Mark Ritson: Harley-Davidson risks riding into a geriatric cul-de-sac if it fails to attract the new rich

Does Harley Davidson’s recent result announcement suggest that the brand is about to mature to the point of decline? Or will a boost in marketing spending avert the demographic crisis on the horizon?

Ritson award winner

It’s always been a bumpy ride for Harley Davidson, America’s largest motorcycle manufacturer. The company was almost seen off by the Great Depression and in the 1970’s a wave of Japanese imports again threatened to company’s existence. But since 1980, when it was taken over by a group of savvy investors who eventually took the company public, Harley Davidson has grown into one of the best run brands in the world.

The key to Harley Davidson’s renaissance was to forgo an all-out war with its cheaper, more efficient Japanese competitors and embrace the retro look of earlier bikes while positioning the brand as more than a motorbike. Harley Davidson was freedom, America and the thrill of the road. In a world of homogeneity, Harley Davidson offered its customers the chance to rebel and take an alternative path.

The success of this strategy has been clear for all to see. Last year Harley sold more than a quarter of a million bikes and generated revenues in excess of $6bn. The company, bought for $8m 35 years ago, is now worth $1bn.

But it is not all smooth riding. Harley’s third quarter results came in significantly below analysts’ expectations last week and shares in the company dropped 15%. With quarterly revenues of $1.bn and gross margins of 36% Harley hardly appears to be in financial trouble. But there is a specific marketing reason for the jumpy response: concern for customers.

Despite the image of a twenty-something Peter Fonda on a revolutionary quest through the American badlands and bearded warriors astride angry machines, you are more likely to find a dentist or retired accountant on a Harley Davidson these days. The positioning of the brand might be of rebellion and freedom, but that message ostensibly attracted baby boomers.

There is nothing wrong with this target segment of course. The WASP 45+ male consumer has more disposable income than any other demographic group making them interested in expensive new hobbies like riding motorbikes and price insensitive about it to boot.

Armchair branding experts might cite the dissonance between the rebellious Harley Davidson image and its middle-aged, mainstream customer base. But in my experience there is always a disparity between the image client and the actual one. Provided a brand takes money from sales to actuals and reinvests it in the image of the prototypical client all will be well. It’s hard work finding a Londoner actually wearing Burberry (except in the ads) but the exceptional work of the brand’s marketing team keeps its Chinese and Spanish clients entirely comfortable with an image of a brand that we Brits could not live without.

The problem for Harley Davidson is not the image client, but rather the changes occurring with real ones. The 45+ white male demographic is not growing. America is changing and unless Harley can escape its core target into African American, Hispanic and female segments the demographic odds are stacked against its future growth. The company is putting huge stock in its “outreach customers” – those who exist in new, fast growing segments – even going to the trouble of announcing its progress in recruiting them as part of its reporting system.

US census population predictions

Second, even among its existing customer segment trouble is brewing. There is a clear demographic sweet spot that exists between the initial mid-life crisis of the early 40’s and the onset of a 60+ reticence to ride because of increasing infirmity. If Harley fails to recruit newly arrived, cashed-up 40-somethings it faces demographic disaster as its brand ages along with its increasingly geriatric customer base and eventually disappears with them into the sunset. Harley’s customer base has been gradually getting older for the past fifteen years. In 1999 the average age of a rider was 43, by 2008 it had reached 48. Tellingly, the company then stopped reporting this statistic.

With each passing year Harley Davidson risks riding into a demographic cul-de-sac in which new customers associate the brand with old, white men and not the freedom of the road. Many analysts read the quarterly results last week as the first signal that Harley Davidson may be losing the rejuvenation challenge and, with it, the fundamental appeal of the brand.

That may not be a fair diagnosis. The marketing team at Harley Davidson are talented and understand the nature of the challenge ahead. The disappointment of the quarterly results was tempered with the announcement that the brand will reduce the number of bikes produced next year and increase marketing spend by 65%. That’s exactly the right response to what is surely one of the great marketing challenges of 2016.

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Comments
  • Al King 29 Oct 2015 at 2:03 pm

    This ones really interesting for me and personal. I turned 50 this year and always planned to buy a bike. The one HD model Id consider (Nightrain) is hard to get in UK. But my main concern was that ID become an instant cliche. I turned to Triumph instead who’ve now got the outstanding Speedmaster in their range. For me its got the RnR cool from the fact its a chopper, combined with rich British heritage and you dont see so many on the road. Ideal combo. So I think the increased (and better) competition is another factor. They need a killer new model (maybe a hybrid) for the youth.

  • Richard 30 Oct 2015 at 8:36 am

    ‘…..best run brands in the world’ is right. Harleys are, by any objective standard, the worst made, most dynamically flawed, least reliable and poorest value motorcycles you can buy. Its brand guardians are geniuses, and I have no doubt whatsoever that they will recover from this – perhaps with another aftershave launch. Luckily for Harley, the majority of buyers are new to riding and therefore have nothing to compare them to, and typically pass out of the other side of their identity crisis and back onto four wheels fairly quickly.

    • BrendaKilgour 6 Nov 2015 at 6:33 pm

      Well, they used to be. Geniuses, that is. For the past few years marketing has been run (into the ground) by a hack from Detroit fresh from killing the Pontiac brand, who thought he could fire his agency and do it all by himself on the cheap via crowdsourcing and other snake oil solutions. The results speak for themselves — sales and earnings on the skid — and the “genius” from Detroit was recently shown the door. Maybe they have learned their lesson.

  • Zbiggy 30 Oct 2015 at 11:40 pm

    Really interesting couple of comments so far, and that for me sums up both the joys and trials and tribulations of running an iconic brand. Namely loyalty beyond reason, which for me is the “ultimate” brand positioning is completely based on a personal and deeply held “irrational” view point.

    For me B&O is a perfect personal case in point, I can buy cheaper, better TV’s and music systems and yet despite being hopefully a somewhat intelligent person, I just love their stuff and therefore pay a premium to buy it. Stupid yes, satisfying personally absolutely!

    Both the comments sum this up, are Harley the best bike available, no, but do they to some people mean something special via a real emotional connection, of course.

    The Triumph comment is equally enlightening, it again for me is a truly iconic brand, therefore people would buy it for what it means to them, rather than what it actually is. Want a reliable, proven, value for money bike buy Japanese. Want a sense of British heritage and expertise, namely a “real” bike buy a Triumph.

    So for me Mark, your article while valid misses the point, if you happen to run an iconic brand you sell a dream not a product. Therefore the worst thing you can do is try and target specific demographic segments. With an Iconic brand you target a mindset not a demographic.

    The real challenge is how do you do that while ensuring you develop and modernise your brand without killing its original DNA that made it special in the first place. That requires right brain not left brain thinking something I like to call “real” marketing.

    Left brain thinking focuses on short term profits and performance, right brain thinking is not only in it for the long term but also ensures a lifetime of potential, but only if people know how to do it. That doesn’t take death by data it takes balls!

  • Ingolf Stern 23 May 2016 at 5:23 pm

    “Caucasian”? are we still saying that? My people are from the North. We are Norse, not from the Black Sea/Georgia region. We be white as fek, but we are most definitely not “Caucasian” regardless of what your high school teacher told you in 1976.

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