Harley Stays Cool in the Heat
Few brands were hit as hard by the recession as Harley-Davidson. Demand for motorcycles has taken a hit, and demand for premium motorcycles has taken an even bigger hit. Itâ€™s hard to sell a lot of twenty-some-thousand-dollar bikes when discretionary income is at a premium. Harleyâ€™s revenues continue to suffer, dipping 7.7 percent in the third quarter.
Under these circumstances, the last thing youâ€™d expect from Harley-Davidson is solid profitability, but the companyâ€™s profits more than tripled in the last quarter as management cut costs, laid off employees and closed plants. That, however, is only half the story. Beyond cutting back on its supply sideâ€”hereâ€™s where Harley departs from average brandsâ€”the company managed its demand side as well.
As the economy tightened up, Harley began requiring larger down payments from its credit customers. The company tightened up its lending standards, too, making it harder for the average Joe to afford one of its motorcycles. And it further refined its brand focus by abandoning its Buell line of motorcycles and selling off its MV Agusta brand.
Only a confident company with a powerful brand can make moves like that. I was reminded of that power a few days ago during a first-time visit to a new client. He was (to say the least) a Harley aficionado, his office decked out with brand paraphernalia. It was like being in an office at the local dealership; everywhere I turned I saw another Harley-Davidson logoâ€”on the walls, on the chairs, on the trinkets on the bookshelves, you name it. It was not the typical office of a senior executive at a major corporation.
Alas, I canâ€™t say Iâ€™m surprised. Harley-Davidson has done such a good job building brand equity over the years that, even in a downturn, the company can make a healthy profit. Rather than abandoning its principles to mount an ill-fated growth-at-any-cost effort, Harley management recognized its economic predicament and decided to protect both the brand and its profits. In fact, in some ways the stricter lending requirements add to Harleyâ€™s mystique. Scarcity, after all, creates value.
No company can control macroeconomic conditions, but every company can control how it responds to them. While other brands lost their nerve during the past couple of years, Harley-Davidson kept its cool. Literally.
Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of “When Growth Stalls: How it Happens, Why You’re Stuck, and What To Do About It.” Learn more about him at www.WhenGrowthStalls.com and at https://twitter.com/whengrowthstall.
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