Harley Davidson: Riding into the Sunset
Harley Davidson has shown stellar growth for decades, introducing the "baby boomer" generation to the "Harley Davidson lifestyle" - a semi-fictional image of the care-free, biker-dude, Easy Rider.
However, since the early part of this decade, the company (and its stock price) has gone from "stud" to "dud." Why?
Well, the average age of the current Harley customer is approx. 55 years old, and they are now starting to face physical challenges and financial troubles from the recent credit crisis that might keep them off of their Hogs for good.
Below we highlight some of the key demographic segments the company must court in the coming years (in order to reinvigorate growth), as its loyal core demographic "rides into the sunset:"
Furthermore, Harley's motorcycles are still considered pricey investments (the typical cruiser costs $16,000), which plays against trends towards more inconspicuous consumption. This compares to cheaper models introduced by competitors.
What Harley needs to do -
1) Something dramatic; small tweaks will not work; they will need to reinvent themselves
- Major Re-branding Initiatives -
this will allow the company to segregate their core market segment from new market initiatives
2) Harley needs a more relevant message, and at the very least it needs to -
- Tout the eco-benefits of a motorcycle v. a car
(i.e. how can riding a motorcycle make you more "green?")
- Tout the cost benefits of a motorcycle v. a car
(introduce sleeker, sportier, cheaper models - perhaps using a different sub-brand)
The tricky balance the company has to achieve is: appeal to new demographic groups, without alienating their current customer base, which still generates the majority of their revenues. This is not an easy task!
Conventional strategy suggests creating sub-brands to appeal to these new target segments (women, ethnic groups, Gen X/Y). Harley has already made strides marketing to these new demographics (albeit not through creating new sub-brands), but they need to do more AND QUICKER. The clock is ticking...
However, since the early part of this decade, the company (and its stock price) has gone from "stud" to "dud." Why?
Well, the average age of the current Harley customer is approx. 55 years old, and they are now starting to face physical challenges and financial troubles from the recent credit crisis that might keep them off of their Hogs for good.
Below we highlight some of the key demographic segments the company must court in the coming years (in order to reinvigorate growth), as its loyal core demographic "rides into the sunset:"
- Women - Only 12% of their customer base is female. In other words, 88% of their customers are male.
- Blacks/Hispanics - Ethnic groups are also a weak demographic for Harley. This must change. Hispanics are one of the few demographics that still experience "normal" population growth and their buying power is growing faster than all other ethnic groups (+8.5% CAGR during last five years). In fact, it is expected that Hispanics will constitute close to 1/4 of the US population by 2050.
- Gen X/Y'ers - The average age of a Harley rider has risen from 38 to 55 in the past decade and a half. This trend is expected to continue, as their core demographic ("baby boomer" easy riders) continue to age, AND more importantly, retire from the biker lifestyle. Meanwhile, Harley has not been able to attract Gen X/Y'ers (25-34 yr olds) to replace the aging baby boomer population. Competitors Suzuki, Honda, Yamaha, and Kawasaki have a combined 92% of the Gen X/Y market.
Furthermore, Harley's motorcycles are still considered pricey investments (the typical cruiser costs $16,000), which plays against trends towards more inconspicuous consumption. This compares to cheaper models introduced by competitors.
What Harley needs to do -
1) Something dramatic; small tweaks will not work; they will need to reinvent themselves
- Major Re-branding Initiatives -
this will allow the company to segregate their core market segment from new market initiatives
2) Harley needs a more relevant message, and at the very least it needs to -
- Tout the eco-benefits of a motorcycle v. a car
(i.e. how can riding a motorcycle make you more "green?")
- Tout the cost benefits of a motorcycle v. a car
(introduce sleeker, sportier, cheaper models - perhaps using a different sub-brand)
The tricky balance the company has to achieve is: appeal to new demographic groups, without alienating their current customer base, which still generates the majority of their revenues. This is not an easy task!
Conventional strategy suggests creating sub-brands to appeal to these new target segments (women, ethnic groups, Gen X/Y). Harley has already made strides marketing to these new demographics (albeit not through creating new sub-brands), but they need to do more AND QUICKER. The clock is ticking...
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