Harley Davidson, an international motorcycle company, started out as a small three man operation in 1903, by the Davidson brothers and William Harley manufacturing heavyweight motorcycles. This included financial services for the motorbikes, accessories and branded apparel. It experienced great success during both World Wars, and managed to survive the trying times of the Great Depression. After World War II, Harley Davidson brand begin to build on the image of the V-twin cylinder engine established in the 1920’s by shifting from manufacturing military bikes to recreational ones.
During the 1970’s and 1980’s Japanese competition nearly destroyed the company. Competitors introduced technological advanced bikes at a lower cost due to mass production. Technological advances and economics of scale and efficiencies made competitor’s products superior in some instances. Harley responded by a re-evaluating its marketing strategy centered on a lifestyle image.
This included a re-organization and brand building program, including the Harley Owners Group (HOG), Harley Davidson was able to re-capture its market share.
It established these groups along with better customer service that helped it establish itself as a dominate company in the motorbike industry. It had a differentiated focus and various target markets as the environments changed. It was positioned effectively as a way of life with a sense of freedom as opposed to selling the best motorbikes. The marketing campaigns focused more on the lifestyle associated with the product and worked on its social image. The marketing team used differentiation to create more awareness of the product by reinforcing Harley from a psychological perspective as a symbol of freedom, developing and maintaining relationships.
Harley Davidson South Africa was established in 1996 and has prospered due to very high annual growth rates. It succeeded as an emotionally driven brand, one that customers choose for a sense freedom, biker image or as a status symbol. It is this emotive response that Harley Davidson capitalizes on in its marketing strategy and that is re-enforced with the Harley Owners Group magazine, events and the international customer rental service. Despite the company’s success it faces some unique challenges. Currently all merchandise is imported from the U.S.A., as a result pricing decisions are problematic relative to competitors. Harley continuously evolved its brand but lacked focus on black upcoming consumer (black diamonds) and on women initially. It will need to do some valuable market research and determine the best way forward with very careful implementation of the strategy to best target black diamonds and increase growth in this ‘untapped’, high disposable income market.
1: Product Policy
Product Policy is defined as “A strategic rule or rules covering how a good or service is promoted to potential consumers” (Kotler and Keller, Year!). Harley-Davidson has since grown from one dealership to seven independent dealerships between 1996 and 2007. Harley product policy was to focus more into customers’ needs rather than the company, this is the strategy that was introduced in the early 1980’s and was subsequently implemented in South Africa. These customer-orientated services have differentiated the company from competitors, in the minds of customers in South Africa as it was about image, sense of Freedom and status. This help in dismissing the myth / reputation of its “bad boy” image. This was seconded by the gender split of 28% female and 72% of male’s riders in South Africa. Harley South Africa set out to promote Harley’s into females who are independent with high salary income as the new market segment; the strategy was to treat them as equals and as owners in their own right. Post 2007, the product policy changed to “Black Diamonds” with an effort to attract and increase the black market into Harley riders.
Their marketing strategy was different as it had done very little above the line advertising, dealers were given freedom to determine their own promotional activities modified to their own client’s needs and demands. Classification: Specialty goods – Customers are willing to make an extended search to find Harley and in some cases, might be willing to travel 20 or 30 KM to find the bike. “Marketing mix” is a general phrase used to describe the different kinds of choices organizations have to make in the process of bringing a product or service to market. The Product which is one of the 4P’s is used in defining the marketing mix and is categorized into 4 pillars namely Product Mix; Product Design; Product Development and Product Life Cycle (Kotler & Keller, 14th Edition)
1. PRODUCT MIX:
Product policy lies at the heart of the marketing mix and encompasses all qualitative aspects of the products offered. Product-mix refers to the range of products offered by an institution. Offering products that are valued and demanded by customers is key to the success of Harley in South Africa.
2. PRODUCT DESIGN
The goal of product design is not to create a different product to satisfy every possible client need. Harley should design products that respond to several different needs with only a few variables. Product design variables must be appropriate for the markets that the Harley has decided to target.
3. PRODUCT DEVELOPMENT
Product development is the process of continually refining client-oriented products. It includes several phases, such as exploring customer needs, screening ideas, evaluating products through pilot testing, revising product design based on the results and finally, launching the products. All of these phases are intertwined.
4. PRODUCT LIFE CYCLE
Below is the summary of the four phases of the Harley product life cycle which include introduction, growth, maturity and decline.
Core Benefits of owning a Harley:
* Harley members have an enduring relationship built on trust and dependability supported by good service and meaningful advice as most of the riders especially females had no technical capabilities of some of the riders. * Become part of the Harley family which include meeting with business associates, share a cup of coffee with new riders and also talk to a friend. This has made most riders to have a “sense of belonging”. * Harley offer in-house finance and insurance program for riders / customers. * A full one-year membership in the Harley Owners Group (H.O.G) comes with every purchase of a new, unregistered Harley motorcycle.
* Associate memberships for H.O.G family members and passengers also benefit and become part of the Harley family membership. * Owner’s memberships are renewable at a discount and they can also become a member for life. * Full access to the company’s website, magazines each year, and a subscription to the special member publication, toll-free customer service and even a touring handbook for trip planning. * Harley also organizes and sponsor special events for H.O.G members including bike parades. *
Analysing the Brand equity of Harley Davidson:
When purchasing a Harley, the customer is endowed with an added value of a sensation of freedom offered by the product, the sense of belonging and a sense of exhibitionism offered by a Harley. Harley Davidson does not market the functional purpose of the bike but rather the emotional and psychological attributes of freedom and belonging. The success of the marketing approach and achievement of brand promise of such psychological attributes are well evidenced by the successful financial performance of Harley Davidson. The following case facts indicate that Harley commands higher prices, market share and profitability:
* Steady share of half the USA heavyweight motorcycle market in 2006; * Annual growth in unit sales in South Africa had averaged 46% over the past few years. * Harley still held the majority share in SA market, an estimated 67%. The above indicates that Harley Davidson has strong brand equity credentials. We can further analyse the brand equity of Harley Davidson by applying one of the Brand Equity Models, ‘The Brand Resonance Model’ (Kotler and Keller YEAR) and applying the 6 fundamental building blocks of the resonance model to Harley Davidson:
Building brand Equity
The right brand knowledge structures targeted at the right consumer can build substantial brand equity (Kotler and Keller YEAR). An analysis of how Harley uses the 3 brand equity drivers (Kotler 2014) to build brand equity: 1. Brand elements – Harleys brand benefits are less concrete (freedom, sense of belonging etc) and thus it ensures that its brand elements focus on emotional and psychological attributes. E.g. slogans such as “The fun is not in the destination, the fun is in the journey”. In addition company marketing themes never emphasize on the bikes mechanical specifications but rather the associated lifestyle for owning a Harley. 2. Marketing activities – product/service – Lifestyle – How do customers make contact with the Harley brand:
* Internal Branding – Harley’s primary focuses is on internal branding Harley makes extensive use of marketing through its brand community, the H.O.G. H.O.G members have a consciousness of kind” or sense of felt connection to Harley. i. H.O.G. as a channel for internal marketing has proved to be more effective than Harley’s external marketing campaigns. ii. HOG is not organic but company-sponsored and facilitated because it’s one of the main and primary marketing activities. iii. H.O.G is a business strategy. The entire business model supports the H.O.G. iv. Harley’s cultivation and engineering of the H.O.G plays a significant role in growing and strengthening the brand * Individual Customer marketing
v. Harley places a lot of marketing attention and focus on the individual customer. Significant investment is made towards dealerships being well equipped to cater for H.O.G meetings, vi. High individual customer focus pays off in terms of, significant sales arising from repeat customers, accessories, customisations of initial purchase, trading upwards after initial purchase etc. vii. Individual marketing to women on a personal basis as they walked into the store with their husbands or partner’s. This was successful in building brand equity amongst female customers. * External Branding is minimal. Harley does not do much mainstream advertising. This has a benefit of cost saving from not having to rely heavily on mainstream high cost advertising channels. Harley prefers to grow through existing dealerships. For example, Dealerships are equipped with coffee areas where staff can connect with customers that walk into the stores.
3. Leveraging secondary associations
* Harley frequently associates itself with charity rides and motorcycle events. This allows it an opportunity to build on its brand promise of exhibitionism and belonging
While applying the logic of the brand value chain (Kotler 2014) backwards, high profitability & market share arise from strong customer awareness and customer associations, which in turn arise from successful marketing programme investment. It could be inferred that Harley has generated valuable return from its marketing approach consistently over a period, indicating successful brand equity building over the years.
Harley Davidson’s new target market is the, ‘Black Diamond’. This has been their focus as they believe this market has potential. In 2007 the market totalled 2.6 million, while they managed to make sales totalling 709. This meant they had 27% of their target market. This was a drop when compared to the previous year. Post 1994 this target market has had opportunities that did not exist before. We also saw the emergence of BEE, which continues to make Black people more financially stable. This therefore makes this market an ideal market to focus on.
Market profile: As much as the female rider target market is growing (28% by 2007) and has potential Harley needs to understand that there are still cultural issues that this market has to deal with. Such issues include that fact that for the black community for a woman to drive a motorcycle it might be not acceptable. Therefore, this would need Harley to come up with strategies to deal with this cultural perception in order for them to benefit from this market.
Future product policy:
Product Portfolio: Harley Davidson has managed to introduce accessories which are priced differently. This works as those that cannot afford to buy the motorcycles can still settle for other biker accessories thus improving margins. Harley needs to continue to widen its product mix. Usually a biker will buy one bike unless they can afford to buy more, therefore for Harley to continue gaining from this consumer they need to also focus more on their accessories which not only bikers like but also non bikers and family members. It was mentioned that 70% of the purchasers were non bikers.
Harley however needs to be careful that its product system does not disadvantage its brand. This is seen as an exclusive brand and one needs to be careful that a product diversification does not bring down the value of the brand and result in consumers perceiving it as cheap. It is therefore important that we keep the current product portfolio as exclusive as possible to protect the brand.
With the increase in fuel prices, Harley might need to consider a two-way stretch where they might need to produce cheaper motorcycles which are more fuel efficient to encourage people who might not want to consider investing in a Harley due to costs.
Strategies for growth:
Driving in a Harley club is a spectacular moment, whether or not the bike itself was bought for show. Cruisers are differentiated products and Harley is the leader in that market but that is a double edge sword as its guaranteed popularity and high expectations as a result. They are effectively selling a lifestyle and for more people to buy into it and to keep those on board they need to focus on strengthening the product differentiation, design, brand and service differentiation. Bikes as an extension of personality and customers will associate with a product that delivers on the highest promise. The design of the bikes and features that are most useful and necessary to the rider are important, the customisation has resulted in unique end products for each customer, the quality in terms of performance and conformance need to me maintained at a level above the competition.
Because customer needs and tastes vary, the service levels required to keep customers happy also varies, the service dimension of the business is therefore important in creating a strategy. By creating awareness about the product and pricing mix and different after sales service options available to the customer (delivery, training, consultation, HOG, maintenance and repair options), Harley Davidson SA can bridge the information gap and appeal to a larger market.
Targeting the Black diamond:
This is one of the fastest growing segments in the South African economic context, the majority being young and qualified and earning a more than descent constant salary. Mostly growing up post apartheid, this group is less stereotypical and more adventurous and likely to try new things than was previously not associated with the age segment. This is the new financial muscle of the South African economy and Harley Davidson should explore it purely as a potential market for its affluence and exploratory capacity if not for its perceived desire for opulence and status. As a product that provides pleasure, fun and value, there is no reason not to tap into this virgin market that hasn’t yet grasped its stance or identity relative to the previous politically influenced generation.
According to Kotler and Keller, ”The customer will judge the offering by three basic elements: product features & quality, services mix and quality, and price” (Refer to Fig 12.1). In our technologically age it is now easier for any company products to be replicated and even produced much cheaper too. This makes the element of “service quality and mix” very important to marketers. The service quality and mix Harley-Davidson offers to its customers will be a source of competitive advantage.
The customer value hierarchy diagram places an ‘augmented product’ at a very high level (Fig 12.2). Customers will value an augmented product because of its additional features and services that come with it. Harley-Davidson should aim for service differentiation at all stages of the buying process and after purchase: (Ordering Ease, Delivery, Bike-riding training, customer consulting, maintenance and repair).
The customer service personnel employed by Harley-Davidson will affect the quality of service. The company would need to ensure that they hire and train the right people for the jobs. Employee satisfaction would be critical to making sure the employees have a positive attitude as they work with customers.
The marketing department at Harley-Davidson has to understand the needs and wants of their customers in order to satisfy them. Customers are concerned with reliability, service dependability and maintenance costs of the motorbike.
A service-quality management system would also need to be set up plus monitoring systems to ensure that all customer complaints are handled properly.