MARKETING PLAN FOR HARLEY DAVIDSON
...ct Comparison Company Harley-Davidson Honda Yamaha Indian Product V-Rod 2003VTX 2003 Road Star Centennial Chief Technical highlights Evolution motor efficient power Superior engine design Best air-cooled engine Smooth throttle response Market Segment Loyal customers: Upper Market Segment 1/3 of US Market Lower Market Segment Loyal customers New American Spirit Performance High performance classic muscle lines High performance High reliability High Functionality Excellent torque and roll on power The preceding table depicts the overall assessment of competitive products in the Performance-Cruiser segment. It provides an overall perspective of the differences and similarities of competitor products that are directly competing with Harley-Davidson’s V-Rod and gives the insights to potential threats and opportunities in each competitor’s product portfolio. Harley-Davidson is faced with a strong presence of quality Asian products. However, market segmentation plays an important role, giving companies the opportunities to find their niches and compete successfully. Even though, Harley-Davidson lost a significant portion of its market share over time, today it manages to represent a strong competitor. The overall assessment of competition indicates a growth in the motorcycle industry and healthy market conditions providing customers with variety of choices. 2.4 Product Offering Specifications for the 2003 V-Rod: Length – 93.6 inches Seat Height – 26 inches Ground Clearance – 5.6 inches Steering Rake – 34 degrees Steering Head Trail – 3.9 inches Wheelbase – 67.5 inches Fuel Capacity – 3.7 Gallons Estimated Fuel Mileage – 47-mpg highway - 37-mpg city Oil Capacity – 4.5 Quarts Dry Weight – 596 pounds Exhaust System – Slash-cut duals Unique Features Chrome 2-tone silver and charcoal engine Hydroformed perimeter frame with silver leafed aluminum powder- coat and clear-coat 49 mm forks raked out at 38° 26” seat height 3.7 gallon fuel tank under seat Radiator shrouded with tin vortex air scoops Powertrain Engine - Revolution™ (Designed in cooperation with Porsche) Displacement - 1130 cc (69.00 ci) Bore × Stroke – 3.94 X 2.84 Torque – 74.o ft. lbs @ 7000 rpm Fuel System – Electronic Sequential Port Fuel Injection Compression Ratio – 11.3:1 Primary Drive – Gear Gear ratios o 1st – 11.475 o 2nd – 7.890 o 3rd – 6.320 o 4th – 5.450 o 5th – 4.890 Wheels & Tires Front Tire Size - 120/70ZR19 60W Front Wheel - 19" disc Rear Tire Size - 180/55ZR18 74W Rear Wheel - 18" disc Electrical Instruments o Electronic speedometer o Electronic odometer o Resettable tripometer o Diagnostic readout o Fuel gauge o Tachometer Indicator Lamps o Oil pressure o Engine diagnostics o Security system o Coolant Temperature Electronics o Standard security system Chassis Brakes o Front: Dual rotors o Rear: Single rotor Lean Angle o 32° left o 32° right Performance Top Speed – Much faster than common-sense dictates Planning: 2.5 Keys to Success The V-rod was born through necessity. The VCRA was in important part of HD’s detailed business plan. A good business plan has helped give HD focus, and brought to light issues and potential problems that we hadn't previously thought of. This also helped form a plan of action. This step was critical in fully developing HD business ideas, and made launching the V-rod line much easier. HD planned for and corrected mistakes before they could actually occur; we saved time, money and reduced the stress on the project team. Once HD gets the V-rod up and running, we will revisit the business plan to help keep team members focused and will be a good measure of success. Marketing and Promotion: A good marketing and promotion strategy is part of HD’s initial planning phase. However, this will be changed and fine-tuned many times over the life of the V-rod and all other product lines. We think of it like this, you wouldn't wake up one day and decide to start performing brain surgery. I'm not saying marketing is comparable to brain surgery, but I think you get my point. Keeping our marketing department involved with perpetual education has and will continue pay big dividends. Keeping the Ball Rolling: HD does not think they can put together, place a few free classified ads, and submit their URL to a bunch of search engines, and suddenly be deluged by people rushing to place orders for our product. HD has a high demand for all products; creating demand will not be a problem. If anything HD needs to be careful not to over-advertise, or demand will be even more beyond our capability to produce. HD’s marketing for the V-rod has been divided into segments - marketing and promotion, web site development, search engine ranking and placement, customer service, products and programs, etc. 2.6 Critical Issues As stated in the previous section HD needs to be careful not to create more demand for the V-Rod than we can currently provide. HD is in the process of expanding current plants and building new ones to provide supply for the overwhelming demand for this product. Dealers already have as much as an eighteen-month waiting list for the latest HOG. The $17,000 MSRP has been ballooned to as much as $35,000 for those who want the first V-Rods to hit the streets. 2.7 Historical Results HD has always limited its marketing due to perpetual demand for our products. We do not anticipate the V-Rod to be an exception. HD does have URLs propagated throughout the internet to ensure search engines bring web surfers to our sites when they are inquiring about Harley Davidson products. 2.8 Macroenvironment A Harley-Davidson motorcycle is more than just a mode of transportation or ordinary product. It's an American icon that is much loved and recognized around the world. So, while the Harley-Davidson Motor Company is dedicated to continuous innovation, it has opted for evolution more than revolution to carefully preserve the elements that make a Harley distinct - the trademark V-twin engine, the teardrop gas tanks and oversized speedometer, among other styling details. "We are constantly improving and modernizing the machine," Schmidt comments, "yet every model retains the classic components. That's what our customers want, and that's also, I believe, what sparks the strong emotional attachments that Harleys generate." These elements have been part of Harley design almost since the company’s beginning in 1903. In the ensuing 93 years, the company has been building the things of which dreams are made - rumbling muscular machines that owners claim liberate and transform them as if by magic. 3.0 Marketing Strategy HD has reached the maturity point and was susceptible to face a decline when it started to rapidly lose its market share to the multinational Japanese companies in the seventies. The company’s management decided to phase out weak models, and become more selective, targeting a specific customer segment, limiting sales promotion. This strategy created a niche market for the Harley-Davidson’s bikes in which the company enjoys a strong position today. Thus, the marketing objectives are to focus on market segmentation, product diversification, marketing mix modification, and increase in production to meet the demand. HD decided to use rapid skimming strategy, which consists of high price and high promotion levels. In greater detail, the company adopted a four fold marketing objectives: First, at the fundamental level, HD will expand its potential customer base to include both enthusiast and non-enthusiast affluent males in the 35-44 age group. This, management believe can be accomplished by introducing the V-ROD model and positioning it in the marketplace to appeal to a younger demographic. Second, HD decided to position the bike in the marketplace, for its unique design to appeal to first time buyers of motorcycles- through building a strong brand identity through core competencies and pull through products such as theme restaurants and various merchandize products. Third, HD set the appropriate pricing strategy, in order to appeal to its target audience by heavy reliance on market research, voice of the customer initiatives, and strong sense of competitive intelligence. Lastly, HD is making sure the supply of its motorcycles meets the market demand, in order to optimize the revenue potential, by setting the correct production schedules, and picking strategic partners that can ensure absolute market coverage in prime niche areas within the marketplace. 3.1 Target Market Segments HD built its marketing strategy on expanding the overall customer and motorcycle marketplace. The company marketing efforts is towards affluent, technology conscious 35-44 year old male buyers who can afford a model that is priced at the top end of its class. This is a shift in business for HD, as it has primarily targeted an older demographic. Harley’s choice of a modern Performance-Cruiser, at this time, makes perfect sense because their customer base is aging and this new product entry can appeal to a younger audience. The current Harley buyer is averaging 45+ years of age; hence in order for Harley Davidson to increase its market share, the company has to go after younger customers and first time buyers. According to Ad Week, there are 22 million males in the Harley’s new target market segment demographic (35-44 year olds) and of this, 50,000 are considered potential motorcycle buyers. If we look at the HD’s current share in the marketplace, of the 50,000 potential purchasers, HD should affect 22% of this figure, or 11,000 new riders. Based on these calculations, HD has a potential revenue stream in the performance cruiser class of $186M from their target demographic. This information is represented in the table below. Demographic Analysis Demographic Total Population Potential Consumers Market share Forecasted HD Consumers Forecasted Revenue 33-45 22 million 50,000 22% 11,000 $186M 3.2 Positioning Strategy HD’s positioning strategy is in accordance with its mission statement “We fulfill dreams through the experiences of motorcycling- by providing to motorcyclists and to the general public an expanding line of motorcycles, branded products and services in selected market segments”. To drill-down further on how HD positions its products in the market place, the bike’s manufacturer uses the buy line”Own an American Icon”. A motorcycle industry analyst with Merrill Lynch describes HD’s market position as “The pride of owning a Harley-Davidson is the pride of owning an American icon, with a cachet that is found in very few products, particularly ones that average more than $15,000.” Furthermore, HD is positioned in the marketplace as a lifestyle purchase, through their offering of motorcycles, clothing, non-motorcycle merchandizing, accessories, restaurants and socializing and the H.O.G. (Harley Owners Group). The chart below, depicts the results of a Cycle World Survey in which the subscribers were asked “What is Harley Davidson’s target market for this addition to their product line HD Awareness in the Market Place First time potential motorcycle buyers 10.3% Existing customers 21.6% First time HD buyers 68.1% What can be gleaned from this analysis is that Harley Davidson has strong awareness in the market place, and the lion’s share of purchasers of the V-ROD will be first time Harley-Davidson buyers, which speaks directly to their brand identity and positioning. 3.3 Pricing Strategy The new V-ROD is priced at $17,000 MSRP, which places it just behind the Indian Chief, which has the largest price tag of all motorcycles in the Performance-Cruiser class. There are three major factors working against HD’s pricing strategy - substitution from three sectors, first - the used motorcycle market, second - lower priced competition, and lastly, the lagging supply of HD’s products in comparison to their market demand – which has steered some potential consumers to HD’s competitors. Based upon the analysis performed in the target-marketing segment above, HD’s potential revenue stream in the cruiser market segment is $186M. However, this forecast is predicated on HD setting its production schedule at or above the appropriate level needed to capture this segment of the market. From the table and the charts below, we can see that Harley-Davidson holds quite a strong position in the market. However, it is clear that HD is in tight competition with Honda and Yamaha, while growing capacity of Indian is threatening to take away some of the affluent bikers from the HD’s customer base. Competitors MSRP Market Share (Total). Potential Revenue Honda VTX $13,000 29.60% $192M HD’s V-ROD $17,000 22% $186M Yamaha Road Star $12,000 20.59% $123.5M Indian Centennial Chief $23,000 .24% $2.76M Comparison of MSRP, Market share and Potential Revenue from 35-44 Demographic 3.4 Distribution Strategy The tenet of Harley-Davidson’s distribution strategy is best described by its creed: “Harley-Davidson dealers are the corporation’s life-line to our customers. The dealers provide knowledge, service, and information to riders out on the road”. HD utilizes a multi tiered approach for the distribution of its products. The “Dealer Network” is tier one and is the vehicle that HD uses to distribute parts, accessories and merchandize. Dealers purchase HD motorcycles directly from the factory - through the use of invoicing and dealer financing. HD’s strategy is to set up dealerships, in demographic areas, that will provide access to the largest concentration of potential consumers – both motorcycle enthusiasts and the non-rider alike for their motorcycles, products, accessories, and merchandise. Each of HD dealerships is privately owned entities that have sole financial responsibility for the products they have in inventory. There are quotas for each dealer to reach from a motorcycle and accessories/merchandize perspective. HD supports its dealer network in the following manner: marketing programs (including direct mail campaigns), dealer and customer promotions, motorcycle shows, events and public relation programs. Additionally, HD is the first motorcycle company to have demo bikes available at major events like Daytona Bike week, and Sturgis, as well as other rallies and shows across the country. Lastly, HD assists its dealers with unique pull-through programs such as national open house and countless other special events and promotions both in the US and abroad. HD’s marketing department is always available to assist dealers on a consulting basis if the need presents itself. HD has an alternate channel distribution strategy to distribute its merchandise in non-dealer environments, such as mid to high-end department stores and some ‘buyers club’s’ such as Sam’s, BJ’s and Costco. These non-dealer distribution centers contribute to HD’s overall strategy of appealing to non-enthusiasts and continue to strengthen their brand identity in the market place. 3.5 Advertising/Promotion Strategy The Harley-Davidson Corporation uses HOG as its primary promotional tool. The company’s print advertisement and commercials are surrounded by female images. There are numerous examples of fashion models promoting HD products. Since most bikers are male, such advertising campaign proved itself to be successful over many decades. Harley-Davidson sells its merchandise at department stores, which attracts the general public who wouldn’t consider visiting a dealership for these items. Another strong promotional campaign of the company is Harley-Davidson Cafes. They are mostly located in the dealerships and have a great popularity among the customers. Harley-Davidson’s advertising techniques have been so successful that the company was one of the 1995 finalists of the Kelly Award for advertising. HD’s advertising/promotion strategy needs to continue to be as successful and productive as it has been up to date. The recent developments on the promotion front include HD’s interactive website. There is a lot of room for expansion in cyberspace. HD plans on building virtual reality show rooms and actually selling its bikes online. Accordingly, Harley needs to make sure to modify its advertising campaigns so they would target a specific customer segment and not try to capture the largest market-share possible. There is also a shift from the chic image to the pro-American image, which would include such symbols as the American flag, the Statue of Liberty, Empire State Building, Washington Monument, etc. The Product-Line strategy, which follows below, elaborates on this issue in greater detail. 3.6 Product-Line Strategy Harley-Davidson has a successful product-line strategy and stays true to its American icon brand. The company continues to develop new products around their signature image, and positions them in the marketplace as such. Today as the feelings of American patriotism are so strong and as the country is praising its heroes, owning a Harley-Davidson fits in well into supporting the national feelings of pride for America. Everything about the HD image is truly American and more than ever it should be appealing to the general public and the existing customer base. Particularly in the domestic market the company can gain a competitive advantage over its Japanese rivals by selling Americans a truly American product, with a slogan to support their people and their country. In order for Harley-Davidson to challenge Honda’s market positions, the company should produce a lower-priced bike, which would be affordable to more people; however, the important issue here would be to preserve the icon of a truly American brand and certain exclusivity. This approach can bring an even greater popularity to Harley-Davidson in the domestic market and abroad. The introduction of the V-Rod can be considered as the first step towards the implementation of this strategy. This motorcycle represents Harley-Davidson’s new development in the Power-Cruiser sector. The driving force for introducing a new brand within a product line was the need for a new bike that would appeal to a younger audience, as well as create competition to the bikes in the power cruiser market. 3.7 Action Plan HD management crew, who are masters of marketing, does well to listen to their customers. The result is that Harley cannot keep up with demand at current production levels. The number one issue for Harley-Davidson today is to find the balance between the demands it creates with its successful marketing campaign and the supply it is capable of generating. The company should draw upon its financial strength and invest to increase its production capacity. Harley-Davidson has an agreement with American dealers not to sell more than 30% of the bikes overseas, if the domestic demand is not met. It means that unless HD manages to su...