Can Harley-Davidson rejuvenate their sales?
This is Jenny Rae Le Roux with Management Consulted. I'm an ex-Bain consultant
who loves to think about businesses. And I'm a numbers person, so
I like to break it down to how the numbers work inside the business and
figure out whether applied to strategy, makes sense to what
they're doing. Harley-Davidson for those of you who don't know
make amazing motorcycles. They are decorative,
collectors pieces, they're communities of them one, of their most famous
motorcycles of all time is a Harley-Davidson sportster.
And they have multiple different ranges, models, and Harley-Davidson is a
community, it's an experience. And because of that, Harley-Davidson has
done exactly what they should have done over the last number of years. Which is
that they have a brand presence which drives a price premium,
because they are a variable cost product. So variable cost products
have two choices for how they can optimize. First they can
maintain maximum price, so they have a great differential in the profitability
over their cost. Or, they can produce at a lower cost. And of
course every business needs and wants volume.
But without those two things you can't compensate in volume,
what you're lacking on a per unit basis, So Harley-Davidson has done an incredible job
from a branding and a community perspective historically,
and making sure that everyone knows when you want to buy a motorcycle the good
ones are Harley's. Here's the problem. In the last couple of
years Harley has begun to recognize that their population is the baby boomer population.
And they are not transitioning younger
buyers sufficiently to compensate for the baby boomers that
are phasing out of the market. In addition, they have launched
internationally and while they're getting good traction, about 42%
of their sales were international last year, international is complicated.
It's much harder from a supply chain perspective.
It's much harder to sustain and to maintain, and so
maybe a couple of markets are going to really make sense for Harley overseas,
but ultimately, they cannot let their U.S. market go. This
aging demographic is a problem, that they can't just let
happen to them. And so my argument is that Harley is
unfocused, undisciplined, and unclear about
what they even are as a business, and what they should be doing.
If they have two choices, higher price premiums, they should be launching
Harley's that are multiple, multiple, collector items. So
they're super premium Harley's, that are hundreds
of thousands of dollars. That people will hold and collect for a
long time. And why? Because when they do that they're
rebuilding the brand and building it as an
elite opportunity. They need to be focusing on driving influencers,
make Harley cool again. Make sure that younger people
know Harley's, ride Harley's, buy Harley's, want Harley's.
How do they do that? There are all kinds of ways and brands have been doing it
for hundreds of years, but it's really essential that Harley
doesn't leave that behind. What has Harley done
instead? They focus on launching electronic motorcycles.
Electronic and electric and the you know, hybrid motorcycles,
what in the world? Okay, there are scooters and other things that are
low emission. There are other opportunities if you want a little
toot-toot vehicle, but if what you want is power
and distance, electric doesn't give it to you. Electric is
120-140 miles. That's not even a two hour round trip to the hills. It's not
anything that's going to give you that substantial Harley experience.
And where are the charging stations? At Harley dealerships!
There is one in the city that you just left but there's nothing
where you're going. So just an incomplete network and a very
like, incomplete thought. And what they're
doing is they're trying to drive the price down
and the costs, they're not at scale for the production. Yes,
it's expensive there's challenges, so they're not really driving their costs
down sufficiently. They're not maintaining the price premium, they're
not maintaining the contribution margin that they need to. So my recommendation
if I were on the board at Harley, would be, "You need to focus on driving
sales where you have lost them." Sure go to different demographics but
focus on your current fixed cost network, which isn't huge, but
focus on where your dealerships are and make Harley's cool again. Do whatever you
need to do, in order to figure that out. Focus on
super premium products and if possible, you can focus a little
bit on optimizing production. But overall, I think that Harley is making poor
strategic choices, based on not really understanding
what kind of business it is. And look, volume is important,
international is great, but ultimately I think there are other issues that Harley
could solve by being a little bit more simplified in their strategy. Again, I'm
Jenny Rae at Management Consulted. If you want more videos like this
check out our channel, subscribe, and also check us out at www.managementconsulted.com