80s that exemplify the action and adventure that

defines the Harley experience are close to the heart of many in the target market. Harley

can use the familiarity of these movies to not only position itself as the American icon

that they have always been, but also show that Harley, like these classic action/adventure

movies, has not gone away. These movies, such as Rocky, Indiana Jones, and The Blues

Brothers are popular with all ages of males looking for the epitome of coolness in a

leading role. Harley can use this as a jumping point for their new “Legends Never Die”

campaign.

For the print ads, Harley will use classically popular and recognizable movie

posters that the target market is familiar. In these posters will be a few small changes,

most noticeably will be the addition of a Harley-Davidson motorcycle displayed

prominently in the poster. This will force the connection between the iconic movies and

the iconic bike. They copy will also relate the Harley-Davidson brand to the classic

movies, along with promoting the Harley experience and community.

The television ads will be similar to the print ads, as they will also use iconic

action/adventure movies to portray the Harley lifestyle. Instead of just putting the bikes

into the movie poster however, the bike will take the role of a lead character in these

popular movies. The differing roles will also show the ability to customize each Harley

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to customers’ desires. These ads will strongly relate Harley to the classic movies not

only through the graphics, but also through a narration that will further stress the

similarities, as well as promote the Harley experience and community, like the print ads.

Harley owners love the internet. There are thousands of web pages created by

Harley dealers, owners, and admirers. Harley will use this information and add a micro-

site off its main interactive web site. The site will be interactive, calling for input from

users. The site will take the user on a journey to “Harleywood,” the Harley-Davidson

version of Hollywood, where they can select from a long list of famous movies and see a

Harley take the lead role, portraying the Harley experience. Users will also have the

option to write reviews of the movies starring Harley as well as suggest other movie roles

that Harley should take up.

The online ads, as well as the television ads, will focus heavily on the newer

models Harley-Davidsons, targeted towards the younger riders. The V-Rod will star in a

majority of the TV spots and internet videos.

Lastly, Harley will sponsor several of the most iconic actors that exemplify the

Harley lifestyle when they attend The Academy Awards. Harley will give actors such as

Bruce Willis, as well as younger actors in the same genres, a brand new V-Rod to ride to

the event and pose for pictures with as they enter the red carpet area. Harley-Davidson

will also pay to have their emblem located on the actors clothing. This will further the

connection of the Harley brand to the iconic, individual, cool persona that Harley

exemplifies and its new target market looks for.

It is this connection that will bring the Harley-Davidson brand to the younger

market where they can affectively compete against their Japanese counterparts, all while

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staying true to the Harley brand experience and holding on to their valued older

customers.

Appendix:

Trendline, Industry Overview, “U.S. motorcycle market is a $21.5 billion business”, Dave Crocker, Powersports Business, October, 2004.

Harley-Davidson USA Web Site: http://www.harley-davidson.com

AP, Ahead of the Bell: Harley Davidson, Friday April 11, 2008 6:19 amhttp://biz.yahoo.com/ap/080411/harley_davidson_ahead_of_the_bell.html?.v=1

Harley-Davidson Investor Web Site – Demographics: http://investor.harley-davidson.com/demographics.cfm?locale=en_US&bmLocale=en_US

Fortune Magazine, “Harley-Davidson, Will Harley-Davidson Hit the Wall?”, John Helyar, http://www.mutualofamerica.com/articles/Fortune/2002_08_01/fortune.asp

The Basic Harley-Davidson Story: http://www.soe.ucsc.edu/~callon/hd.html

webBikeWorld, “Motorcycle Industry on Track for 12th Year of Consecutive Growth”, Nov. 18, 2004, http://www.webbikeworld.com/Motorcycle-news/motorcycle-sales-growth.htm

USA Today, “On the Harley free-trade Brigade”, David J. Lynch, Aug 17, 2008, http://www.usatoday.com/money/economy/trade/2006-08-17-bush-cover-usat_x.htm

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