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Tuesday, 16 September 2014

Comment by Editor-in-Chief, Robin Bradley

Is going "broad" spreading the brand too thinly and making Harley vulnerable in the long-term?

HAS Harley's strategy of "drip-launching" new models backfired on them?

That is the question being asked in some quarters following the 2015 new model announcement (see cover story). The proposition being that the many publicity opportunities it has sought to exploit have watered down the impact it can have with its primary publicity opportunity - its annual new model launch.

However, there is another question that could be asked, one that I for one would certainly think needs to be asked. That is whether the breadth of product and platform that Harley is now fielding can be carried by a brand that has traditionally had quite specific "core" values for a quite specific "core" audience?

When Keith Wandell became the first 'outsider' to head up the Motor Company at the time of its perilous plunge over the cliff of market collapse, his default knee-jerk was to jettison all that was not "core" (Buell, MV Agusta), strip the balance sheet back down to 'essentials', and re-focus the company on its traditional customer base and core brand values.

There was absolutely nothing wrong with that as a default knee-jerk response at the time, despite the collateral damage.

However, since then, and certainly once the bottom of the U-curve had been safely navigated, it could be argued that the company has done everything but concentrate on its traditional customer.

Now don't get me wrong. Personally I think that the company has done the right thing to search out new customers and find new niches where it can surf its brand values into hitherto untapped wallet books and purses, but in endeavouring to find something to sell to anyone who'll buy, has the company stored up long-term trouble for itself by not doing so in parallel to exploiting additional PTW (Powered Two Wheeler) revenue opportunities that its own brand can't exploit?

Indeed is it at risk of trying to now take its brand into areas where its brand simply isn't "fit for purpose"?

does breadth also mean embracing thin?
Leaving aside that the present strategy of "breadth" militates directly against the short-termism of the Buell and MV Agusta decisions, short of chocolate-by-the-checkout and beer-by-the-diapers, Harley's dealers need all possible hot buttons to be pushed to maintain footfall.

That said though, some dealers are voicing concern (see the AMD Baird quarterly reports published so far this year) that the current marketing strategy leaves some of them vulnerable with their own specific or regional demographic dependency on those "core" customers not being addressed as vigorously as the new market opportunities are.

They (those dealers) may not internalize or verbalize the marketing re-focus as being why they, on their turf, feel that promotional activity is thin and ineffective, but that is why.

It isn't that Harley is being lacklustre in marketing spend and promotional initiative terms as such, it’s just that rather than being locked onto core customers, the cross-hairs of Harley's marketing are being scatter-gunned across many groups of potential customers - groups that aren't as thick on the ground in every part of the United States and elsewhere as may be supposed.

Therein lies a potentially serious problem for Harley in the long-term; by embracing "breadth" - as Matt Levatich proudly boasts - the company may also be embracing "thin", and doing so at a time when some are saying that it is already vulnerable to being raided.

In balance sheet and investor ROI terms Harley currently needs to restore some lead to its pencil, some beef to its sandwich. With something like eight different platforms to market, and so many different customers to try and find a home for within its one baggage-rich brand, it is starting to be suggested in some circles, especially among the more "active" of the new breed of dividend-hungry post-downturn 21st century investors, that the company may be trying to go in too many directions at once.

Let's list them - those eight  platforms - Softails, Dynas, Tourers, Sportsters, CVOs, V-Rods, 'Streets', and now potentially, probably, E-bikes as well. As I said before, don't get me wrong, in many respects this is an excellent thing to be doing, diversity of business-base is never a bad thing as such. But in business terms don't let anybody be fooled - as strategies go it doesn't come risk-free. It can bring further vulnerability of the kind it is designed to reduce if it is not part of a wider multi-track strategy.

Add to the platforms the other product group revenue streams such as P&A, MotorClothes, Finance and so forth, and maybe the danger of target-overload starts to outweigh the traditional strengths of the Bar & Shield as a brand; maybe there'll soon be too much static for those cross-hairs.

I'm all for the aggregation of marginal gains, but for a publically listed company that is traded in shark infested waters, and where the concept of long-term is who's picking up the tab for the next lunch, in the bigger picture the incremental gains to be garnered from the niches that Harley is chasing are at risk of being analysed away as mere morsels.

That bigger picture is one in which the luxury of servicing so many platforms and customer groups is a strategy that Wandell eschewed when he first became CEO, and is a strategy that is bought as a result of balance street strength, not one that of itself and on its own can generally be used to build balance sheet strength.

Critical mass is rarely an aggregation of many things, it is a result of focus.

Hey Keith, when and why did you decide to change course, and isn't it now a shame that the Buell and MV Agusta brands are exploiting other rival's markets and powering other owner's balance sheets instead of yours?