Harley Davidson is a classic and quintessentially American automotive brand. Its name and logo are so widely know that just about everyone has an opinion about the bikes and their riders, whether they know anything about motorcycles or not. And yet, despite all this, Harley Davidson (the company) seems in trouble. Every few months, a new article comes out fretting about the company’s long-term position, and investment experts typically advise against buying Harley Davidson stock, even when it seems to be performing well on the market and the company’s sales are solid.
I confess, I don’t know much about motorcycles, but the Harley Davidson brand represents an interesting opportunity to explore why the strength of the brand isn’t translating into the kind of success that you might expect: the kind of success that makes people turn their heads and pay attention. How valid are the worries in these articles? Does Harley Davidson need to consider changing their image to court more buyers? Or are the investment experts out to lunch? I decided to flex my planning muscles and perform a brand audit to see what I could find.
What follows is a very in-depth look at Harley Davidson and the potential problems it faces as a brand. It is more information than I would provide if I were to actually present my findings to a live audience, like during a pitch, but I thought it would be worth expressing my thought process here in full. If you would rather skip to a summary of my brand audit, click here.
The first thing I wanted to look at is the competition. Harley Davidson’s brand image doesn’t exist in a vacuum, so to understand how it stacks up against the other choices out there, we have to understand the competition. And that competition falls into two groups: the Japanese and the Europeans.
Japanese bikes come from companies like Honda, Suzuki, Yamaha, and Kawasaki. They are known for their low costs, both in purchase price and upkeep. They often have a small, fuel-efficient engine that leads to high gas mileage with decent top speeds and acceleration. The conventional wisdom amongst people who consider themselves “in the know” is that these bikes are great for first time riders and anyone who is heavily motivated by budget concerns and maximizing value.
In Europe, the big brands include BMW, Ducati, and Vespa. There are also many smaller brands in Europe, but they generally don’t get exported to America, and therefore aren’t direct competitors with Harley Davidson here in the States. The motorcycle brands carry forward the brand image associated with cars from their respective companies/nations, so BMW is known for precision engineered excellence and Ducati, being Italian, is known for insane speeds and stylish designs. Vespa, on the other hand, is unique, and only known for its popular scooters. Vespa’s image in America can be understood through a simple cliché: they are the bikes that sorority girls drive from their house to school if they live off campus. This is because, in the United States, motorcycles carry a masculine persona, even though many women do drive them, and scooters carry a feminine persona, which makes them popular amongst the kind of girls who embrace that identity.
There are some minor brands, such as Triumph in England, KTM in Austria, and Victory in the United States, but for the most part the competition that puts the biggest pressure on Harley Davidson for sales within the United States are the low cost Japanese bikes and the high end European bikes.
So with this somewhat cluttered marketplace, how does Harley Davidson stand out? Obviously, their brand image plays a large role. When looking at that brand image, you can arrange people’s feelings about the brand into three categories: the positive, the negative, and the divisive.
In the positive space, you find a beloved style and design. Generally speaking, the look of Harley bikes is one of their strongest features. People consider their retro look to be a timeless classic. The bikes have such a good look that occasionally other manufacturers will ape their designs, like Yamaha did with the Star Bolt. Online, when discussing the look of Harley Davidsons, people often proudly claim that “chicks dig them,” though whether that means they are great for picking up women, that they are the most popular amongst design-conscience female riders, or both, is never made clear. It is also worth noting that the bikes are made in the United States, which holds a certain cache amongst Americans who, all things being equal, would rather buy American. That also helps to anchor the brand in Americana, and give it its status as a classic and quintessentially American line of bikes.
In the negatives are two big black marks. The first is the costs associated with ownership. It is a commonly held belief that Harleys are expensive to purchase, and expensive to maintain, and that makes them undesirable for some and unattainable for others. The second is the negative image propagated by elitist bikers. On motorcycling sites and in motorcycling magazines, Harleys are never the attention-grabbers that get a bunch of free press. For example, when Cycleworld listed the bikes they were most excited about in 2014, only one Harley Davidson bike made the list. Most of their major competitors, namely BMW, Honda, and Ducati each got two, and minor competitors like KTM, MV Augusta, and Motus each got one. Bikers “in the know” attack Harleys on much the same grounds as people attack Apple computers: you overpay for underpowered machines built with inferior technology because you are infatuated with the brand identity. On Top Gear, a tent-pole program for automotive elitism, the British show’s two bike enthusiasts compared Harleys to Mustangs, claiming (paraphrased): people who don’t know anything think they go fast when really they don’t.
The divisive is where the meat of the brand identity can be found. What people think of when they think Harley Davidson is also what most divides people about the brand. I call this persona the Rebel Biker. All of the biker clichés stem from this image of a Harley rider. The black leather vest with the custom logo on the back, such as a snake slithering through a skull’s eyehole, that represents a rider’s club or gang. The tatted up tough-guy types who hang out in dingy roadside dive bars only frequented by other bikers. The loud and low engine note that rumbles down a quiet street when the bike starts up. The do-rag sporting, Viking-bearded chopper enthusiasts who never wear helmets that protect more than the top of their heads.
While many Harley owners don’t fall into these clichés, they do hold a certain power. Brian Van Auken of The Blake Project wrote a piece for Brand Strategy Insider where he discussed the power of what he called Tribal Brand Strategy. He basically argued that certain brands become tribal brands if they unify their customers under a shared set of values and/or emotions, in the same way that socio-political tribes form around shared values and experiences. Harley Davidson, which he uses as one of his examples, is all about “the experience of the freedom of the road and comradeship of kindred spirits.” I totally agree, and see the rebel biker as the gateway to this shared set of values. Whether or not you want to wear a half-helmet and a leather vest instead of a full-face helmet and a leather jacket, you aspire to be one of those people who can flaunt authority and live the Easy Rider life on the open and seemingly endless highways, freeways, and backwoods roads of America.
Of course, for every fan this makes, it also creates an opponent. For some, the aging yuppy come corporate stooge who buys a bike to try and recapture some lost independence reads as false as the middle-aged family man who buys a sports car to try and recapture his youth and fleeting sex appeal. For others, the engine note serves no purpose other than to wake them up at an ungodly hour when they are trying to get some much-needed sleep. A few even buy into the Hollywood image of riders as dangerous thugs who would beat you within an inch of your life for accidentally spilling your beer on them, and worry about the implications of these anti-authoritarian anarchists terrorizing America’s roads.
Obviously, some of this hate is spurious, but there is nothing wrong with Harley Davidson maintaining this divisive persona. Dividing people can be a powerful tool for a brand; it is better to stand for something than to stand for nothing. Milk toast is boring, and people crave a strong message or interesting story. Batman breaks box office records while Superman flops. We can see the power of a strong statement by looking at pop music. Two of the biggest pop stars right now are Miley Cyrus and Justin Bieber. Plenty of people hate their guts, and yet their personal brands soar. In part this happens because the hate galvanizes existing fans into super fans, as they are forced to defend their love and thereby reinforce it, but also because the debate between the lovers and the haters increases the number of times the brand is mentioned, increasing impressions and increasing curiosity amongst neutral outsiders, who wonder where they would stand if they were more knowledgeable.
Regardless of the theory behind the power of divisive brands, Harley Davidson’s current identity, with its staunch supporters and vocal detractors, is working. They outsell all of their competitors in the United States, and do so across all demographics. While the bikes might be most popular amongst middle-aged white men, Harleys are also the highest selling bikes amongst females, amongst minorities, and amongst the young. In short, they are indisputably the leading motorcycle brand in the country. While the vocal minority may take to the Internet to complain about Harley’s overpriced bikes and mid-life crises riders, the silent majority is out buying Harley Davidson. Even Harley’s stock is doing well right now. So why do these articles come out again and again questioning the company’s future?
One of the commonly cited fears about Harley Davidson is their aging ridership. This view is so prevalent that the company actually includes charts and raw data in their investor information packets that show their strong sales in youth markets. No other brand in their category does something similar, to my knowledge. But it’s also odd that no other brand feels the need to, since aging ridership isn’t something limited to Harley Davidson, it’s a problem with the entire category of motorcycles in the United States. The same is true for Harley Davidson’s struggles with being perceived as a luxury brand in a downturned economy.
So how bad is the aging riders problem really? I mean, orchestras and theater troupes live and die on the patronage of the elderly, everywhere but New York City. True, but in that example, the bell curve always sits with the bulge on an older demographic. This is because the elderly make up the vast majority of people who have reached a level of maturity, financial security, and availability of time where they feel free to become patrons of the more expensive arts. The bell curve for childrearing products sits around the early thirties, because that’s when most people have their children, and no one questions the health of the Pampers brand. In Harley Davidson’s case, of course, the difference is that the bulge is moving, which indicates one strong generation of sales that were followed by weaker sales in the following generations. It is so stark that a J.D. Power and Associates study showed that the average age of all motorcycle riders in the country is aging at one year per year.
The other major problem is the position of motorcycles in the larger automotive transportation category. Most Americans view a bike as a luxury item, an expensive toy, similar to a sports car. Whereas a sports car is a status symbol for wealth and success, with the iconic trip being a summer drive down California’s Highway One with the top down, the motorcycle is a symbol for an independent spirit who paves his own way, with the iconic trip being a cruise through the wide expanses of middle America on Route 66. In both cases, these vehicles are not viewed as a practical purchase. You commute to work in a hatchback or sedan. You drive the kids to school, buy groceries, and go on family road trips in a minivan or a crossover. You take your toy, a sports bike or sports car, out on the weekend and tool around on mountain roads. When everyone is forced to tighten up their spending, an expensive toy looks like a really bad use of money, especially when it comes with shockingly high insurance rates and expensive upkeep costs as well.
The good news for Harley is that this is a category problem for all motorcycles in the United States. They don’t need to worry about a competitor gaining ground on them in sales. The bad news is that this is a category problem, which means that as the category shrinks so too does their gross sales numbers. But that also means that bolstering the overall sales of motorcycles will be beneficial to Harley. If you control the largest piece of the pie, then it stands to reason that as the pie grows, that piece grows, and you end up with more pie overall. You just have to make sure that you don’t grow the pie in such a way that everyone else grows while you stagnate.
So the next question is how to raise motorcycle ownership in America while facing down an economic recession and an aging customer base. Luckily, there are a few places in the world where motorcycle ownership remains quite high, including amongst the youth, despite facing a similar economic downturn after 2008. These include the two regions that house Harley’s largest competitors: Europe and Japan.
In Europe, the attitudes towards motorcycles differ greatly from country to country. In some countries the penetration of bike ownership is rather small, like Austria. In others, it is larger but shrinking, such as Germany and the United Kingdom. On the other hand, some countries might as well have bike ownership hard-coded into their DNA. In Sweden, for example, 30% of the population is licensed to ride a motorcycle. Despite being smaller than the United States, Italy has over 8 million registered bikes in the country, which is 2 million more than here. So why are these numbers so much higher than in America?
One interesting statistic, which I found in a U.S. Department of Commerce report on the European motorcycle market, was the widespread popularity of very small engines. For example, Hungary, the Netherlands, the Slovak Republic, and France (just to name a few) all favor engines in the 0-125cc range, which includes mopeds and scooters. In France specifically, a staggering 77% of bike ownership falls into the moped (0-50cc) and light motorcycle (50-125cc) categories. Even in countries where sales are declining, such as the United Kingdom, the segment that is declining the least is the light motorcycle. This gets really interesting when you compare it to what’s happening in Germany. Germany is the highest purchaser of large-engine sports bikes in Europe, and it is also seeing the same aging ridership problem as the United States.
So what do these statistics ultimately reveal about motorcycle ownership trends? Well, the European countries with high raw ownership numbers and/or high market penetration numbers don’t think about bikes the same way that riders in the United States do. They view the bike as a tool, not a toy. Based on my research, anything under 200cc is considered underpowered for highway driving, but the fact that these extremely underpowered mopeds and light motorcycles are so popular shows that highway driving isn’t what they are for; they are for inner city travel. Europeans usually live in dense, urban environments because of how cities and towns grew organically through the Middle Ages and Renaissance. They don’t have an urban center surrounded by a suburban sprawl like in America, but rather have densely populated cities and towns, with open estates and farmland in between. This results in complicated parking for cars, including extremely limited street parking, smaller garages on average, and many apartments that have no garage at all. It also means that most cities have very narrow roads, which favors a bike’s slender design. They have strong public transit options, like express buses and trains, to get from major city to major city, which alleviates some of the need for cars that can comfortably take you from Paris to Berlin. Finally, Europe has extremely high gas prices, with countries like Italy seeing gas prices over $9 per gallon. Since all many Europeans need from a vehicle is a way to get from point to point within the bounds of their city of residence, the small, agile, cheap, and fuel-efficient motorcycle is an attractive choice for people of all ages, including the young. Europeans still want the convenience of point-to-point travel not offered by public transit, and the speed of motorized transportation. However, when buying a day-to-day machine, the bike simply makes more sense. In the countries where this isn’t the prevalent attitude, like Germany, they are seeing the same category problems as the United States.
Japan also offers another useful alternative perspective to what the motorcycle can represent to people. According to the Japanese Automotive Manufacturers Association’s 2013 fiscal survey of motorcycle market trends in Japan, the country has almost 12 million registered motorcycles, which is basically double that of the United States. Like in Europe, the most popular bikes are 0-125cc scooters and light bikes, with 0-50cc scooters making up more than 50% of Japan’s total motorcycle ownership. Sales have been declining since 2006, especially in the younger male demographic of 18-30 years old. The biggest deterrent to young people buying bikes appears to be attitudes they inherited from their parents, specifically that bikes are for when you are older and more mature. This comes from a nationwide campaign in the 1970s to cut down on motorcycle related deaths amongst the youth called “The 3 Don’ts,” which told teens to not get a motorcycle license, buy a motorcycle, or ride a motorcycle. While the campaign itself no longer runs, it affected the children of the ‘70s and now, as parents, they have ill feelings about their kids becoming riders, even if they have become one themselves. Some of the down tick was probably also caused by the global economic crises, which is supported by the fact that motorcycle sales have seen a minor resurgence since 2010 as Japan’s economy re-finds its footing.
The most relevant piece about Japan, however, is why bikes remain so popular despite negative cultural pressures like “The 3 Don’ts.” The first is the congestion. Japan is one of the most densely populated countries in the world, and most of that population lives in mega-cities like Tokyo or Osaka. Japan even made the list of all-time worst traffic jams, compiled by Forbes, for a time when, in 1990, 15,000 cars crawled over 84 miles between the prefectures of Hyogo and Shiga. This congestion can be alleviated, or even thwarted, by motorcycles. It is a common cultural practice amongst Japanese bikers to lane split at intersections: to thread between the cars at a traffic light until they get to the intersection, in order to bolt forward when the light changes. Lane splitting can also be done on highways during heavy traffic, by using a bike’s slender width to drive in the gap between side-by-side cars stuck in their lanes. Another issue in Japan is high gas prices. While not as steep as many European countries, Japan’s gas prices are $2 a gallon higher than the U.S. average. As a result, a bike’s fuel sipping qualities look very appealing. It’s no surprise that, even amongst large motorcycles, Japanese bikes dominate the lists of most fuel efficient, with makers like Honda producing bikes that can reach a staggeringly high 84 MPG.
These two regions can offer a great jumping off point for improving motorcycle ownership in the United States. There are four key takeaways: Bikes are great when you live in a dense, urban environment. Bikes are often more fuel-efficient than cars, which is important when gas prices are high. Bikes are easier to store when parking is tight, as is often the case in America’s large cities. Finally, when congestion is a major problem, bikes can navigate the mess more quickly by lane splitting, helping the commuter cut down his or her travel time.
These features are increasingly relevant. As gas prices in the United States fluctuate, seemingly ever upward, people grow more and more concerned about the impact daily commutes will have on their wallets. The trend is for young people to move to the city when possible. Sometimes this is motivated by proximity to their work, but it is also driven by a sense that cities are more interesting places to live. In Silicon Valley, for example, the trend is so strong that young engineers actually pay a premium to live in San Francisco, even though their work is on the suburban peninsula, and then commute to work via car, public transit, or corporate sponsored buses, provided by the likes of Google, Facebook, and Genentech. For these city dwellers, it can be hard to justify a car when parking is so limited and expensive. Congestion is also a major problem in many of America’s largest cities. Houston, Orlando, and Seattle are just a few of the cities with notoriously awful commutes from bedroom towns to the city, and back again. Even New York, with its famously low percentage of car ownership, is a packed up mess of cars most of the time. While I wouldn’t recommend using the specific benefits of lane splitting to ignore congestion in an American ad campaign, as the practice is actually illegal in every state but California, the benefits a bike can offer in a congested setting may still be fertile grounds for a communications campaign to increase bike ownership.
So finally, my recommendation for Harley Davidson’s complete strategy: Convince the American people that a motorcycle can be a practical alternative to a car, with the Harley Davidson name at the center of discussion. This attack would come from two different angles.
The first would be to go after the youth market. The young urban dweller who doesn’t want to give up the freedom and convenience of on-demand travel provided by owning a motor vehicle, is primed for a motorcycle. Many don’t drive outside the city very often, so a bike for everyday city use is ideal. They are concerned about the environment (and their wallet), so high MPG is a major selling point. Parking is a major hassle, and can either be annoying, costly, or both, depending on the city. The ease with which you can find a place to put your bike should not be overlooked. Harley recently announced a 2015 model that comes in 750cc and 500cc, so they already are headed towards making street bikes that can do double duty as city machines and highway machines, when needed.
The second would be to go after the commuter. It is very common for families in America to be two car homes: one is for commuting and the other is for more family oriented needs. One is a small sedan with OK gas mileage and an acceptable sticker price that is just to get mom or dad to work. The other is a multi-seat minivan or crossover that can take the kids to school, carry a large load of groceries, store all the gear needed to coach a sports team, and transport the extended family (plus food) to a family picnic, as well as get the other parent to work. Our target here should be the pure commuter car. Motorcycles can have a cheaper sticker price, cost less in gas, circumvent congestion, and be easier to park once you arrive. Of course, there are associated risks when riding a motorcycle to work, like the increased danger during an accident, but for the commuter who doesn’t need to go 50+ miles on the highway to get to work, and for whom public transit doesn’t work (either practically, or by preference), why can’t the motorcycle be a worthy alternative to the Ford Fiesta, Nissan Versa, or Kia Forte? And why can’t that motorcycle be a Harley Davidson?
I will end with a point of caution: many of the features that people want from a bike when they are shopping for the tool, and not the toy, do not fit with Harley Davidson’s existing image. In fact, fuel-sipping low CC engines on simple, durable bikes with little need for maintenance is not only different from Harley’s current image, it is anathema to it. All that buttoned up and boring stuff kills the sex appeal of the brand for rebel bikers. And to position Harley Davidson to fit this world of small-engine practicality would run the serious risk of sacrificing years of built up brand value and alienating their current base. This is where the strategy of increasing bike ownership gets tricky, as Harley could simply stagnate. Basic sub-brands help create that barrier while maintaining the name identity, but a “Harley Light” could harm the parent brand by being too off message. On the other hand, an independent sub-brand, in the vein of Proctor & Gamble’s model, that would be owned by Harley but stand for something else, could be a way out of the box, without diluting the Harley name.
Harley Davidson’s biggest competition is from overseas.
Japanese imports are known for being both decently made and cheap, both in price and upkeep, which makes them popular amongst buyers where money is a big concern.
European bikes are more mixed in reputation, but the big brands are BMW, Ducati, Vespa. BMW is known for excellence in engineering, Ducati for absurd speeds, and Vespa for low power inner city scooters.
A vocal minority hate the Harley Davidson brand and consider Harleys to be overpriced, underpowered, and image driven. These “elitist bikers” recommend competitor brands as alternatives whenever discussion of bikes crops up. The vocal majority continues to buy Harleys, however, and they remain the top selling brand in American, across the board.
People buy because of Harley’s image of the rebel biker, who enjoys the freedom of the open road and camaraderie of fellow iconoclasts.
Despite strong sales, Harley is still in trouble. The entire category of motorcycle ownership is shrinking, and the average age is steadily increasing.
A rising tide raises all boats, so as the market leader Harley should aim to increase the motorcycle category amongst American consumers, and reap the benefit of being the brand at the center of it all.
To understand how to raise the tide, we can look at high-tide regions, namely Europe and Japan.
In these regions, bikes are widely used because they are seen as a tool, not just a toy. They think of bikes this way because of concerns over gas prices, congestion, and the challenges of dense urban living.
Harley Davidson can aim to raise the bike ownership numbers in the United States by…
– Convincing young urbanites that a bike can be both practical for their day to day tasks and sexy/cool, in a way that a car never can be.
– Convincing young families that they should swap their commuter car for a cheaper, more fuel efficient, motorcycle.
This approach does carry some risk, however. Low CC bikes and hip urban youth are not exactly in line with the Harley Davidson brand’s current image. Pushing this kind of bike could increase the category while Harley stays where it is. On the other hand, shifting the company towards this market could increase sales, but at the risk of gutting the brand image and alienating the existing fan base. These worries could be alleviated with a spin-off brand, to not tarnish the Harley Davidson name with bikes designed for city slickers.