After making a remarkable comeback in the 1980s, motorcycle manufacturer Harley-Davidson had two-year-long waiting lists all over the country. But the success placed the company in a familiar quandary. Should Harley expand and risk a market downturn or should it stay the course, content with its good position in the industry?
“To invest or not to invest, that was the question”, notes Frank Cimermancic, Harley's Director of Business Planning. "Dealers were begging us to build more motorcycles. But you have to understand our history. One of the things that caused past problems was lack of quality, and that was the result of a too-rigid expansion. We did not want to relive that situation."
In 1989, the reputation of Harley-Davidson was excellent. Harley shipped 30,000 motorcycles in 1985; just four years later it shipped 44,000. Harley's market share in the heavyweight bike category went from 27 per cent to 57 per cent during the same time period. It was regularly turning a profit—USD 53 million in 1989.
At the same time, however, the market for heavyweight bikes was shrinking. Harley-Davidson needed to know whether its growth could continue. "We were doing fine, but look at the market", said Cimermancic. "Maybe, we thought, we could reverse these trends and become an industry leader, something we had not been for years."
A new kind of customer seemed to hold the key to market growth. White-collar motorcycle enthusiasts, or "Rubbies" (rich urban bikers), started to shore up Harley sales in the mid-1980s, adding to the company's success and image. But whether these people were reliable, long-term customers was another question. Harley also needed to know if it should market its product differently to different audiences. A core clientèle of traditional "bikers" had kept Harley afloat during its leanest years, and they could not be alienated.
From their research, Harley identified seven core customer types: the Adventure-Loving Traditionalist, the Sensitive Pragmatist, the Stylish Status-Seeker, the Laid-Back Camper, the Classy Capitalist, the Cool-Headed Loner, and the Cocky Misfit. All of them appreciated Harley-Davidson for the same reasons: independence, freedom, and power constituted the universal Harley appeal. Also, owners were very loyal.
Loyalty meant the company could build and sell more motorcycles without having to overextend itself. In 1990, Harley expanded to build 62,800 bikes; in 2000, it built more than 180,000. Based on research and the still-expanding waiting lists, Harley expects its phenomenal growth to continue. In addition, Harley is expanding its product line. In early 2000, the company introduced a USD 4,400 bike called the Blast, aimed at first-time riders and women. 1
- Identify the ways in which Harley-Davidson exhibits the propositions discussed in this chapter.
- Would you consider Harley to be a marketing organization? Why or why not?