Evolution of Marketing Strategy Harley-Davidson - Case Study Example

and Number Today's Evolution of Marketing Strategy Harley-Davidson The advantagesof positioning Harley Davidson (H-D) as a lifestyle product were many. Gaining a competitive advantage by not just selling a product but selling a community; a place where people could have a sense of belonging. By touching people's emotions, they were able to hit right at the heart, where people are moved, and decisions are easily made based on emotions and what touches them. Their customers were made to feel special and a part of an elite group surrounded by others like them as only those who purchased the motorcycles could attend rallies and events. It is more than just a mere motorcycle that they were getting. It is a lifestyle, a community, a way of life. By selling a product via targeting the customers' desires (emotions), H-D was able to capture people from all walks of life. From top executives to blue-collar workers, a diverse group of people bought into the lifestyle and sense of belonging to an elite group that H-D had created. This occurred because H-D staff members from all various positions, departments, and socioeconomic Last Name 2 status were involved in the company's decision making regarding the changes. Vedpuriswar (2003) reports, "By 1986, H-D had regained 25% of the US motorcycle market'it went public on the New York Stock Exchange'From 1988 t0 1995, annual shipments'more than doubled. Although H-D generated more than $1.3 billion revenues in 1995, it spent less than less than $2 million in advertising'In H-D achieved its 18th consecutive year of growth, outselling all other manufacturers in the heavyweight category for the third straight year'" H-D had the right idea when it focused on people being the greatest competitive advantage. By focusing on four marketing objectives, H-D was able to capture both beginners and those who had already fallen in love with its products. After much research, it was able to gear its motorcycles, pricing, advertising, and all other aspects to enthusiasts and non-enthusiasts. H-D used the same research and customized approach to target the international market by keeping motorcycle production below demand. The freedom and liberty of America was the symbol that H-D used to sell its products. The image that the company sold was the niche that made it successful above its competitors. With products ranging from motorcycles to clothing to financing, H-D's marketing mix was advertised in that many found surprising. The company wanted to get the general public's attention. H-D also combined forces with other companies such as Ford to create limited edition of vehicles. Hence, the community of customers that H-D built is from all walks of life. Membership, with purchase of a motorcycle, allowed customers to attend unique activities and functions (at local, regional, national, and international levels), which allowed them to share their love of riding and to Last Name 3 belong to a special community of those who share the same interests. Brand loyalty was the result of all this research and hard work and it proved to be extremely successful. The brand and licensing was sold to various companies in the United Stated and other countries. Eighty licenses covered eighteen product categories worldwide. The H-D brand can be found on cafes, dolls, children's wear, toys, etc. As with anything in life, with the pros are the cons; with the advantages there are usually disadvantages. A disadvantage was that H-D listened to their customers so well and created such a desire that they could not keep up with the demand at the current level of production. Some executives are concerned that the H-D brand, which exemplifies ruggedness and masculinity, may be disastrous as it goes into a category that does not live up to this hardcore image and value. They feel that the company may have ventured into territories that it had no business in dealing with which may have led to devastating consequences. Some of these companies may have included Barbie dolls and children's apparel. With good advice, the company is now particular with the categories and firms that it works with. H-D takes precaution before extending its brand into various areas. The company now enjoys more advantages than disadvantages and so does its customers. The development and extension of the Harley-Davidson brand outside of the core market of motorcycle began with adopting Japanese management principles, marketing techniques, and marketing strategies. Placing people and listening to their desires was the sustainable competitive advantage that made H-D successful. The Circle of Management did not only consist of top Last Name 4 executives and CEO's but both workers and dealers. A well-rounded group of people from various walks of life was included in the key decision-making process from the very beginning. H-D moved from selling products to selling community, a way of life. The Harley Owners Group (HOG) in order to create a connection, an emotional bond, which united the community of motorcycle owners. The lifestyle and privileges of being able to attend special rallies and events pulled at the hearts and emotions of its customers. Only by belonging to this elite group can one get the camaraderie of belonging to the Harley-Davidson community. H-D saw the importance of its customers and realized that the customers were the real sales force, which allowed their advertising expenditures to drop down to only $2 million in comparison to the $1.3 billion brought in via revenues. Motorcycles, clothing, and accessories used by customers were the main advertising and sales tactic that H-D employed. Expanding their manufacturing plants to various locations around the world helped to increase production. Special models and designs, such as anniversary models, were created in celebration of various events added to the exclusiveness of the community and lifestyle. Customers could own a piece of history with each special model. H-D narrowed down their marketing objectives to four major ones. Their first target is the affluent enthusiast and non-enthusiast male customers (ages 35-44). The company's second objective was to focus on first-time buyers. The third objective was to set the prices according to each target group. The fourth objective was to meet the demands of the market by determining the appropriate production schedules and working with the right partners. Last Name 5 H-D offered a variety of models with a price range that a diverse group of people would desire and could afford. There were 24 different motorcycle models and the prices ranged from $5,595.00 to $18, 980 U.S. By intentionally limiting the production of the motorcycles, H-D succeeded in keeping the demand higher than what was available which was successful in targeting its international market. The company not only kept its international market waiting but also kept the price of last year's model higher than the newest model that was coming out. Thorough research allowed H-D to know its customers and their demographic profile and its product market was divided into four major categories: "1) standard, which emphasized simplicity and cost; 2) performance, which emphasized handling and acceleration; 3) touring, which emphasized comfort and amenities for long-distance travel; and 4) custom, which emphasized styling and individual owner customization" as Vedpuriswar (2003). Harley-Davidson focused on the general public by implementing a marketing communications mix. H-D focused on advertising to people who normally would not look into buying motorcycles by providing not only motorcycles but also clothing, accessories, and financing. Clothing and accessories were found in department stores, financial services, and one-stop shops. Stores offered lounges and meeting rooms for riders and contained H-D pinball machines, videos, and older-edition motorcycles. By romancing the American dream and creating the proud-of-our-heritage idea, customers were emotionally-drawn into the American image and the community of belonging to the exclusive Last Name 6 H-D lifestyle. The company allows only customers to receive a one-year membership to the Harleys Owners Group (HOG). Rallies, found at local to international levels, allowed members to share their love of the motorcycles, products, and services. Rallies were also events where customers could register their bikes and have their questions answered. The company also focused on encouraging customers to make use of their bikes. It was not only the initial purchases that H-D was interested in the lifelong partnership and repeat business. By offering special routes and journeys for participants to partake, H-D encouraged the use of their motorcycles. If a customer uses what he or she buys, then he or she is more likely to come back and stay involved which leads to repeat business. Groups were also formed which allowed customers to share with other customers their experiences. Riding experiences, in particular, were the foci of these special groups. The customer also kept record of customers' wants by gathering communication and keeping up databases. Genuine parts were stocked and sold at full-service Harley-Davidson one-stop shops, which were independently owned. Airports and popular vacation destinations host locations, which sell clothing and licensed collectible products. By grabbing the emotions of its potential and current customers, H-D was able to create a desire for the free spirit of America. The motorcycle resembled the American pioneer spirit, which was free and adventurous. The motorcycle is symbolic of the horse that allowed pioneers to explore and find new adventures and set off to places unknown. This was the image that was being advertised and sold. Last Name 7 Having customers who are loyal to a certain brand is the key to a company's success. When a company can obtain customers who are loyal to its brand, this is extremely advantageous as the customers are the ones who will do the advertising and the selling. The company does not have to work as hard. Profit maximization is usually the goal of most companies. Through resource allocation and utilization, profit maximization is obtainable. Harveston, Kedia, and Davis (2000) quote Caves (1991), "Once an organization has developed firm-specific advantage, it can exploit the advantage in international markets at little or no additional cost over the home market." The same authors, Harveston, Kedia, and Davis (2000), also quote Bartlett and Ghoshal (1989), "'four types of strategy: international, multidomestic, global and transnational" and Hill (1998): An international strategy is adopted when firms try to create value by transferring valuable products and skills to foreign markets where indigenous competitors are lacking those same products and skills... Production and marketing functions tend to remain in the home country. The product or skills are tailored to individual markets only to a limited extent. Firms following this strategy face low cost pressures and low Last Name 8 pressures for local responsiveness. Entrepreneurial firms entering international markets tend to follow an international strategy. However, as will be discussed more fully in the next section, we propose that all entrepreneurial firms do not follow the same type of international strategy. Harveston, Kedia, and Davis (2000) also quote Bartlett and Ghoshal (1989): Firms adopting a multidomestic strategy focus on achieving maximum responsiveness to the local market conditions. In this instance, multidomestic firms extensively customize their products and skills and marketing strategies to better conform to variations in local market conditions. In support of a multidomestic strategy, firms often establish a full value chain of activities (from production to end product or service marketing) in each national market it serves. Firms following this strategy tend to face low cost pressures but must contend with high pressures for local responsiveness. The situation is reversed for firms following a global strategy. These firms face high cost pressures and low pressures for local responsiveness. They attempt to concentrate specific activities in a few favorable locations, wherever the costs are lowest, and thereby reap cost reductions from location-specific economies. In following this strategy, the product or service is not customized to local market conditions Last Name 9 because customization would necessitate an increase in costs. Rather, the strategy is to standardize their product and service offerings to take advantage of scale economies. The fourth type of strategy proposed by Bartlett and Ghoshal (1989) is a transnational strategy. Firms employ this strategy in response to high pressures for both low cost and local responsiveness. Thus, transnational firms must exploit cost and location economies, like global firms, while simultaneously adapting to the pressures for local responsiveness, like multidomestic firms. Trying to manage and achieve these objectives simultaneously is very complex and generally contended to be beyond the limited resources and capabilities of a start-up firm. The firm specific advantages (FSA) that Harley-Davidson has over other companies cannot be duplicated. By exploiting its competitive advantage of selling a community, a lifestyle, H-D has maximized its profits well above its competition. By offering a way of life, a special community, and brand loyalty by allowing its customers to do most of the advertising/marketing and selling for the company, H-D keeps its expenses down and is able to acquire large gains on profits. In other words, its superior financial performance is due to the fact that its expenses are far less than its profits, or income. Last Name 10 The core competency, or the source of advantage that H-D has that is hard to duplicate by other companies, was to use its real sales force, which is its customers. By creating a community and a lifestyle, which allowed customers to live the American free spirit of adventure and youth, customers proudly attend rallies and special events, wore the apparel, and even formed groups to discuss the trips and routes that they took on their motorcycles. The customers do the advertising, marketing, and selling. This brought H-D's expenses down extremely and maximized profits. Another FSA of Harley-Davidson's is involving people from all levels of the company in the top decision-making process. This empowers its staff and allows the company to have input from all areas of its company. Listening to its customers also gave H-D an advantage unmatched by its competitors. H-D narrowed down their marketing objectives to four major ones. This is another advantage that is firm specific. Their first target is the affluent enthusiast and non-enthusiast male customers (ages 35-44). The company's second objective was to focus on first-time buyers. The third objective was to set the prices according to each target group. The fourth objective was to meet the demands of the market by determining the appropriate production schedules and working with the right partners. H-D is able to gear its products and services to almost everyone anywhere and at any level. Last Name 11 Harley-Davidson focused on the general public by implementing a marketing communications mix. H-D focused on advertising to people who normally would not look into buying motorcycles. Licensed toys, accessories, apparel, dining facilities, financial services, etc. has drawn in the rest of the world who are not riders are now very loyal to the brand. Harley-Davidson has created this advantage that has become an FSA. With an elite community which offers a sense of belonging to a part of the American spirit, the brand loyalty, targeting each person (regardless of the love of motorcycle or not, socioeconomic level, location, etc.) the company definitely has many FSA's. Keep in mind that firm specific advantages are interchangeably termed as monopolistic advantages, ownership advantages or competitive advantages, which are the building blocks of a company. (Hymer, 1960, states in the introduction of Krishna, Sanjeev, and Seong-Soo, 1997.) Once these blocks are set in place, profit maximization is accomplished with less effort and expenses. The owner advantages have allowed their advertising expenditures to drop down to only $2 million in comparison to the $1.3 billion brought in via revenues. The FSA of having customers who are loyal to a certain brand is the key to a company's success. When a company can obtain customers who are loyal to its brand, this is extremely advantageous as the customers are the ones who will do the advertising and the selling. The company does not have to work as hard especially as Harley-Davidson has accomplished this globally. Last Name 12 Many people around the world dream of the American spirit, the ability to be free and pursue their dreams. At least many wonder about it. By grabbing the emotions of its potential and current customers, H-D was able to create a desire for the free spirit of America. The motorcycle resembled the American pioneer spirit, which was free and adventurous. The motorcycle is symbolic of the horse that allowed pioneers to explore and find new adventures and set off to places unknown. This was the image that was being advertised and sold and yet another FSA for H-D. Many could get on their bikes and live, or the relive, the dream. Others can sport the apparel, use the accessories and other licensed products, visit the cafes, etc. A piece of the Harley-Davidson dream, the American youthful spirit, can be achieved even if only by wearing a licensed-apparel. H-D is now recognized as the adventurous and free American and when one thinks of H-D, one cannot separate that image. By taking the steps that Harley-Davidson has taken and by becoming extremely successful, the firm specific advantages led to a worldwide corporation that has touched global customers. Many companies cannot compete with this and if they are able to, their costs and expenditures are much higher and profit maximization is much lower than what H-D has been able to achieve. Erramilli, Argawal, and Kim (1997) reports, "firms generate unique skills that give them absolute advantages over firms in almost all foreign host locations." Harley-Davidson has created the FSA that many successful companies have achieved. They have acquired competitive advantages that cannot be duplicated or replicated. Wikipedia (2006), "In marketing and strategic management, sustainable competitive advantage is an advantage that one Last Name 13 firm has relative to competing firms. The source of the advantage can be something the company does that is distinctive and difficult to replicate, also know as a core competency. For example, P&G' ability to derive superior consumer insights and implement them in managing its brand portfolio. It can also be an asset such as a brand, e.g. Coca Cola or a patent, such as Viagra. It can also simply be a result of the industry's cost structure, for example the large fixed costs that tend to create natural monopolies in utility industries. To be sustainable, the advantage must be: distinctive and propriety." By focusing less on technology and more on brand loyalty, customers are so loyal to H-D that they even have the company's logo tattooed on their bodies. The motorcycle represents the stallion that delivers the adventurous, free-spirit into the American journey. Vedpuriswar (2003) reports, "The bike represents to America, the adventurous pioneer spirit, the wild west, having your own horse, and going where you want to go- the motorcycle takes on some attributes of the iron horse. It suggests personal freedom and independence. Brand loyalty for H-D is emotional. The H-D's symbol is based on a pattern of association that includes the American flag and the eagle; reflective of the passion for freedom Americans enjoyed'" In conclusion, Harley-Davidson, through listening to its staff and customers, and through marketing strategies have developed FSA that no other competitor in its field can match. The companies' employment of FSA has proven to be a tremendous success and as it continues on this path, the future looks tremendously bright for Harley-Davidson and the worldwide community it has created. Its customers will see that the American spirit rides on. Last Name 14 References Erramilli, M., Argawal, S., and Kim, S. (1997). Are Firm-Specific Advantages Location- Specific Too' Journal of International Business Studies. December 1997, Volume 28, Number 4, Pages 735-757. Harveston, P., Kedia, B., and Davis, P. (2000). Internationalization of Born Global and Gradual Globalizing Firms: The Impact of the Firm-Specific Advantage. Caves (1991). Krishna, E.; Sanjeev, A.; and Seong-Soo, K. (1997). Are firm-specific advantages location-specific too' (Hymer, 1960.) Available from: < http://www.findarticles.com/p/articles/mi_hb3274/is_199712/ai_n7974165 > [Accessed 30 June 2006 ]. Vedpuriswar, A.V. (2003). Harley Davidson: Evolution of Marketing Strategy. ECCH Collection, pp. 1-12. Hyderabad, India: ICFAI Knowledge Center. Wikipedia (2006). Available from: < http://en.wikipedia.org/wiki/Sustainable_competitive_advantage> [Accessed 30 June 2006 ]. Read More