Harley-Davidson: A Cult Brand Hit by

Demographic Challenges
This case is about the demographic challenges faced by USbased iconic motorcycle maker Harley-Davidson Inc.
(Harley). Harley was the world's leading designer and
manufacturer of heavyweight motorcycles with over a 50%
market share. Harley bikes were known for their distinctive
design and heavy customization. The company created an
experience around their bikes that emphasized freedom and
empowerment. Analysts attributed Harley's success to its
loyal customer base which basically comprised men over the
age of 35.
The case discusses the marketing strategies of Harley
including the product, price, distribution, and promotion
strategies of the company. By adopting a focused
differentiation strategy, Harley was able to command a
premium for its products, analysts said.
However, since the late 1990s, Harley had fallen on hard
times. The key problem facing the company was the changing
demographics of its purchasers. The median age of a Harley
rider, which was 35 years in 1987, increased to 47 in 2005 as
majority of Harley's core customers, the baby boomers, were
aging. Experts said the company's sales would be affected as
baby boomers were fast approaching their peak spending
years.
Moreover, the younger generation preferred sports bikes
rather than the heavy American style cruisers manufactured
by Harley, they said. Due to shifting demographics, Harley
planned to step up its efforts to appeal to a broader range of
customers in the US and other emerging markets including
young adults, women, and ethnically diverse adults.
The case concludes by discussing how Harley could adapt to
the changing marketplace and attract new customer groups,
without alienating its traditional customer base and diluting
the brand. This case is aimed at MBA/MS level students as
part of the Brand Management/ Consumer Behavior/
Marketing Communication curriculum.

Harley-Davidson: A Cult Brand Hit by

Demographic Challenges
It is a unique brand that is built on personal relationship and deep connections with
customers, unmatched riding experiences, and proud history. i
Jim Ziemer, former president and CEO of Harley Davidson, Inc. in 2009.
Harley has been on an unbelievable roll, phenomenal by any measure. But they have
a number of developing issues that theyre going to have to pay attention to, the most
significant one being the aging of the baby boomers. The results of the demographic
shift wont be a big deal for Harley tomorrow at nine in the morning, but over the next
ten years it will be major.ii
Don Brown, an independent analyst for DJB Associates, LLC 1, in 2001.
In 2009, US-based iconic motorcycle maker Harley-Davidson Inc. (Harley) reported a
full year net loss of US$55.1 million. iii Revenue from the sales of Harley motorcycles
was US$3.17 billion, a decline of 25.2% over the preceding year. Income from
continuing operations decreased by 89.7% to US$70.6 million compared to 2008. The
poor financial performance was attributed to an aging customer base and a weak
economy. Clearly its a challenging environment, and were doing all the right things
in this environment to position our premium brand in this marketplace to make sure
were even stronger when were out of this cycle, iv said Tom Bergmann, chief
financial officer of Harley.
Harley was the worlds leading designer and manufacturer of motorcycles which
included heavyweight2, touring3, cruiser,4 custom, and performance motorcycles.
Besides motorcycles, the company also offered a line of motorcycle parts &
accessories5 and general merchandise6. From the beginning, Harley bikes were known
for their distinctive design and heavy customization. Over the years, Harley
established an image of raw power which became its unique selling proposition. The
brand adopted a focused differentiation strategy wherein it targeted specific products
at niche segments in the market. According to experts, Harley was able to carve out a
niche for itself in the marketplace due to its powerful brand image which was built on
deep personal relationships with customers and matchless riding experiences. The
Harley brand achieved a cult status among its loyal customers as it characterized
adventure, tradition, and power. The motorcycle maker maintained a loyal brand
following by catering to the needs of the customers in the heavyweight motorcycle
1
2
3

DJB Associates, LLC, is a US-based management and research consulting firm.

Heavyweight motorcycles have an engine displacement of greater than 651 cc.
The Touring family of motorcycles is generally equipped with fairings, windshields, and
saddlebags. These motorcycles include models like the Road King, the Road Glide, and the
Electra Glide.
The cruiser segment has a distinctive styling associated with classic Harley motorcycles.
The motorcycles include the Dyna, the Softail, the VRSC, and the Sportster family of
motorcycles.
Parts and Accessories (P&A) comprise replacement parts (Genuine Motor Parts) and
mechanical and cosmetic accessories (Genuine Motor Accessories).
General Merchandise products include MotorClothes apparel and accessories.

215

Strategic Marketing

market. The companys loyal fans and customers used words like freedom,
Americana, adventure, edgy, and coolv to describe the brand. Harleys marketing
efforts centered on company-sponsored events, dealer promotions, and advertisements
in magazines. The companys core customers were men over the age of 35.
Since the early 1990s, the median age of a Harley rider had risen consistently from 38
7
to 47. Experts said that as the baby boomers who had transformed Harley into an
American icon were aging, they were less likely to ride a motorcycle given the
physical constraints. In late 2010, the company decided to revamp its marketing
efforts and adopt a multi-generational and multi-cultural marketing strategy focused
on non-core customers such as young males, women, and ethnically diverse adults.
However, some experts contended that as Harley tried to adapt to the changing
marketplace and attract new customer groups, it should continue to maintain its
traditional customer base. How do they do it without hurting existing customers and
vi
destroying the brand? Thats the $64 million question, said Geoff Meredith,
8
president of Lifestage Matrix Marketing.

Early Years
Harley was established in 1903 by William Harley and Arthur Davidson (Arthur) who
built the first Harley motorcycle, a racer bike, in a small wooden shed in Milwaukee.
Later, Arthurs brother Walter Davidson (Walter) joined the business. The first Harley
dealership opened in Chicago in 1904 and sold one of the first three Harley
motorcycles ever produced. In 1906, the company built a new factory in Milwaukee
and also launched its first product catalog. In 1907, William A. Davidson, brother of
Arthur and Walter, joined the company. The Harley-Davidson Motor Company was
incorporated on September 17, 1907, with the stock being split among the four
owners.
Harley bikes had a characteristic design and were known for heavy customization that
gave rise to the chopper style of motorcycle. The heavy use of chrome and the styled
tail fenders highlighted the typical image of the bike. Customers were attracted by the
bikes distinctive roar and toughness. Harley motorcycles were used in local races and
rallies. Their popularity rose after Walter rode a Harley motorcycle to victory in a
9
10
1908 race . In 1909, Harley developed its first V-twin powered motorcycle. The Vtwin engine gave Harley motorcycles an aggressive appearance of raw power.
By 1910, Harley had sold 3,200 motorcycles and its dealer network had grown to over
200 in the US. The company introduced its popular Bar & Shield logo in 1910
(Refer to Exhibit I for the logo). The bikes American image and use of patriotic
symbols such as the flag and the eagle on its logo struck a chord with customers. Two
years later, Harley began exporting motorcycles to Japan, marking the first ever sales
7

8
9

10

In the US, the term Baby Boomer is used to describe a generation of individuals born
between 1946 and 1964.
Lifestage Matrix Marketing is a California-based marketing consulting company.
In 1908, Walter Davidson won the 7th Annual Federation of American Motorcyclists
Endurance and Reliability Contest with a perfect score of 1,000 points.
The V-twin engine derived its name from its cylinders which were set opposite each other at
a 45 degree angle. The V-twin powered motorcycle was the fastest motorcycle during those
times and could travel at a speed of 60 miles per hour.

216

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

outside the US. To promote its bikes, Harley published advertisements in American
expert magazines like Bicycling World, Motorcycle Illustrated, Motorcyclist, and The
Western Bicyclist. The companys advertisements, which featured leather clad riders
and police officers on Harley motorcycles, gave the Harley a tough image. Harley also
launched an in-house magazine Enthusiast which published articles about the
companys new motorcycle models and accessories. In the late 1920s, the motorcycle
11
industry in the US suffered a downturn due to the Great Depression . During this
period, the company focused on sales to the police and the military in the US. Harley
was one of two major American motorcycle companies to survive the Great
12
Depression, the other being the Indian Motorcycle Company . By the end of 1920,
Harley became the largest motorcycle manufacturer in the world, supported by over
2,000 dealers in 67 countries.
Exhibit I

Harley-Davidsons Bar& Shield Logo

Source: http://www.logo-design-and-the-story-behind.com/Harley-Davidson-logo.html

Harley motorcycles were used extensively by the US military during the First and
13
Second World Wars . During the First World War, Harley produced more than
20,000 military motorcycles to serve the US forces. It supplied 90,000 motorcycles
14
during the Second World War which earned it the coveted Army-Navy E award for
excellence in war time production for three consecutive years. After the Second World
War, Harley shifted its focus to recreational bikes as it faced competition from foreign
imports, mostly from Europe. To compete with the smaller, sportier motorcycles
11

12

13

14

The Great Depression was a worldwide economic crisis caused due to the crash of the US
stock market. Lasting nearly a decade (1929-39), the Depression caused massive levels of
poverty, hunger, unemployment, and political unrest.
Established in 1901, the Indian Motorcycle Company was one of the largest motorcycle
brands in the US. Hendee Manufacturing, makers of the Indian motorcycle line, went
bankrupt in 1953. The company struggled for decades before it was acquired by Polaris
Industries Inc, Minnesota-based maker of snowmobiles and all-terrain vehicles, in April
2011.
The First World War took place between 1914 and 1918 while the Second World War was
fought between 1939 and 1945.
The Army-Navy E Award, also known as the Army-Navy Production Award, was an
honor presented to a company during the Second World War for excellence in production of
war equipment.

217

Strategic Marketing

imported from Great Britain, Harley introduced the K-model with an integrated
engine & transmission in 1952. By 1953, Harley was the sole American manufacturer
of heavyweight motorcycles as its only competitor Indian Motorcycle Company went
out of business. Harley remained profitable by introducing heavy and powerful
15
motorcycles. It launched the XL Sportster , a lightweight sports model, in 1957. The
following year, Harley launched the Duo-Glide, the first motorbike with rear
hydraulic suspensions and brakes.
By the mid-1950s, Harley had become the market leader in the heavy weight
motorcycle segment with a market share of over 60%. Harley bikes became a symbol
of machismo due to their heavy frames and the power of their roaring engines. Many
Hollywood movies of the 1960s glorified the Harley motorcycles. Classics like The
Wild One16 and the Easy Rider17 which showcased the wild American bike culture and
strengthened Harleys image of hairy-chested rebellionvii. Soon the brand was
associated with people who were willing to come out of the traditional mold and live
life on the edge.

The Japanese Invasion

During the late 1950s, Japanese motorcycle manufacturers entered the US market
18
beginning with Honda Motor Co., Ltd (Honda). Honda focused on smaller, faster,
and less expensive motorcycles compared to the Harley bikes. Other companies like
19
20
21
Yamaha Corporation , Suzuki Motor Corporation , and Kawasaki Motors Corp
soon followed. They marketed smaller and more fuel-efficient motorcycles that
required little maintenance. These Japanese bikes attracted younger riders who could
not afford the expensive Harleys and older riders who could not power them around
steep curves. The Japanese manufacturers constantly improved and redesigned their
products and introduced new high quality models in quick succession. Customers
were enamored by the technical advances offered by the Japanese motorcycle
manufacturers. During the late 1960s, the demand for Japanese motorcycles grew
viii
rapidly and they accounted for more than 85% of the motorcycle sales in the US.

15

16

17

18

19

20

21

The Sportster with a 55 cubic inch overhead valve engine became known as one of the first
Superbikes. It was a sleeker, less expensive alternative to the companys touring bikes.
The Wild One was an iconic outlaw biker movie released in 1953. The film starring Marlon
Brando depicted the image of a Harley motorcycle rider as a lawless, violent rebel.
Released in July 1969, Easy Rider was a classic American road movie. The protagonist in
the movie rode a modified Harley motorcycle adorned with an American flag.
Headquartered in Tokyo, Japan, Honda Motor Co., Ltd is one of the largest motorcycle
manufacturers in the world. For the year ended March 31, 2011, the companys revenues
were US$ 107.82 billion.
Yamaha Corporation is a global conglomerate based in Japan which manufactures a wide
range of products such as electronics, motorcycles, and power sports equipment.
Headquartered in Hamamatsu, Japan, Suzuki Motor Corporation is a Japanese multinational
corporation that specializes in manufacturing automobiles, a full range of motorcycles, allterrain vehicles (ATVs), outboard marine engines, and a variety of small internal
combustion engines. For the year ended 2010, the companys revenues were US$30.452
billion.
Kawasaki Motors Corp designs and manufactures motorcycles, sportbikes, cruisers, utility
vehicles, and watercrafts. It is headquartered in Irvine, California.

218

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

Harley, on the other hand, did little to offset the rise of Japanese competitors. The
company hardly made any technological improvements to its motorcycles. Despite
increasing sales, Harleys overall market share declined and it was transformed into a
niche player focusing on just heavyweight motorcycles. Moreover, Harley lacked the
resources to finance new product designs and expand production. In 1965, the
company went public to raise the capital for new products. Unable to attract enough
capital, the motorcycle manufacturer continued to face pressure from its competitors.
22
In 1969, Harley was acquired by American Machine and Foundry Company (AMF),
a heavy industrial conglomerate looking to expand into leisure products.
Under AMFs ownership, Harley started manufacturing small off-road motorcycles
and snowmobiles. This diluted its image. AMF expanded the production of Harley
motorcycles from 15,475 units in 1969 to 70,000 units in 1973. According to some
observers, AMF focused more on short-term sales and profit rather than on long-term
investments. In a bid to increase production, AMF overlooked the quality aspect of the
Harley bikes and workers who were not too skilled were added to the production lines,
they said. It was reported that the quality of Harley bikes went down so much that
dealers had to place cardboard under bikes in the showroom to absorb leaking oil.
Besides expanding production, AMF also changed Harleys advertising strategy and
focused on the non-traditional market dominated by the Japanese motorcycle
manufacturers. AMFs management removed Harleys ads from certain successful
advertising outlets in the US. The change in advertising approach isolated Harleys
23
traditional customers .
During the 1970s, Japanese manufacturers continued to flood the US market with
technologically sophisticated and low priced motorcycles. They gave tough
competition to Harley by introducing newer and larger motorcycles. Harley was now
faced with a situation in which it was losing ridership to the Japanese in the traditional
biker segment and not attracting enough customers in non-traditional segments.
Harleys sales began to drop. Between 1973 and 1983, the companys market share
plummeted from 77.5% to 23.3%. On the other hand, Honda with its superior
manufacturing techniques emerged as the market leader in the worldwide motorcycle
market with a market share of 44%. Harley was teetering on the brink of bankruptcy
due to poor quality products and intense competition. In 1980, AMF put Harley up for
sale due to poor profitability.

The Revival
In 1981, a group of senior Harley executives with support from the then CEO Vaughn
Beals (Beals) reacquired the company from AMF. In a leveraged buyout24, thirteen
members of Harleys senior management pooled US$1 million in equity and
borrowed US$80 million from Citibank25, thus making Harley an independent
22

23

24

25

Founded in 1900, AMF initially manufactured automated machines for the tobacco industry.
It started manufacturing a broad range of sporting equipment during the 1960s and 1970s. It
was one of the largest recreational equipment companies in the US.
Harleys traditional bikers were those customers who maintained and customized their own
bikes. Non-traditional bikers included recent converts to Harleys who had earlier ridden
smaller Japanese bikes.
A leveraged buyout is a buyout using borrowed money. In a leveraged buyout, the target
companys assets generally serve as security for the loan.
Citibank is the consumer banking arm of the leading global financial services company
Citigroup Inc.

219

Strategic Marketing

company again. Among them was William Davidson, grandson of the founder,
Arthur. During this time, Harleys market share continued to fall as the overall
demand for motorcycles dropped drastically in the US. Reduction in sales resulted in a
large inventory of unsold products.
After reacquiring the company, Beals and his management team felt that the entire
manufacturing system at Harley needed to be modified. Using Japanese production
methods they formulated a new approach called productivity triad which focused on
employee involvement26, use of JIT inventory practices27, and statistical operator
control28 (SOC). The company also cut production drastically and laid off more than
1,800 employees. In 1983, in a move to support the struggling US motorcycle
industry, the then President of the US, Ronald Reagan, raised tariffs on Japanese
motorcycles from 4.4% to 49.4%. The raised tariff provided some relief to Harley.
In 1985, Richard Teerlink (Teerlink), the then CFO of Harley, laid down a financial
restructuring plan to rescue the company from bankruptcy. The company identified its
strength to be the heavyweight division and hence focused on niches such as
customized, touring, and sporting motorcycles. Harley based its marketing strategy on
the idea of selling not just bikes, but a lifestyle. This idea led to the emergence of the
Harley Owners Group (HOG) in 1983. The group aimed to strengthen relationships
between customers, dealers, and employees of the company by sponsoring rallies and
riding events. That same year, Harley launched a marketing campaign called
SuperRide, which authorized over 600 dealerships to invite people to test-drive
Harleys. Over 40,000 potential customers accepted the invitation. The feedback
received from such events was used to design new models.
Clyde Fessler (Fessler), the then Vice-president of business development at Harley,
felt that the company could use its popular brand image to enter the other accessories
business. In 1986, Fessler introduced a range of Harley MotorClothes which included
shirts, jeans, kidswear, and fashion accessories for women. The company also began
to license its popular bar & shield logo for various product categories including Tshirts, vehicle accessories, jewelry, leather goods, toys, and other products.
In 1986, Harley launched an initial public offering (IPO), and by the end of 1986, the
company was able to regain a 25% share in the US motorcycle market. Two years later,
in 1988, Teerlink was appointed the CEO and chairman of the company. Between 1988
and 1995, annual shipments of Harley motorcycles more than doubled. As the demand
for Harleys rose, buyers had to wait for six to eighteen months for the delivery of a new
motorcycle. This sparked an attitude of must-have among customers.
In 1993, to build sport motorcycles, Harley acquired a minority interest in the Buell
29
Motorcycle company, a manufacturer of performance motorcycles. Five years later,
Harley purchased the remaining 49% of Buell to gain management control of the
26

27

28

29

First line workers were encouraged to contribute to the decision-making process. Workers were
required to participate in the newly formed quality circles that were responsible for improving
motorcycle quality.
A materials-as-needed (MAN) program based on Hondas JIT inventory control practices was
implemented to release cash by reducing WIP inventory. The company felt that by lowering the
inventory levels, quality problems would become more apparent.
SOC taught employees how to detect and correct quality problems developed during the
production process.
Buell Motorcycle Company was an American motorcycle manufacturer which basically
manufactured sport bikes. It was founded in 1983 by Erik Buell.

220

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

company. The Buell motorcycles were an alternative to the Japanese sports bike with
a high-output engine and radical frame design. In 1997, Teerlink was replaced by
Jeffrey Bleustein (Bleustein) as the companys CEO. Bluestein continued Harleys
transformation through new product development, improving processes, and
strengthening dealer network. In 1999, Harley launched the Custom Vehicle
Operations (CVO) program to offer factory customized motorcycles to its customers.
Under Bluesteins leadership, the company which had once been on the verge of
bankruptcy, rebounded and became a market leader in the US heavyweight
motorcycle industry. Harleys annual revenues grew from US$1.5 billion in 1996 to
US$5 billion in 2004. Over the same period, net income increased from US$143
million to US$890million.
In 2002, the company introduced the VRSCA V-Rod, the first motorcycle in the
companys history with a liquid cooled engine. In April 2005, James L. Ziemer
(Ziemer) was appointed president and CEO of Harley. Between 1992 and 2007, sales
of new bikes increased from 278,000 to 1.1 million annually. As of 2007, Harley
enjoyed a market share of 50% in the US heavyweight motorcycle market. In July 11,
2008, to enhance the companys image in Europe, Harley acquired the Italian
30
motorcycle maker, the MV Augusta Group , for US$109 million.
In 2008, Harley reported a decline in the demand for its motorcycles due to the global
economic downturn. The recession affected the growth of the company as people were
reluctant to spend money on luxury items. In 2008, the companys revenue decreased
by 2.3% to US$5.59 billion compared to the previous year. Net income fell 29.9% to
US$654.7 million.ix To push sales, Harley rolled out the We Ride Free

campaign in 2008 which allowed customers to buy a new Harley model and
receive the full manufacturers suggested retail price if they decided to trade
up to a bigger displacement model later. Experts said this trade in, trade up
marketing strategy helped the company in pushing sales in a weak economy.
In April 2009, Keith E. Wandell (Wandell) took over from Ziemer. Wandell launched
an aggressive restructuring strategy for managing through the economic downturn by
investing in the brand, cost-cutting, cutting back motorcycle production, and closing
down plants. He divested the company of assets and restructured business activities.
With the aim of focusing fully on the Harley brand, Wandell discontinued the Buell
line of sport bikes and sold MV Agusta back to its founder. He concentrated more on
the international market as economic growth in the US was slow. In 2009, Wandell
announced a long-term business strategy for the company which aimed at enhancing
productivity and profitability through focusing on new products, global expansion,
demographic outreach, and commitment to core customers. Commenting on the
companys strategy during recession, Mark-Hans Richer (Richer), chief marketing
officer of Harley, said, The great recession will be proven to have been great for
Harley-Davidson. It allowed us to focus on what we were great at and also on who we
really wanted to be for. In these kinds of crises you get to make of choices that maybe
you werent as willing to make in the past. That forced a lot of creativity and a lot of
energy. The mission of the company has always been about fulfilling dreams. We
dont have things and our mission to talk about S&P 500 or stock performance. Its
x
about fulfilling dreams for customers. We wanted to get back to that.
30

The MV Agusta Group was an Italian motorcycle maker which manufactured premium,
high-performance sport motorcycles under the MV Agusta brand and lightweight sport
motorcycles under the Cagiva brand.

221

Strategic Marketing

Marketing Approach
Over the decades, Harley emerged as the most powerful and focused motorcycle
brand in the US. The companys marketing strategy was based on focused
differentiation wherein it targeted specific groups with focused products. Harley
exclusively focused on the heavyweight motorcycle segment. 31 It concentrated on
mini niches such as customized, touring, and standard motorcycles in the heavyweight
division. The companys family of motorcycles included the Sportster, the Dyna, the
VRSC, the Softail, the Touring, the Trike, and the CVO motorcycles.
Harley bikes had a characteristic design and were known for heavy customization.
The heavy use of chrome and the styled tail fenders highlighted the bikes unique
image. The bikes were associated with a distinctive attitude and a lifestyle. They were
considered to be the ultimate biker status symbol...a quasi religion, an institution, a
way of life.xi According to industry experts, the Harley motorcycle was not just a
product; it was a lifestyle depicting personal freedom. When you buy a Harley,
youre not buying a motorcycle, youre buying a lifestyle,xii opined a Harley dealer.
Harley bikes were regarded as symbols of American free-spiritedness as they
demonstrated power, persuasion, and presence. Benson P. Shapiro, marketing
professor at Harvard Business School, said, Harley reflects many things Americans
dream about. Theyre a little bit naughty, a little bit nice, which is a very attractive
brand image to have.xiii
Generally, Harleys bikes were more expensive than those of competitors. The price
of a Harley bike ranged from US$5,350 to US$18,500. Sometimes the price for a
year-old Harley was 25% to 30% higher than a new one due to increase in demand.
The company realized that competing with the foreign manufacturers on price would
be difficult and so attempted to create value by keeping the production of its
motorcycles well below demand. Harley developed a strategy of value over price
through the development of mini niches and by offering heavy customization options.
Harleys customers, popularly referred to as enthusiasts, came from all walks of life.
The companys core customer base were men over the age of 35. Non-core customers
included young adults (aged between 18 and 34) and ethnically diverse adults. The
average US retail purchaser of a new Harley earned a median household income of
approximately US$ 85,000 (Refer to Exhibit II for median income of HarleyDavidson purchasers in the US and overall US customer demographics). The
companys bikes were marketed to customers primarily through promotions, word of
mouth, customer events, and advertising through national television, print, radio, and
direct mailings. Harley instilled a strong sense of loyalty among its customers. The
customers were so devoted to the brand that they tattooed the logo of the company on
their bodies and traveled for days to attend bike rallies sponsored by the company.
Experts said it was the strong loyal customer base that had made Harley a cult brand.
We are committed to motorcycling. Its not hardware; it is a lifestyle, an emotional
xiv
attachment. Thats what we have to keep marketing to, said Teerlink.
31

The companys heavyweight motorcycles segment comprised Standard, Touring, Custom,

and Performance bikes. Standard motorcycles had no extra features, touring products were
meant for long distance travel, Custom bikes offered the customer the options to add on
different parts and accessories, and Performance motorcycles had engines tuned for high
speed travel.

222

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

Exhibit II

Median Income of Harley Davidson Buyers in the US (000)

HARLEY-DAVIDSON MOTORCYCLES
U.S. PURCHASERS MEDIAN INCOME
$100
$90
$80
$70
$60
$50
2006

2007

2008

2009

2010

Overall US Customer Demographics

CORE - Caucasian men over the age of 35

OUTREACH - Young adults 18-34,
women and ethnically diverse adults

Adapted from http://investor.harley-davidson.com

Harley identified the womens market as its fastest growing segment. Even its
competitors like Honda and Yamaha designed special bikes especially for women.
These bikes were lower to the ground and easier to maneuver. There was a significant
jump in the sales of Harley motorcycles to women between 1985 and 2006. The
percentage of sales grew from 2% in 1985 to 12% in 2006. To appeal to female riders,
Harley produced models with lower frames and saddles and soft clutches. A group
called The Ladies of Harley was created to generate interest among young women
motorcyclists. To attract women customers, Harley dealers organized garage parties
wherein women riders could learn the fundamentals of motorcycling, know which
models of Harley suited them, and various customization options. These parties which
were hosted by Harley dealers provided an opportunity for female riders to bond with
one another. To reach out to more women riders, the company published ads with real
women riders in womens magazine such as Jane, Allure, Glamour. It also launched
an exclusive website for women riders.
223

Strategic Marketing

The company also encouraged non-traditional riders to take up motorcycling through

its Riders Edge program started in 2000. The Riders Edge program, initiated through
Harley dealers, taught basic and advanced motorcycling skills and knowledge to new
riders. The program also taught inexperienced female riders the techniques of
handling and driving a heavy motorcycle. In 2007, Harley hired Lagrant
32
Communications to market to the African-American and Hispanic population. To
33
target Hispanic customers, Harley sponsored the Tom Joyner Morning Show , which
xv
had a strong audience of eight million in the US. In addition, Harley also sponsored
the Roundup, an African American version of the annual gathering of bikers at Sturgis
rally. Harley also advertised in Latino mens magazines such as the Hombre and
Fuego to attract young Hispanic riders.

The Harley Owners Group (HOG)

Central to Harleys marketing strategy was the focus on building a strong bond with
the customer, maintaining a close relationship, and providing them with an engaging
and interactive brand experience. To keep Harley riders more actively involved in the
sport of motor cycling, the HOG was established in 1983. Considered to be the
industrys largest company-sponsored motorcycle enthusiast organization, the group
sponsored motorcycle events, including rallies and riding events, for Harley
enthusiasts at local, regional, national, and international levels. The rallies featured
live music, food booths, games, prizes, and vendor stalls. During the rallies, potential
customers were given demonstration rides and they could even register their bikes and
buy merchandise. Harley employees and senior executives also took part in the rallies.
Analysts said that such events strengthened the community and gave Harley owners a
sense of belonging. The most famous among these rallies was the Black Hills rally34
in Sturgis, South Dakota. The rallies, like the one in Sturgis or Daytona Bike Week
(in Florida), really serve as our product development centers. We see thousands of
bikes and what our customers are doing to them. We get new ideas through our
discussions. And then the riders take demo rides on our new models and give us
feedback. If you want to know what Harley-Davidson is all about, how we develop a
design strategy, just make the scene at a rally and listen to our riders. They set the
tone, and believe me, theyre not bashful,xvi felt William G. Davidson, vice president
of styling at Harley.
Analysts said Harley promoted its products and the related lifestyle through HOG
which boasted of around 1.1 million members worldwide as of 2010. HOG members
received a free one-year membership to a local riding group, motorcycle publications,
motorcycling events, and a host of other benefits. According to Joe Hice, former
director of corporate communications at Harley, A lot of those members have sons
and daughters who will inherit the passion for Harleys. Others have neighbors and
relatives that see them on their Harleys and aspire to be like that. Its really a
grassroots network of hundreds of thousands of fanatics out there promoting the
brand. Not too many products, let alone motorcycles, can claim to have that. xvii
32

33

34

Lagrant Communications is an advertising and public relations corporation targeting the

African American and Latino consumer markets.
Tom Joyner Morning Show is a nationally-syndicated program hosted by African American
radio host Tom Joyner.
Started in 1938 in western South Dakota, the Black Hills rally was the largest company
sponsored rally which annually attracted more than 400,000 Harley riders from around.

224

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

Dealerships
Harley retailed its products through an independent dealer network which offered
Harleys motorcycles, parts & accessories, general merchandise, and licensed
products and carried out servicing for the motorcycles. The dealers also sold through
non-traditional retail outlets such as Secondary Retail Locations (SRLs), Alternate
Retail Outlets (AROs), and Seasonal Retail Outlets (SROs). As of 2010, Harley
distributed its motorcycles through 1,334 dealers worldwide. The company offered
various services to its independent dealers including service and business management
training programs and customized dealer software packages. The dealers were trained
35
by the Harley-Davidson University . The company also offered motorcycle rental
and tour programs through its dealers.
To promote the Harley lifestyle experience, the dealership stores were remodeled to
create new designer dealership stores. Besides display counters for motorcycles, these
designer stores had a separate area for Harleys line of MotorClothes, complete with
dressing rooms. The designer stores also featured customer lounges and meeting
rooms with pinball machines, antique bikes, and videos of rallies. Harley-Davidson
Cafes were also opened at some dealership stores. In 2009, Harley opened the Fit
Shop at its dealerships wherein customers could customize the suspension, seat,
handlebars, and/or foot controls of their bikes by using Harley parts and accessories
available at the stores. Jam sessions, cook outs, concerts, and swap meets were
organized regularly at these designer dealership stores.

Promotion
Harleys advertising strategy was based on creating a specific image and lifestyle for
the product. The company did not spend much on advertising and Harley bikes were
promoted mainly through word of mouth. Employees personally marketed the brand
by modeling in the companys Motorclothes catalogue, attending rallies, and acting as
tour guides at the manufacturing plants. Were not dependent on advertising or other
traditional marketing techniques as automobile companies or even our competitors
are. Theyre selling transportation. Were selling dreams and lifestyle. Theres a big
difference. Because our bikes are so visually and audibly compelling, you get a bunch
of them together, whether by the dozen or the thousands, theres going to be
excitement and curiosity. Add to that the fun associated with motorcycling and youve
got natural word-of-mouth promotion. In a very real sense, our customers are the sales
xviii
force, and the bikes, accessories, and clothing serve as our calling cards, said Ken
Schmidt, former director of communications at Harley.
Harley advertised mainly through magazines, catalogs, and brochures. A Harley
poster was included in every annual report of the company. Harley also benefited
36
from its unsought association with outlaw motorcyclists gangs such as Hells Angels
and several Hollywood movies which introduced Harleys to a wider audience. The
cult biker film Harley-Davidson and the Marlboro Man (1991) was one such
example. Harley-Davidson motorcycles have inspired filmmakers since the
beginnings of modern film. Our bikes have been featured in countless movies to
portray the spirit of individualism, freedom, and rebellion, and we have many
35

36

Harley-Davidson University provides technical and management training to all the

employees at its dealerships to help them develop the necessary skills.
Established in 1948, The Hells Angels Motorcycle Club was a notorious motorcycle gang in
the US. Its members typically rode Harley motorcycles.

225

Strategic Marketing
xix

examples of this at the [HarleyDavidson] Museum, said Jim Fricke, Curatorial

Director at the Harley-Davidson Museum. Harley bikes were owned by celebrities and
Hollywood actors such as Arnold Schwarzenegger, Elizabeth Taylor, Elvis Presley,
Tina Turner, Don Johnson, Jackson Browne, Cher, and Mickey Rourke.
Besides traditional advertising, the company also launched a website www.harleydavidson.com to market its products and services. Using the online catalog, customers
could create and share a product wish list, use a dealer locator, and place orders for a
catalog. The online orders were fulfilled by the authorized dealer chosen by the
customer. Members of HOG could log in to view the specific calendar and events for
their club associated with that dealership. In August 2008, Harley entered the social
media scene by launching its official page on Facebook Inc. 37 The page featured
exclusive content and official news about the company. Commenting on the Facebook
initiative, Randy Sprenger, manager of electronic advertising and direct promotions at
Harley, said, It has all been organic. We wanted to go to where the like-minded
people are, to fish where the fish are, so to speak. We wanted to build the presence in
a good way, and to let the social networking do what it naturally does.xx
Experts said that Harley was selling a lifestyle by creating an experience around the
product that emphasized freedom and empowerment. As of November 2010, Harley
commanded about a 65% share of the Motorcycle, Bike & Parts Manufacturing
xxi
industry in the US. (Refer to Exhibit III for market share of Harley-Davidson).
Experts said that Harley had emerged as the market leader retaining its traditional set
of customers and at the same time reaching out to new customer groups. According to
Harleys senior director of corporate communications, Bob Klein, In a way, that
notoriety had a certain appeal and weve been feeding off that, but Harley-Davidson
made a decision to change our image and broaden our appeal. We did that by getting
involved in muscular dystrophy research, charity rides, and outreach to the community
through our HOG (Harley Owners Group) groups to show that motorcyclists are good
people at heart. The custom and chopper shows on cable TV are also giving us
xxii
visibility and anything that enhances our popularity is a good thing.
Exhibit III

Market Share of Harley Davidson (in the US)

As of November 2010
Source: www.ibisworld.com
37

Facebook Inc is a US-based social networking utility with more than 600 million active users
by the end of 2010.

226

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

Shifting Demographics
Between 1996 and 2000, Harley witnessed robust growth in the heavyweight
motorcycle registrations. However, the growth slowed down considerably between
2003 and 2004. The drop in sales was attributed to the economic downturn and an
aging market. George Brown, an independent marketing consultant based in
California who watches the motorcycle business, said, Harley-Davidson is facing
some long-range challenges such as changing demographics. Their prime market has
been the Baby Boomers. If they can catch Generation X and Generation Y, which is
xxiii
the next big bubble, theyll catch the next wave.
As the motorcycle market in the US was demographically dependent, a major
challenge confronting the company was its aging customer base. Reports indicated
that over 60% of Harley motorcycle riders were baby boomers aged between 35 and
54. The average age of Harley riders was consistently increasing by about six months
since the early 1990s. The median age of a Harley rider which was 35 years in 1987
increased to 47 in 2005 as a majority of consumers who were from the baby boomer
generation were aging (Refer to Exhibit IV for demographic profile of HarleyDavidson). Experts said that as baby boomers reached their prime riding age, they
were less likely to ride a motorcycle due to physical constraints. They added that the
companys sales would be affected as baby boomers were fast approaching their peak
spending years.
Exhibit IV

Harley-Davidson Demographic Profile

Year

Gender

Median Age (in years)

1987

Male
98%

Female
2%

1988

96%

4%

34.6

1989

96%

4%

34.6

1990

96%

4%

36.7

1991

95%

5%

38.5

1992

95%

5%

38.4

1993

93%

7%

41.6

1994

93%

7%

42.1

1995

91%

9%

42.5

1996

91%

9%

43.6

1997

93%

7%

44.6

1998

93%

7%

44.4

1999

91%

9%

44.6

2000

91%

9%

45.6

2001

91%

9%

45.6

2002

91%

9%

46.0

2003

90%

10%

46.7

2004

90%

10%

46.9

34.7

227

Strategic Marketing

Year

Gender

Median Age (in years)

2005

Male
88%

Female
12%

2006

88%

12%

46.9

2007

88%

12%

47

46.9

http://case-analysis.wikispaces.com/file/view/page16.PDF
Some experts opined that it was increasingly important for Harley to address shifting
demographics as its primary market was expected to grow to 122.7 million people in
2010 and to approximately 124.2 million people in 2020. According to Alex Taylor
III, senior editor-at-large at Fortune38, Harley-Davidson was the feel-good
turnaround story of the 1990s and then the poster-boy for brand values in the 2000s.
[] But after expanding exuberantly in the last decade, Harley has fallen on hard
times. Now it is struggling against a foe that not even cost-cutting nor brand loyalty
can overcome: demographics. Its current owners are getting old, and not enough
younger ones are coming up behind them. xxiv
In 2009, a weak economy and its aging customer base significantly dented Harleys
sales. Revenue from sales of motorcycles declined by 25.2% to US$3.17 billion
compared to the previous year. The company also witnessed a rapid decline in brand
value. In 2010, Harleys income from continuing operations was US$259.7 million
compared to US$70.6 million in 2009xxv. Revenue from the sales of Harley
motorcycles decreased to US$3.14 billion in 2010, a decline of 1.2% from 2009
(Refer to Exhibit V for the selected financial data of the company and to Exhibit VI
for motorcycle shipments). Experts said Harley would be continually troubled by the
demographics of its traditional customer base as the demographic shift would continue
to change through 2016. They felt it was time for the motorcycle maker to move
beyond its aging customer base.
Exhibit V

Harley Davidson Income Statement

(Amount in thousands of US dollars)

Period Ending

2010

2009

2008

Operating Revenue (Revenue/Sales)

4,859,336

4,781,909

5,594,307

Total Revenues

4,859,336

4,781,909

5,594,307

Cost of Sales

2,387,212

2,654,590

3,421,207

Cost of Sales with Depreciation

2,749,224

2,900,934

3,663,488

Gross Margin

2,472,124

2,127,319

2,173,100

Gross Operating Profit

2,472,124

2,127,319

2,173,100

Selling, Gen. & Administrative Expense

1,113,489

1,148,590

984,560

Operating Income

560,631

196,086

1,029,024

Total Income Avail for Interest Expense

(EBIT)

753,310

483,974

1,332,724

Pre-tax Income (EBT)

390,469

178,660

1,033,977

38

Fortune is a global business magazine published by media group, Time Inc.

228

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

Period Ending

2010

2009

2008

Net Income from Total Operations

146,545

(55,116)

654,718

Total Net Income

146,545

(55,116)

654,718

Normalized Income

423,177

323,306

654,718

Net Income Available for Common

259,669

70,641

654,718

4,859,336

4,781,909

5,594,307

146,545

(55,116)

654,718

Income Statement - Year-to-Date

Revenues Year-to-Date
Income Year-to-Date from Total Ops.

*Data not available

Source: http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=HOG

Exhibit VI

Harley-Davidson-Motorcycle Shipments
(In Units)

2010

2009

2008

2007

2006

2005

Sportster

41,409

47,269

60,684

72,036

64,557

70,215

Custom

87,158

91,650

140,908

144,507

161,195

148,609

Touring

81,927

84,104

101,887

114,076

123,444

110,193

Total

210,494

223,023

303,479

330,619

349,196

329,017

Domestic

131,636

144,464

206,309

241,539

273,212

266,507

78,858

78,559

97,170

89,080

75,984

62,510

210,494

223,023

303,479

330,619

349,196

329,017

2,614

9,572

13,119

11,513

12,460

11,166

International
Total
BUELL

Source: http://investor.harley-davidson.com/ Shipments Annual -1.pdf

As demographic changes were affecting sales, Harley planned to step up its efforts to
appeal to a broader range of customers in the US and other emerging markets. Some
analysts said Harley must focus on the youth market. Joanne Bischmann, vice
president of marketing at Harley, The demographics are changing. But that doesnt
mean there arent other populations we dont want to tap into.xxvi However, some
analysts were of the view that the baby boomer generation still was an attractive
segment of the market because of their high levels of disposable income and leisure
time. They said that as baby boomers aged, they were likely to lead active lifestyles
and continue riding.

Bumpy Road Ahead?

Harley planned to adopt new strategies to reach out to younger customers while
maintaining its growth in the traditional segments. Wandell said he was focusing on
diversifying the buyer base of Harley by extending the reach of the brand beyond its
core customers. However, he added, Thats a touchy situation ... our core customers
have allowed our company to be successful so theres a certain amount of jealousy,
if you will, around the brand.xxvii
229

Strategic Marketing

In late 2010, Harley decided to adopt a multi-generational and multi-cultural

marketing strategy in order to increase sales to non-core customers such as women,
young (25-34-year-old men) and ethnically diverse adults. The company wanted to
change its marketing approach from a one size fits all agency-based marketing
approach to a consumer led model. Weve always listened to our customers, said
Mark-Hans Richer, chief marketing officer for the Milwaukee-based motorcycle
manufacturer. It only makes sense for us to tap into their passion, as well as the ideas
they openly share with us to bolster our brand, rather than keeping our creativity
xxviii
bottled in the creative department of an agency of record
The company also
planned to capture a more diverse set of riders, especially women. For this purpose,
Harley planned to develop new bike model designs and new riding gear specifically
for women.
Experts said, going forward, the biggest challenge for the company would be to
market traditional cruisers and touring motorcycles to young riders who preferred
sports bikes and dual-purpose motorcycles to the heavyweight models. They said
smaller bikes were one of the fastest growing segments of the US motorcycle market
and even Harleys competitors like Honda, Suzuki, and Yamaha sold mainly sports
bikes. Moreover, some analysts felt that Harleys close association with boomers
could make the brand difficult to sell to younger customers. Harley-Davidson is so
embedded in peoples minds as the brand for old fat guys in black leather. Kids want
something different. Its almost universal that the younger generation rebels against
the older generation. The stronger the brand is with the older generation, the weaker it
is with the younger generation,xxix averred Al Ries, a marketing strategist. Another
challenge before Harley was how to appeal to a broader set of customers without
diluting the image of a company that was known for making big toys for big
boys.xxx They said by launching smaller and less-expensive models, the company
could end up watering down the Harley brand and alienating its core customers.

230

Harley-Davidson: A Cult Brand Hit by Demographic Challenges

End Notes:
i

Harley Davidson Posts $105.7M Profit for Fourth Quarter, http://autos.ctv.ca, January
24, 2012.

ii

Nick Thornton, Is the Hogs Future Roadkill? www.brandchannel.com, September 10,

2001.

iii

Harley Davidson 2009 Annual Report.

iv

Steven Gray, Harley-Davidson Tries to Rejuvenate Its Business, www.time.com,

February 18, 2009.

Joyceann Cooney, Why and How Harley-Davidson has Maintained Consumer Brand
Loyalty, www.licensemag.com, August 2005.

vi

James B. Kelleher, Harley-Davidson Fights Changing Market with Appeals to Blacks,

Hispanics, www.targetmarketnews.com, March 15, 2006.

vii

Alex Taylor III, Harley-Davidsons Aging Biker Problem, http://money.cnn.com,

September 17, 2010.

viii

Robert D. Buzzell and Dev Purkayastha, Note on the Motorcycle Industry1975,

http://hbr.org, June 1, 1978.

ix

Harley Davidson 2008 Annual Report.

Melanie Wells, Harley-Davidson CMO: Crowdsourcing Ads to Engage a New

Audience, http://blogs.forbes.com, November 18, 2010.

xi

Robert M. Grant, Kent E, Cases in Contemporary Strategy Analysis, Blackwell

Publishing Ltd, 2003.

xii

Joseph
V.
Tirella,
Is
Harley-Davidson
http://articles.moneycentral.msn.com, March 30, 2009.

xiii

How Harley-Davidson Revs Its Brand, www.businessstandard.com, March 3, 1998.

xiv

Ibid.

xv

James B. Kelleher, Harley-Davidson Fights Changing Market with Appeals to Blacks,

Hispanics, www.targetmarketnews.com, March 15, 2006.

xvi

Harley-Davidson: Marketing an American Icon, http://www.cdf.org/issue_journal/harleydavidson_marketing_an_american_icon.html.

xvii

Nick Thornton, Is the Hogs Future Roadkill? www.brandchannel.com, September 10,

2001.

xviii

Harley-Davidson: Marketing an American Icon, http://www.cdf.org/issue_journal/harleydavidson_marketing_an_american_icon.html.

Over

the

Hill?

xix

Easy Rider Bike Showcased at Harley-Davidson Museum, www.autoevolution.com,

July 15, 2009.

xx

How Harley-Davidson Drives Mobile Marketing, Facebook, www.adweek.com, April

29, 2009.

xxi

Justin Molavi, Motorcycle, Bike &

www.chopperexchange.com, November 2010.

xxii

Harley-Davidson Riders Settle into Middle Age, www.v-twinforum.com, March 29,

2005.

xxiii

Buell Offers Deal as Way to Grow into Motorcycling, http://articles.chicagotribune.com,

June 17, 2001.

xxiv

Alex Taylor III, Harley-Davidsons Aging Biker Problem, http://money.cnn.com,

September 17, 2010.

xxv

Harley-Davidson Reports Broad Improvement in Full-Year Results from Continuing

Operations For 2010, http://investor.harley-davidson.com, January 25, 2011.

xxvi

James B. Kelleher, Harley-Davidson Fights Changing Market with Appeals to Blacks,

Hispanics, www.targetmarketnews.com, March 15, 2006.

Parts

Manufacturing

in

the

US,

231

Strategic Marketing

xxvii

John D. Stoll, Kyle Peterson and Nick Zieminski, Insight: Bare-bones Bikes Help
Harley Slay Geezer Glide Image, www.reuters.com, December 4, 2011.

xxviii

Rick Barrett, Harley-Davidson Seeking

http://m.jsonline.com, November 18, 2010.

xxix

Rick Popely, Aging Owner Base Aside,

http://articles.chicagotribune.com, June 19, 2005.

xxx

James R. Hagerty, Harley, With Macho Intact, Tries to Court More Women,
http://online.wsj.com, October 31, 2011.

232

Ideas

Through

Harley

Crowd

Says

its

Sourcing,
No

Buick,