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BADM 110 – Basic Marketing Management

Spring 2009

Marketing Audit
Harley-Davidson Motorcycles
Harley-Davidson Motor Company

Group 17
Mahmoud Abdel Wahab
Justin Alexander
Katherine Arsenio
Rong He
Shirley Liu
Benson Mensah-Bonsu
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Executive Summary

Harley-Davidson aims to maintain long term relationships with its riders who embody the

ultimate H.O.G. member. Consumers that remain loyal to the company are those who live

without boundaries and pursue their passions for adventure.

Although the overall product for Harley-Davidson is composed of many features, there

are only two parts of the total product that consumers truly care for. The first part of the total

product that actually matters, and the most obvious, is the motorcycle. To the untrained

consumer, motorcycles are the only things that Harley sells, however the most valuable product

Harley provides is its image. The image Harley provides is the reason why Harley is able to

effectively retain its customer base and attract a great number of new consumers.

Harley-Davidson Company is using exclusive distribution and has established world-

wide dealerships. These dealerships are independently owned, which means that there are no

franchise fees, but still operate under a contract with Harley-Davidson.

A majority of its promotion mix revolves around public relations including being the

official sponsors of Women’s Rider month, Milwaukee Bucks and Daytona Bike Week. Personal

selling is Harley’s main point of sales as customers cannot order bikes online.

Harley-Davidson is able to use a premium pricing system because it owns close to fifty

percent of the U.S. market share. Harley’s most popular motorcycles lines, (Touring and Cruiser

product lines), range from $3,000 to $5,000 more expensive then their top competitors, Honda

and Yamaha.
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Harley-Davidson has also worked to improve the communities in which its products

exist. However, there have been exceptional incidents when Harley has acted in an unethical

manner, mainly for the sake of maintaining its market share.


Table of Contents

1. Business Mission and Marketing Objective.............................................Page 4

2. Target Market…………………………………………………………….Page 4

3. Product……………………………………………………………………Page 5-6

4. Place……………………………………………………………………….Page 6-7

5. Promotion....................................................................................................Page 7-10

6. Price……………………………………………………………………….Page 10

7. People - Business Ethics………………………………………………….Page 10-12

8. Conclusion…………………………………………………………………Page 12-13

9. References………………………………………………………………....Page 14-15
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I. Business Mission and Marketing Objective

Harley-Davidson Motor Company began with William Harley and the Davidson Brothers

in 1903 with their first prototype of an engine designed to assist a bicycle. Within a few years,

they had produced their first trademark two cylinder, the V twin engine. By the 1920s, the

company was known for its modern design, the “teardrop” gas tank and front brake which were

part of the famous Harley-Davidson look. During the Depression and World War II, the

company prospered with orders from the military and police. They produced new models to

address the demand of a new market that consisted of recreational consumers with money to

spend. Harley-Davidson went public in 1965 and was bought by American Machine and Foundry

in 1969.

In the 1970s, Harley-Davidson was struggling to compete with the influx of Japanese

bikes. The company made a great comeback in the 1980s with the help of a tariff on imports and

its new plan to restructure. By 1987, Harley-Davidson owned about 25% of the heavyweight

motorcycle market. Sales had grown steadily since 1995. Recently, reports have shown that the

net income has dropped about 10%. Such a drop is due to the current credit crisis of the US

economy. Harley-Davidson has been forced to shut down facilities and has suffered a loss of 8%

in its shipments in 2008. Moreover, it has been reported by Goldman Sachs Group Inc. that

Harley Davidson’s 2008 financial statements state that the company has also experienced a 30%

drop in sales and a 95% drop in operating profit.

II. Target Market

In the mid 1980s, Harley Davidson’s targeted the markets of motorcycle riders in the

young adult age range. As they transitioned in the 1996, they started to redirect their marketing

initiatives towards targeting motorcycle riders in the middle age (40-60 years old) and old age
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(60+ years old) ranges. As a result of this redirection of the demographics Harley Davidson Inc

marketed to, a 40 percent increase in sales became noticeable.

III. Product

The product lines of Harley-Davidson include many different products. The primary product

of Harley is the heavyweight motorcycle, which is the centerpiece of the company‘s image. Along

with motorcycles, Harley-Davidson offers helmets, jackets, gloves, eyewear, boots, tee shirts, jeans,

bags, jewelry, belts, wallets, key chains, caps, lounge wear, watches, and home collectables. All of

these complimentary products help bolster the image of the company. Consumers have an added

incentive to purchase Harley-Davidson accessories along with their motorcycle in order to complete

the image of Harley-Davidson.

Currently, Harley is the number one seller of motorcycles in the United States. Despite the

dominance by Harley in the American market, the company has not done as well in the

internationally. Honda, Peugeot, Bayerische are the top 3 motorcycle international makers of

motorcycles.

The total product of Harley-Davidson is made of the core product, supplemental features,

symbolic and experimental features. As stated earlier, the core product of Harley-Davidson is the

heavyweight motorcycle. Harley offers 5 different models of motorcycles, which are The Sportster,

The Touring, The Dyna, The Softail, and The VRSC.

The supplemental features of Harley-Davidson include the 2year/unlimited mile warranty,

after sale insurance, and accessories that Harley provides. Although Harley mainly manufactures

motorcycles, the company prides itself on the service it provides to its customers, which includes

fully trained technicians, specialist engineering equipment, computerized diagnostic equipment and

technical updates. The package includes a very expedient after-sale service that includes insurance
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from the Harley-Davidson Company itself which they claim is the best insurance plan for their

motorcycles, an extended service plan which protects you from costly repairs and expensive service

bills, and an assured and affordable protection plan that covers the costs of accidents.

In completing the total product of Harley-Davidson, the company also presents symbolic and

experimental features. These features are events throughout the year that help display the Harley

image, Harley lovers come together to share their experiences with Harley and see new motorcycles

that the company plans to sell. Also, the company helps consumers plan their Harley “adventure”.

Planning for such an adventure includes favorite motorcycle routes, Best Western hotels and Shell

gas stations. In order to appeal to new motorcycle buyers, the company gives lessons that will help

consumers master their Harley. All of these accommodations allow for consumers to truly be

involved in the Harley way of life.

The mission of Harley-Davidson is to make the Harley-Davidson dream a way of life. The

core product, supplemental features, symbolic and experimental benefits enable Harley to create the

Harley-Davidson package. When someone purchases a Harley, they purchase a lifestyle that

represents the American free spirit.

IV. Place

In 1904, Harley-Davidson opened its first dealer in Chicago, Illinois. Presently, there are

695 dealerships located in the United States, 684 of which are full-service Harley-Davidson

dealerships. These dealerships are independently owned, which means that there are no franchise

fees, but still operate under a contract with Harley-Davidson. In terms of the suppliers, Harley-

Davidson maintains a number of long and loyal relationships to enable the production of

customized motorcycles that H.O.G members demand. However, if a supplier wishes to raise its
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price of materials, Harley-Davidson can easily switch to another firm without disrupting its own

production because it has a wide span of suppliers.

There is no specific policy as to where they are located. However, Harley-Davidson has

its own policies to address this issue, and they are using exclusive distribution to meet specific

customers need. Also, some states have their own regulations to dictate the distances between

dealerships.

The company first conducts their own research to strategically determine where to place

the dealerships that would optimize their sales. Once an expansion in an area is determined based

on market studies, Harley-Davidson will interview candidates to run the unit based upon his/her

shared entrepreneurial position and knowledge of motorcycling. Potential candidates will be

notified either through Harley-Davidson’s search in its own internal database or advertise in

local newspapers.

Not all dealerships provide the same services, which range from H-D Motorcycles,

services, MotorClothes Merchandise, Genuine Motor Accessories. Dealerships that sell

motorcycles also offer the majority of their supplemental and experimental features to give their

customers the full Harley-Davidson shopping experience. Also customer can customize their

bikes online but cannot order online.

In 2009, Harley-Davidson has experienced a 10 to 13 percent reduction in its shipment

plans from 2008 and an 8.2 percent decrease from 2007 in 2008. According to Jim Ziemer, the

CEO of Harley-Davidson Inc., the firm has cut down on production so dealerships will have

lower inventory, which would be matched with the lower sales in 2008. Ziemer believes that

lowering production will be beneficial for the company and its privately owned dealerships.

V. Promotion Mix
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Advertising

Harley-Davidson focuses on advertising the brand over advertising specific products.

They promote the image and lifestyle that Harley-Davidson embodies. The brand name has a

specific reputation, which attracts a certain type of customer. Harley Davidson produces four to

five television commercials per year; One of its commercials won best TV spot in Adweek

Magazine in 2004. Originality and humor are usually incorporated along with communicating

two ideas that Harley-Davidson intended to express: the appeal for women riders and the appeal

of male riders to females. Model Marissa Miller was recruited for an advertising campaign,

which Harley-Davidson believes will promote women riders while simultaneously appealing to

male riders. No matter what method Harley-Davidson used in promotion, it has always

emphasized “the Harley experience,” which encompasses all aspects of being a wild and free

rider.

Sales Promotion

The only short-term incentive that Harley-Davidson is currently offering is the Best

Western Ride Rewards program. It is available exclusively to members of the Best Western Ride

Rewards. This promotion entails booking travel through Harley-Davidson at a Best Western and

in return customers receive double points which include the following: free nights, airline miles,

gas cards.

Direct Marketing

Harley-Davidson is well organized in its non-store retailing by utilizing direct marketing.

They have an easy, interactive website for H.O.G. Members to address any of their upcoming

events and travel opportunities or motorcycle needs. The website is also welcoming for potential

new customers to research about the Harley-Davidson brand. On their website, they use
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Customer Identifiable Information to help cater to their customers. Visitors of the site can fill out

information related to the services, products, or programs they have requested information on.

Harley-Davidson uses this information to answer inquiries and present products, services, or

programs that Harley-Davidson or its distributors, dealers, and Business Alliance Companies

have to offer. Customer Identifiable Information is a method that allows Harley-Davidson to

implement its direct marketing.

Public Relations

In the past, Harley Davidson has outsourced Public relations activities to PR firms. The

Southern Nevada Harley-Davidson branch, which owns the award winning Las Vegas dealership

hired Preferred Public Relations & Marketing to host various events to welcome in there newest

branch in the region. Villing & Company has been hired on several occasions to produce TV

Commercial and Radio ads promoting new Harley Davidson models. In recent years, Harley has

increased sponsorship and public participation in motor exhibitions and professional sports. In

February 2008, Harley Davidson agreed to a multiyear sponsorship of the NBA team Milwaukee

Bucks. The in-game segment called “Rev Up” will include the Bucks’s Mascot riding in on a

Sportster, trying to increase fan participation. They have also been the main sponsors for the

American Motorcyclist Association (AMA) International Women & Motorcycling Conference.

Other Public Relations endeavors includes hosting special rides for women during Women

Riders Month, a celebration of African American Riders during Daytona Bike Week and

promotions for other businesses at Electrical Power 2009. Harley Davidson bikes have made it

way into many Hollywood movies including X-Men.

Personal Selling
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As Harley Davidson produces prestige priced motorbikes, it has t have a strong personal

base. Harley Davidson goes above and beyond to acquire customers and sustain relationships

after the purchase of a Harley Davidson. 90% of Harley Davidson motorbike customer will buy

another Harley Davidson within their lifetime, so sustaining a relationship is vital. The salesmen

job is to persuade and increase interest of a potential customer to purchasing a bike. The online

initiative of “RoadStore” allows customers to customize their desired purchase and continue the

sale with an authorized salesman. Motorbike purchases cannot not be completed online and

therefore need to be pasted onto a sales representative. The contact between the customer and the

Harley Davidson sales representative is inevitable.

VI. Price

Price is a very important factor in Harley-Davidson's marketing mix. Harley-Davidson uses a

premium pricing system. “The company believes its larger-displacement custom products continue

to command a premium price because of the features, styling and strong resale value associated with

Harley-Davidson custom products" (10-K Report, 2007). The premium pricing policy of their

motorcycles is reflective of the quality that Harley Davidson implements into their product line. As

Harley Davidson owns close to 50% of the US’s motorbike industry, it is evident to see that their

customers value the products that they produce.

Figure 1: Price Analysis of Harley Davidson’s Industry Competitors

Company Name Sport Bike Touring Cruisers


Harley-Davidson Inc. $8,899 $23, 499 $17,699
Honda $10,932 $20, 549 $8,499
Yamaha $9,740 $16,299 $13,690

As depicted in the table above, Harley Davidson’s Touring and Cruiser motorcycle lines are

on average $3,000 to $5,000 more expensive then its competitors, Honda and Yamaha. The average
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retail price for Harley Davidson’s traditionally styled motorcycles are priced the highest on the

market in comparison to their competitors.

The Harley Davidson FXD 105th Anniversary Edition reflects the company's value based

pricing system. The cost to produce the Special Edition FXD increased by $200-$300, whiles its

retail value increased by $5625 in comparison to a non-special edition FXD.

VII. People - Business Ethics

For the majority of their existence, Harley-Davidson has operated ethically. Due to the

company’s success, Harley-Davidson has almost never been forced to take any unethical action

to stay in competition. In fact, the LLH Enterprises website claims that Harley-Davidson has

raised $40 million for muscular dystrophy in Canada and the U.S., as well as collecting toys for

children, and cash for the blind and homeless teenagers. Harley has long provided good

treatment and cares for their employees, providing favorable working conditions and pension

plans. Also, Harley has been long known for providing quality bikes that their consumers have

grown to love.

Harley-Davidson’s Corporate Governance Policy, which was described as excellent by the

company’s Chief Executive Officer, James L. Ziemer, promotes fairness, financial transparency

and accountability to all shareholders of the company. The company also has an environmental

policy that was completed in 1994 by the Chief Compliance Officer and approved by the Board

of Directors in which they abide to. The policy prohibits any act of harm for the environment. It

includes compliance with environmental regulations, advancement of environmental awareness,

minimization of environmental risks, the reduction of emissions and waste, and the conservation

of energy and water consumption.

. In order to reduce their impact on the environment, Harley dealerships have recently
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begun to incorporate leadership in energy and environmental design (L.E.E.D.) certification. By

adopting LEED strategies, Harley has drastically lowered the amount of energy consumption

needed for some of their dealerships. Also, Harley is now making a strong marketing movement

to appeal to minority and female riders as well as their current consumer base.

Richard F. Teerlink, a retired C.E.O of Harley-Davidson, stated in his speech at the UW

Madison School of Business Dean's Executive Leadership Series in September of 2005 that the

company is inspired by five major guidance values: Tell the truth, be fair, keep your promises,

respect the individual and encourage intellectual curiosity. The report also includes that Harley-

Davidson has contributed a lot to the University of Wisconsin Madison School of Business.

During the late 1970s and into the 1980s, the American motorcycle market was

noticeably losing its market share to Japanese motorcycle makers. In September of 1982,

Harley-Davidson petitioned the U.S. International Trade Commission relief from the importation

of heavyweight motorcycles. By 1983, President Reagan acted by placing an increased tariff on

imported heavyweight motorcycles from 4.4% to 49.4% for that current year. Within the next 5

years imported sales were down 20,000 units, while Harley noticed an increase between 8,000 -

10,000 units. Although this tariff did help Harley avoid bankruptcy, it is seen by many as an

unethical barrier to Japanese motorcycle companies. Another unethical incident happened in

2008, when sales was slowing down, Harley-Davidson Financial Services issued $700 million of

no-money-down loans through subprime lending, with interest rates as high as 18 percent.

Basically, Harley-Davidson was giving out unsecured loans without any disciplinary action.

Consequently, borrowers were not paying on loans and investors stopped buying the securities.

As a result of this “unsustainable strategy of financing” as described by Robin Farley, an analyst

with UBS, Harley-Davidson was left with $80 million in debt for 2008. After this incident, the
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company’s C.E.O, James L. Ziemer, and the head of the finance unit, Saiyid Naqvi, announced

their resignation.

Conclusion

Harley-Davidson has a loyal customer base which has allowed it to dominate in the

United States. Harley should continue to emphasize the iconic lifestyle that comes with the

ownership of their motorcycles because that is how it has differentiated the company from

competitors. The devotion of their riders will guarantee Harley Davidson its stake in the

motorcycle industry.

The image of Harley speaks for itself and is bought for a bargain when compared to the

price tag. Owning a Harley has transformed the most uptight individuals into patriotic rebels.

This image, which is so accepted domestically, is an image that is somewhat frowned upon

internationally. Harley’s image is what sells the motorcycles in the United States, however the

quality of the motorcycle itself is what sells internationally. Harley’s strong sales figures are

evidence of how strong their image is in the U.S. as compared to the rest of the world.

After high-speed spread its dealerships in the previous year, Harley-Davidson will strive

to against the economic crisis. In 2009, Harley-Davidson will reduce ten to thirteen productions.

Moreover, Harley-Davidson will expand IT system to cut down the cost of operating.

They needs to direct its promotion mix to attracting younger riders as the economy is

affecting their primary target market. Harley should continue to support female riders as their

female riders also attract male riders to the lifestyle.


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In order to continue being prosperous, Harley-Davidson should concentrate on their two

most successful product lines, the Touring and Cruiser lines, and put less emphasis on the

Sportster motorcycles because their competitors excel in this product line.

After performing unethically in the previous year, Harley-Davidson will strive to regain

its market share by prioritizing customer relationship management over the goal of increasing

sales and profits. For a company like Harley-Davidson that has high ethical values and an

outstanding reputation to maintain its market share, Keith E. Wandell, the new Harley-Davidson

Chief Executive Officer, will have to comply with the company’s strict governance policies in

order to avoid any unethical incidents in the future.


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harleydavidson.html>.

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