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Clyde Fessler

"If you do what you've always done, you're going to get what you've got, or less." That was the message from Clyde Fessler, retired VP, Business Development, Harley Davidson Motor Company, to kick off the general session at this year's NEXPO.

Kessler provided a look at how the company literally came back from the brink of bankruptcy in the early '80s to dominate the market for large motorcycles. Like newspapers today, Harley Davidson was faced with falling sales and increasing competition. The company had already written press releases to announce that it was going out of business, said Kessler. What followed was a fundamental transformation in corporate culture, and a marketing strategy based on a new and intimate understanding of the Harley customer.

So just how did Harley Davidson turn it around, and what can be learned from the experience?

Harley Hits The Wall and Builds a Brand
Harley Davidson survived two world wars, the depression, any number of recessions and a negative image stemming from an association with "bad boy" movies in the 1950s. But when parent AMF decided to drain cash from the company, leading to a management buyout in 1981, the stage was set for trouble. Unit sales slipped from 50,000 to 30,000,and the company lost $50 million in the first two years after the buyout.

Faced with growing competition from lower cost, higher quality Japanese bikes, the company focused on its customers and identified a number of perceived strengths including its heritage, tradition, styling, and the fact that it was the last American motorcycle manufacturer. From that analysis, a brand strategy was born.

Moving forward, the Harley brand would be built around the lifestyle it represented, positioned as a symbol of strength and freedom. "Any product can be imitated," said Fessler, "but a brand cannot."

So just how did the company change its image, broaden its appeal and expand its customer base?

Fixing the Product
Harley was woefully behind its Japanese competitors when it came to quality. In fact, Harley Davidson bikes were widely known to "leave their mark," not for the impression they made, but for the oil spots they left in parking lots.

Quality became the company's primary internal focus, and the search for solutions led directly to the competition. Japanese management and manufacturing techniques were imported, including employee involvement at all levels of the organization.

Moving to a just-in-time inventory system removed millions of dollars worth of parts from Harley warehouses. And quality improved as employees were given more operational control and responsibility for measuring and meeting production standards in their day-to-day work.

Motorcycles: By the People for the People
With its mousetrap steadily improving: the company still faced significant marketing challenges.

- Its core customer was perceived to be more of a marauding gang member than a weekend cruiser.
- It was still more expensive than Japanese bikes.
- Its dealerships looked more like warehouses than showrooms.

"By the people for the people" was the message developed to address the perception issue head on. It not only tapped into the company's American heritage; it also reinforced the fact that owning a Harley was as much about the experience as it was about the product. Whether they look like ZZ Top or the nightly news anchor, Harley owners have a common psychographic profile that combines elements of patriotism, independence and a love of the outdoors.

"Would You Sell an Unreliable Motorcycle to These Guys?"
Armed with a clear understanding of its customer base, Harley implemented its brand strategy across all customer touchpoints, from advertising and promotion to dealer training and dealership design.

One advertisement, developed to address the quality issue head on, showed a tough looking group of Harley owners and asked the question: "Would you sell an unreliable motorcycle to these guys?" Although the image leaned toward the previous Harley owner stereotype, Kessler is also a firm believer in turning negatives into positives. "Anyone can do that no matter what business your in," he says. Dealerships, on the other hand, were redesigned to invite a much broader customer base. While lighting and merchandising were upgraded throughout the network, each location is unique from an architectural standpoint, designed to reflect the personality of the area and the owner.

Finally, the Harley brand went totally mainstream by introducing clothing lines and retail outlets in major tourist centers.

Today, Harley Davidson has almost 50% of the "big bike" market, and its number one international market is Japan. Kessler beams when he shares that tidbit.

The company has developed an owners club which now boasts more than 1 million members, each of whom pays an annual $40 membership fee. Most of that money is used to fund member events.

This close connection with customers is a direct result of following a clear and consistent brand strategy for almost two decades. The key, according to Kessler, is knowing who you are, who your customers are, and what they expect from you.

To help maintain that connection, Harley Davidson devotes 80-85 percent of its advertising and promotional budgets to customer programs. "We let them spread the word," Kessler says.

The Harley lesson in change management provides valuable insights from outside the newspaper business, a theme that was promoted at other NEXPO sessions. "We need to get outside the industry," said Sharon Mandell, Vice President of Technology, Knight Ridder, during her presentation on IT leadership. "We all talk to each other just a little too much."