Its core customers have grayed, and they are buying new bikes less often. The average age of a Harley rider is 49, up from 42 five years ago. But company executives don’t seem outwardly worried by the lackluster growth among those 35 and younger, even as it takes steps to turn them into Harley owners.
NOT THE END OF THE ROAD
They say they’re confident that the baby-boom generation has 15 more years of riding life. “They’re not about to stop riding because they’re getting older,” Richer says. “It would be dumb to walk away from our core customer, the most lucrative customer.”
In an effort to make inroads with bikers in their 20s and 30s, Harley poured money into developing the V-Rod, a high-powered cruiser that starts at about US$15,000. The company says the V-Rod is successful, but even so, the sport market represents only 12 percent of Harley’s sales, analysts say.
“Harley understands the baby-boomer consumer incredibly well, in a holistic sense,” says Gregory Carpenter, a marketing professor at the Kellogg School of Management at Northwestern. “But to grow and thrive, they must create a deep emotional connection with younger consumers.”
A decade ago, Harley executives made a decision that, along with the loan push, now appears to be a major contributor to its current problems. Determined to appease consumers who were stuck on two-year waiting lists, the company ramped up production. Last year, Harley built more than 303,000 bikes, up from 159,000 in 2000.
Some dealers also took advantage of heightened demand for Harleys to charge more, a move that may have done long-lasting harm. “Dealers were charging more than the suggested manufacturer price and it made Harley look greedy and jeopardized our brand that we spent a long time building,” Ziemer said.
Now, with so many Hogs in the marketplace, Harley has an issue involving its brand.
“Traditionally, Harley-Davidson had a very loyal consumer,” says Anthony Gikas, senior research analyst at Piper Jaffray. “But those riders lost interest in the brand because everyone has a Harley bike. It’s not a club anymore.”
To offset weakening sales, Harley is paring production this year, to about 270,000 bikes and is shuttering two plants. In addition, the company will cut 1,100 of 9,000 jobs over the next two years.
To curb additional loan defaults, Harley adopted stricter credit standards in November, requiring buyers to put down 20 percent.
Motorcycle consultants and analysts argue that Harley should take more drastic steps, including beefing up efforts to court younger riders.
Making major changes isn’t easy, especially for a brand with an image so deeply ingrained in pop culture. Harley executives say they are committed to regaining their momentum.
“We’re encouraging our designers to think out of the box,” Ziemer said. “We have to be quicker, more responsive to what our customers want. And we will.”
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