Harley Davidson Faces Recession — and Aging Riders

Harley Davidson Faces Recession — and Aging Riders

In a Facebook video, the screen is filled with a sea of 20-something men and women cruising on sleek black motorbikes, all of them Harley-Davidson’s Sportster Iron 883. It’s part of marketing campaign to generate buzz around the newest Sportster. “That’s hot!” one woman declares on Harley-Davidson’s Facebook page, where other mini-documentaries promoting the bike are posted.

Back at Harley’s Milwaukee headquarters, one can only hope for heat. At roughly $8,000, the Sportster is positioned to help one of the world’s most iconic brands survive the gravest economic crisis in decades. But it must also help Harley-Davidson move beyond its aging Baby Boomer base.

It’s been a grueling few weeks for American companies, but particularly so for Harley-Davidson, purveyor of bikes that easily top $30,000. Last month, the company reported that its fourth-quarter global sales fell 13.1%. Last year, its profit sank nearly 30%. And it’s been a wipeout for investors: Harley-Davidson’s stock price has plunged nearly 70%, to $11.96 a share in mid-February, from $37.34 a share one year ago. Americans haven’t lost reverence for Harley-Davidson. But a key problem is that people are simply less willing to spend money on luxury items: Overall motorbike sales fell 7.2% last year, according to the Motorcycle Industry Council, an Irvine, Calif., trade group.
America’s leading motorcycle manufacturer is enduring its bleakest period since the 1980s, when it nearly went bankrupt. “Clearly, it’s a challenging environment, and we’re doing all the right things in this environment to position our premium brand in this marketplace, to make sure we’re even stronger when we’re out of this cycle,” says Tom Bergmann, Harley-Davidson’s chief financial officer.

Harley-Davidson has been through a few cycles. It was founded here in 1903, and within a decade had built a global business. It survived the Great Depression by selling to police departments. In 1957, it introduced the Sportster, a sleeker, less-expensive alternative to the company’s popular touring bikes, and a response to a wave of British imports. The Sportster’s relative small size made it appealing to women. But by the 1970s, motorcycling had become a marginalized sport. Its renaissance came in the late-1980s, driven largely by Baby Boomers’ new affluence. Between 1992 and 2007, new bike sales soared from 278,000 to 1.1 million annually. Harley-Davidson rode much of that wave, chiefly with touring bikes like the brawny Ultra Classic Electra Glide . Its patrons grew older and wealthier, but its efforts to cultivate a large base of female and younger riders have been marginally successful.

Acknowledging the challenge of selling premium motorcycles in this environment, Harley-Davidson recently introduced a print ad aiming to play on the Sportser Iron 883’s relatively low price. The message: “About six bucks a day. Cheaper than your smokes, a six pack, a lap dance, a bar tab, another tattoo, a parking ticket…” The Sportster line is expected to account for a larger share of Harley-Davidson’s sales this year — though still less than 25% of the total.

Guiding Harley-Davidson’s marketing strategy is Mark-Hans Richer, 44, who was hired as chief marketing officer in July 2007 after having led marketing efforts at General Motors’ Pontiac unit. One of Richer’s first moves was to hire a director of product development for “outreach customers” — young people, women and non-U.S. markets. Richer’s team quickly discovered that young people aren’t into the heavy chrome found on many Harley-Davidsons. Hence the emphasis on the primarily black Sportster Iron 883, which was already in development.
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