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Imagine a vastly popular product, offering excellent quality, for which people happily pay tens of thousands of dollars, while also willingly purchasing accessories and related equipment, all emblazoned with the brand logo. It sounds like a marketing dream. But for Harley-Davidson, the great ride it has enjoyed for decades, as a result of these superb conditions, is creating some new roadblocks for its retail dealerships. In particular, no one is buying new Hogs anymore.
Priced at $18,000–$25,000, a new Harley motorcycle is a serious investment. At this price point, consumers expect the bikes to be well made too, so a well-maintained Harley can last for decades. That means many riders hold on
to their first purchase. For others, even if they decide to make a trade, a used Hog is a great option, because it retails at about half the price, but often has thousands of miles of use still in its tank.
The price points also define the target market. To spend $25,000 on a vehicle that is mostly recreational and likely secondary to a more practical car or truck, the buyer needs substantial disposable income. For Harley, the Baby Boomer generation was an ideal target: They had money to spend, and they loved the idea of embracing their inner rebel by riding down the road with the wind in their face. As that generation ages though, fewer consumers are willing and able to handle a massive motorcycle.
The younger generations to which Harley might turn its attention feel less nostalgia for the image of an “Easy Rider,” and they generally have less disposable income than their parents did. Thus if they are interested in a Harley at all, they too are likely to go for a used model, enabling them to attain some of the fun at a lower price.In response, Harley-Davidson is expanding its product lines, seeking to establish more introductory, lighter bikes alongside its well-known, massive Hogs. It is adding sport-style motorcycles, as well as hybrid models that can handle both paved and unpaved surfaces. Harley also has plans to introduce its first electric-powered motorcycle.
Even if they are not going to be riding a Harley though, the company wants to appeal to consumers, such that it is also moving more of its branded clothing and accessories to Amazon. This expansion is a significant change; previously, it only sold branded items through its own stores and dealerships or its website. For dealerships, the challenges are a little different. They worry that the move into Amazon will reduce their foot traffic; many fans stop by to grab a baseball cap, and during that visit, the dealership likely can gather information to be able to contact that same fan later, in the hopes of making a bigger sale. In addition, the glut of used vehicles puts strain on the dealerships’ inventory processes, so their goal is to sell as many of the used bikes as possible, rather than adding new products to their showrooms.
Overall though, whether taking the company’s perspective or the view of its dealerships, if young consumers do not start embracing the appeal of riding a Hog, where the sales go will matter less than if there are any sales at all.
Discussion Question:
- How does Harley-Davidson segment its market based on price sensitivity?
- How does the glut of used Harleys affect the parent company? Its owner-operated dealerships?
Source: Bob Tita, The Wall Street Journal, October 1, 2018