Saturday, July 18, 2015

More Product = Added Revenue…Right?

One thing I respect more than a company that can nearly go bankrupt twice, yet continue to survive for over 112 years, produce revenue of $5.5 billion dollars in 2014 and have an estimated market share of 36% in 2013, are the customers that ride and buy their products.  I am talking about American Icon Harley Davidson (H-D).  This is a company that successfully captured what I would consider to be the most loyal customers in the World.  The distinguishable sound and rumble of a Harley Davidson and the quality, time, and detail put into their motorcycles is untouchable by competitors.  Although extremely successful, even the best companies venture off their proven strategic path and find themselves in unfamiliar and, due to other large experienced players, unprofitable territory.

Harley Davidson’s customers not only love to ride their bikes, but love to wear the H-D logo and brand merchandise accounted for $300 million dollars in 2014 sales.  Today this ranges anywhere from t-shirts, riding jackets, and lighters, but in the 1990’s aftershave, perfume, infant clothing, ornaments and wine coolers were a few untraditional brand items offered on their shelves.  Matt Haig said it best in his book Brand Failures “Harley Davidson owners aren’t just loyal. They love the brand.”  The company recognized this brand loyalty in the 90’s and began producing untraditional merchandise in addition to traditional merchandise in hopes of increasing revenue and finding profit in different markets. 

While reading The Coherence Premium this week, I started to research companies that had major brand failures.  After reading about Harley Davidson’s product line push in the 90’s, I quickly saw that they lost focus on what they do best. Build strong American motorcycles.  Customers were happy to purchase a nice leather jacket to wear while riding, but the responsive to the release of Harley’s new untraditional product lineup was not positive. 

Conducting an internal organizational analysis and determining which new markets H-D may have an opportunity to enter into would have been beneficial.  Entering into an oversaturated market, with little or no experience, resulted in failure.  Anheuser-Busch made the same mistake when they launched Eagle Snacks. While their reasoning of “beer and salty snacks go together” was true, they did not fully analyze the snack market and were quickly overpowered by Frito-Lay.  Harley Davidson thought that, for example, offering an entire line of kids wear would be appropriate because mom and dad wore the clothing while riding. They created little value in the market space and it resulted in removal of many merchandise products.

After reviewing Harley Davidson’s website and merchandise page, in general they are only selling traditional brand items.  Understanding that some of their products were producing a negative impact on loyal customers and removing those products was a great move.  If they did not remove these products they would have hurt the brands reputation and the result would have been a loss of loyal customer’s.  

Sources:


Market share of major motorcycle manufacturers in the U.S. in 2013. http://www.statista.com/statistics/252210/market-share-of-major-motorcycle-manufacturers-in-the-us

Harley Davidson 2014 Annual Report. file:///C:/Users/Adiemus/Downloads/2014%2010-K%20as%20filed.pdf

Matt Heigs, 2003, Brand Failures: The Truth about the 100 Biggest Branding Mistakes of All Time

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