THE 4 C SITUATION ANALYSIS: HARLEY-DAVIDSON

ASD&MFALL 2013

EXECUTIVE SUMMARY

Harley Davidson is a well-established high end motorcycle brand that has been helping people achieve their dream lifestyle for over a century. Despite its unmistakable brand image and the loyalty of its customers, Harley Davidson is suffering from an ever-aging customer base. The average Harley Davidson customer (upper-class 48- year old male) has been getting older at a rate of 6 months every year for the last 20 years. While Harley Davidson is the largest manufacturer of heavyweight motorcycles in the world by market share, Baby Boomers' children prefer lighter, more inexpensive bikes.

This media plan is the result of extensive customer and competition research emphasizing the target audience age issue that Harley Davidson is facing. It will focus particularly on young adults between the ages of 18 and 34, who have finished high school, and own a home. This shift in advertising attention should happen without alienating its already existing older customer base. The goal of this plan will be to increase the target audience's preference and purchase interest by 15% within the following year.

CATEGORY: HISTORY

After World War II, American soldiers arrived home only to realize that the motorcycles in the U.S. were not as fun nor comfortable as the ones they had used in Europe. That is when the first “bobbers” and “choppers” were created. These bikes were the regular stocked bikes that had been customized by the consumer. The “chopper” finally gained popularity upon the release of the 1969 motorcycle film “Easy Rider.” At this time the main companies that were in the chopper business were Harley Davidson and Indian motorcycles.

CATEGORY: TOP BRANDS

As of 2012, PowerSports Business published the sales of recreational, on-road motorcycle dealers in 44 states and Canada.

CATEGORY: SALES ANALYSIS

Year Motorcycles Registered in the U.S. (units)

1945 198,000 1962 646,000 1970 2.8 million1985 5.4 million 2002 936,0002004 1.1 million2005 1.2 million

1945-2005 Motorcycle Growth The Motorcycle Industry Council lists 1973 as the zenith for annual motorcycle sales, when Americans bought more than 1.5 million bikes. Sales for 1979 topped the one-million mark, then cooled in the 1980s and early 1990s. Motorcycling began its 13 years of increasing success back in 1993, with sales growing every year since. The potential reasons for this steady growth include:

Sales Margin Trends for Private Dealers Sales have appeared to level off over the last 3-4 years. However, recreational motorcycle sales increased just over 2% in 2012 compared to 2011. The Motorcycle Industry Council reported U.S. motorcycle sales for the first half of 2012 have improved:

Recreational motorcycle sales rose only 1.8% (to 318,105 from 312,520) between 2011 and 2012

193,287 recreational motorcycles have been sold in the first half of 2012 (January to June), up from 187,571 in the same period the year before (+3.0%)

A snap-back from the recession. Tough times kept people from buying bikes and low sales kept dealers from replenishing inventory.Motorcycles are far more fuel efficient than cars

Recent Motorcycle Growth

1901- William S. Harley and Arthur Davidson created their first “motor bicycle”

January 1905- Customers could buy a Harley-Davidson engine and create their own bike

April 1905- Complete bikes were being sold on a limited bases

1906- Harley built their first factory, allowing them to increase production to 150 by 1907

1907- They began selling their motorcycles for to police departments

1917- The U.S. demanded motorcycles for combat in WWI, Harley provided 15,000 bikes

1920 Harley-Davidson was the largest motorcycle manufacturer in the world

1942- Harley continued to create motorcycles for the Army during WWII

1969 American Machine and Foundry bought the company and began cutting the workforce leading to labor strikes and low quality

1980s Harley began to exploit the retro appeal of their bikes, to compete against Japanese bikes

2003- Harley bought Buell Motorcycle Company, a sport-bike manufacturer

2004- Harley was involved in several class action lawsuits

2000- Police departments began reporting high speed instability causing the death of an officer

2009- The value of the Harley-Davidson brand fell by 43

2011- Sales improved dramatically, income from operations in the third quarter rose 95.9%

COMPANY: HISTORY

COMPANY SALES ANALYSIS

2008 Recession

Sales Dramatic increase since 2011

Harley- Davidson, Inc.NYSE: HOG

COMPANY: THE 4 P’S

• Products

• Place: Harley-Davidson motorcycles are purchased through authorized dealerships only. They cannot be purchased through the factory, but they have over 800 stores in the US as well as stores in 67 other countries.

• Promotion:

• Price: Prices range anywhere

from $8,249 to $38,999

COMPETITIVE SPENDING ANALYSIS: AD DOLLARS SPENT BY EACH BRAND

Network TV Dols

Cable TV Dols

Magazine Dols

Int Display Dols

Outdoor Dols

Total Dols

Harley-Davidson: Motorcycle

2680 5060.1 1357.5 2370.5 11468.1

Honda: Motorcycle

120.8 3300.4 952.9 918.8 5292.9

Yamaha: Motorcycle

252.4 170.8 163.7 483.5 1070.4

Kawasaki: Motorcycle

568.6 1578.1 340.4 16.4 2 2503.5

Grand Total 3621.8 10109.4 2814.5 3789.2 2 20334.9

MEDIA MIX OF COMPETITIVE BRANDS & TOTAL CATEGORY

Network TV Dols

Cable TV Dols

Magazine Dols

Int Display

Dols

Outdoor Dols

Total Dols

Harley-Davidson: Motorcycle

23.37% 44.12% 11.84% 20.67% 100%

Honda: Motorcycle

2.28% 62.36% 18.00% 17.36% 100%

Yamaha: Motorycle

23.58% 15.96% 15.29% 45.17 100%

Kawasaki: Motorcycle

22.71% 63.04% 13.60% 0.66% .08% 100%

Total Category

(%)

17.81% 49.71% 13.84% 18.63% 0.01% 100%

SHARE OF VOICE & ADVERTISING EFFECTIVENESS INDEX

Market Share Share of Voice Effectiveness Index

Harley-Davidson: Motorcycle

35% 71% 49

Honda: Motorcycle

14% 17.6% 80

Yamaha: Motorcycle

15% 8.6% 174

Kawasaki: Motorcycle

15% 2.8% 536

Total Category (%)

79% 100%

WRITTEN ANALYSISHarley Davidson has 71% of the Share of Voice by spending $7,941,600 on

advertising through Network TV, Cable TV, Magazine and Internet. While Honda, Yamaha and Kawasaki also tend to focus on these media as well, Harley is the largest investor, spending the most in every category except for Magazine where Honda prevails. Harley Davidson spends the largest portion (33.5%) of its budget on Cable TV ads, which translates to $2,659,700. This is a prominent difference when compared to Yamaha and Kawasaki who only spend 19.3% ($181,900) and 20.2% ($63,600) in the same category.

Harley also paves the way in Network TV ads, spending 30.6% ($2,427,800) of its advertising budget compared to Honda who only spends 6.3% ($123,200) and Yamaha with 19.3% (184,000). Kawasaki does spend a large portion of heir ad budget on Network TV with 62.6% going to this medium, but due to their smaller budget, this only translates to $196,900.

Harley Davidson is definitely not as reliant on the Internet as some of its competitors. By spending 29.8% ($2,370,500) of its budget in this medium, it seems that Honda (46.7%- $957,000) and Yamaha (50.5%-$483,500) depend on this area to reach their consumers more than any other medium.

Harley-Davidson is clearly working hard to advertise their brand in the top media markets and spending comparatively more money to ensure quality in their ads.

Overall, however these companies are spending more money in Internet advertising altogether than they are in any other media, by investing 33% ($3,789,200) in the medium. Of the markets they actually utilize, this category is spending the least amount of money in outdoor advertising (.03%- $3,600), which only consists of Kawasaki. None of these companies use Network radio as a means of reaching their audience though.

CONSUMER PROFILE/ MRIDemographic Variable Proj ‘000 Percent Down Index

Education: Graduated High School

3210 33.4 107

Age 45-54 2201 22.9 120

Occupation: Natural Resources, Construction, and Maintenance Occupations

1337 13.9 130

Occupation: Other Employed 2179 22.7 106

HHI: $75,000-$149,000 3295 34.3 116

Census Region: Midwest 2492 25.9 119

County Size: B 2987 31.1 102

Marital Status: Now Married 5416 56.3 102

Child Age: 12-17 Years 2134 22.2 124

Years at Present Address: 5+ years

6183 64.3 112

Home: Owned 7536 78.4 114

Home value: $100,000-$199,999

2803 29.2 124

Race: White 8155 84.8 112

PROBLEMS & OPPORTUNITIES• Harley recalled many of its touring bikes built

between May 3and October 14, 2013 because of a problem with their hydraulic clutch system

• Even with the decreasing average age, the average still remains in the late 40s

• Harley “[refuses] to report numbers on its ability to attract customers from new demographics”

• Harley only spends 15% of its budget on paid media, and focuses mostly on word of mouth which isn’t effective for the digital age

• Still the biggest issue seems to be with the brand image appealing more to the older audience because of its association with 60s rebellion

• Harley has had issues with safety and reliability, some are unstable at high speeds

• Ali Larkins 2011 Public Relations Plan• “Media’s Portrayal of Harley enthusiasts,

a stereotype of fringe, flames and old geezers in leather has emerged.”

• “Our most tangible threat is our (cheaper) foreign competition- Kawasaki, Suzuki, Yamaha and Honda.”

• “A Harley Davidson motorcycle is considered a luxury item not a necessity.” So people current lack of disposable income threatens the brand

• They are now making the Iron 883, a cheap bike much like the more expensive Harleys but only $8,399. It has helped them gain 48.6% of the under 35 years of age market.

• According to RL Polk, a provider of automotive information and marketing solutions to the automotive industry, the average age of the Harley rider is going down, but the average age is 47 (which is one year later than the youngest baby-boomer)

• The 500cc motorcycle in development could be good for targeting a younger crowd, however it would not appeal to everyone because it will be made in India, not America

• According to Harley-Davidson’s Chief Operating Officer, Matthew Levatich, they are possibly making an electric motorcycle

• Their 2014 lineup includes new bikes with many advancements including anti-lock brakes, better headlights, better aerodynamics

• It sponsors the UFC events• Harley is targeting social media for advertising

but still only pages that you can “like”• Harley is crowd sourcing for a lot of its new

advertising

MARKETING OBJECTIVE

The objective of this 2014 year long branding campaign is to increase sales volume of Harley-Davidson brand motorcycles within the younger user population by 15%

TARGET MARKET DEFINITION

Demographic Variable Figures and Calculations

Age 18-34 29.9% Down

High School Grad 33.4% Down

Homeowner 78.4% Down

Race: White 84.8% Down

Target Market Size Calculations .299 x .334 x .784 x .848= .07.07 x 9,613,000= 672,910

Target Size 672,910 people in target market

Name of Target Market

Young Adults

Target Market Statement

Young adults are age 18-34, white, high school grads who own their own home. The size of the

target market is 672, 910 people.

TARGET MARKET: QUALITATIVE PSYCHOGRAPHIC PROFILE

The personification of the ideal target audience for Harley Davidson is hard working, blue-collar, high school graduates. We can name our ideal customer Dave. Dave is usually between the ages 45-54, and has a household income of about $75,000. Dave is married and has children in their teens. Dave is most likely to be from the Midwest region, making him a lover of the outdoors. Dave is a hard worker, who likes to unwind by taking a stroll on his Harley Davidson on the weekends.

ADVERTISING OBJECTIVE & POSITIONING STATEMENT

Advertising Objective:

To increase interest and preference of Harley-Davidson as a viable option of motorcycle transportation through test drives by 15% before the end of 2014.

Positioning Statement

For men between the ages of 18 and 34, Harley-Davidson is the ideal motorcycle to purchase because it’s big, it’s loud, and it’s all-American

MEDIA OBJECTIVESPeriod Reach Frequency GRP % of Entire

GRPSBudget Breakdown

January 40 2 80 2.8% $280,000

February 40 2 80 2.8% $280,000

March 70 3 210 7.5% $750,000

April 75 3 225 8% $800,000

May 80 4 320 11.4% $

June 80 4 320 11.4% $

July 40 2 80 2.8% $

August 40 2 80 2.8% $

September 75 3 225 8% $

October 85 4 340 12.1% $

November 85 5 425 15.2% $

December 85 5 425 15.2% $

Total 2,810 100% $10,000,000

MEDIA OBJECTIVES

• A pulsing advertising schedule adjusts to the weather dependency of motorcycle usage while emphasizing the high purchase months and maintaining awareness during low purchase months.

• To recover from the end of the previous year, in January and February (dead months) start off by reaching a modest 40% of the target audience at least 2 times.

• Gradually increase reach and frequency in March and April in preparation for the warmer months and to take advantage of upcoming tax returns, taking GRPs from 2.8% in earlier months to a high point of 8%.

• The moderate to warm temperatures in May and June make them the most popular months of the year to motorcycle aficionados. In response to the large percentage of recreational motorcycle sales that take place in these months, bring GRPs up to 11.4% with a combination of 80% reach and frequency of at least 4.

• Decrease media budget to $280,000 in July and August, as summer sales are slowing down but to actively keep Harley Davidson in customers' minds.

• As the last quarter of the year begins, September and October will serve as stepping stones between the slow late-summer months and the busy holiday months. Reach will increase from 75% in September to 85% in October while frequency stays consistent at 5.

• The holidays will improve media receptiveness and gift purchases will lead sales to skyrocket in November and December, making the Harley Davidson end-of-year campaign the most important one of the year. By reaching 85% of the target audience at least 5 times, GRPs will peak at 15.2%.

MEDIA STRATEGY: MEDIA MIX

Medium Percentage Weight Dollar Amount

Interactive 70% $7,000,000

Internet 20% $2,000,000

Cable TV 7% $700,000

Magazine 3% $300,000

MEDIA STRATEGY: SUMMARY• Though there are not currently any figures to support interactive

advertising as an advertising medium, we still recommend taking advantage of it so customers can get a first hand experience with the vehicles and make an informed decision to buy a Harley.

• Internet Advertising will attract the attention of the new target market who spends much of their time on the internet. As of 2012, the average American spends more than three hours on the internet a day.

• We recommend advertising on Cable Television because it is still the most used medium and if the ads are put on the right channels, the target audience should be easily reached.

• Magazines have proven to be a successful form of advertising for Motorcycle companies in the past, so Harley should continue to advertise in magazines to reach both its new target market and current target market.

MEDIA TACTICS

Medium Vehicle Index Number

Column B

(Down)

Units Dayparts

Interactive Displays at sporting events

Weekend Sports

Test Drives

Motorsports Events

Weekend Sports

Internet eBay 131 27.7

ESPN.com 86 19.3

YouTube 15 Second

Cable TV ESPN Channel

89 38.4 15 Second TV (Daytime) III (Light)

SpikeTV 120 30.5 15 Second TV (Daytime) III (Light)

Magazine Motorcyclist 356 5.9 Full Page

Playboy 119 4.8 ½ Page

MEDIA TACTICS: SUMMARY• Displays at sporting events will be a good way of reaching the target audience

because many men between the ages of 18-34 are interested in sports so advertising at the games will bring the advertising to the possible customers.

• Test Drives will allow possible customers the opportunity to ride the bikes for themselves and come to the conclusion that Harley is the best bike for them.

• Motorsports Events are a great place to connect with motor vehicle enthusiasts.

• We recommend eBay be used as an advertising medium because its high index of 131.

• ESPN.com much like the display ads will target the new demographic where they are already likely to be.

• YouTube is currently the third most popular website on the internet and has a very diverse audience.

• ESPN will reach the new audience in there homes on one of the most popular channels for men.

• Spike TV, with its programming tailored specifically for men and an index of 123, is a great medium for targeting men between the age of 18-34

• Motorcyclist has served motor cycle companies well in the past with its large index, it is one of the most important mediums to continue advertising in.

• Much like Spike TV, Playboy is tailored for men and has a relatively large index of 119.

FLOWCHART

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec GRPInteractiveDisplays at sporting eventsTest DrivesMotorsports EventsInterneteBayESPN.comYouTubeCable TVESPN ChannelSpike TVMagazineMotorcyclistPlayboyMonthly R/F/GRP 40/2/80 40/2/80 70/3/210 75/3/225 80/4/320 80/4/320 40/2/80 40/2/80 75/3/225 85/4/340 85/5/425 85/5/425 2,810% of GRP/ Budget 2.80% 2.80% 7.50% 8% 11.40% 11.40% 2.80% 2.80% 8% 12.10% 15.20% 15.20%Budget $280,000 $280,000 750,000 $800,000 $1,140,000 $1,140,000 $280,000 $280,000 $800,000 $1,210,000 $1,520,000 $1,520,000 $10,000,000

WORKS CITEDhttp://www.choppers.com/history.asp

http://www.statista.com/topics/1305/motorcycles-in-the-us/

http://www.chopperexchange.com/SellingTips/Tip/1024

http://www.motorcycle-usa.com/6/2014/Buyers-Guide-Manufacturer/2014-Harley-Davidson-Buyers-Guide.aspx

http://www.harley-davidson.com/en_US/Motorcycles/motorcycles.html?locale=en_US&bmLocale=en_US

http://www.campaignbrief.us/2013/08/harley-davidson-launches-new-t.html

http://brand-innovators.com/brandnews/harley-davidson-revs-up-project-rushmore/

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