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Attracting Younger Riders and Keeping Premium Status news Strategy for Harley


07/10/2016


Attracting Younger Riders and Keeping Premium Status news Strategy for Harley
Starting with pricing pressure in the U.S. market and a stagnant share price, the management of Harley-Davidson Inc is back to dealing with more basic problems after the shares of the company took a wild ride last week on unconfirmed buyout rumors.
 
For much of the year the share price of the company has been weighed down by the challenge of getting more people to walk into one of 600 U.S. Harley dealerships and ride out on a new motorcycle.
 
More than $70 million have been invested by the company in marketing and product development for 2016 to attract new, younger riders, reverse sluggish sales and boost U.S. demand for motorcycles even as the motorcycle maker is intent on maintaining its premium status amid pricing pressures.
 
A summer sale that was supposed to end in June was extended this month by Harley. The offer is aimed at younger buyers and includes a $99 a month offer on the new $6,849 Street model with zero down payment.
 
"Typically Harley-Davidson does not have summer promotions like this. It is definitely unexpected, but it is definitely welcomed. It is helping us sell more bikes," Brian Rapier, sales manager at Fox River Harley-Davidson in St. Charles, Illinois told Reuters.
 
Ahead of the company's second-quarter earnings report, due to be released on July 28, Harley executives declined to comment, citing the "quiet period". They were counting on the strength of the company's brand to avoid having to match price cuts by rivals, Harley executives said earlier this year.
 
"We are competing against wider price gaps and we're not going to compete by discounting," Harley's chief financial officer, John Olin, said during an April call with analysts.
 
The competitive pressure on Harley's premium pricing strategy is illustrated by the extended summer sale. However there are other costs for the company defending that strategy which includes Harley's $70 million effort to reach new riders and produce new models.
 
"We believe we need the $70 million to grow the business despite wider price gaps that we expect to compete with into the future," Olin said.
 
Analysts will be looking for evidence that the new spending is paying off when Harley reports results later this month. Harley shares were up 16 percent earlier this month after a rumor on July 1 that Harley could receive a takeover offer from Kohlberg Kravis and Roberts. But the shares gave up all the gains made after tere was no confirmation of a bid.
 
In its biggest market, the United States, Harley is facing declining demand for motorcycles. According to data from the Motorcycle Industry Council, overall U.S. motorcycle sales fell 48 percent from 2005 to 2015.

The favorable Yen-dollar exchange rate has been used to cut prices and offer low-interest financing to attract younger riders by Japanese rivals Honda, Yamaha Corp. and Suzuki Motor Corp.
 
Brands such as Indian - a venerable U.S. motorcycle name revived by Polaris Industries presents new competition to Harley's larger bikes like the $21,899 Street Glide. Arrayed against Harley's top of the line bikes, Indian now has nine models.
 
"Our core customer is the same. As we ramp up, we are able to compete with Harley-Davidson," said Steve Menneto, Polaris president of motorcycles.
 
Baby boomers, a generation whose oldest members are celebrating 70th birthdays this year, have been the major customers for Harley and the company has failed to expand its appeal beyond them.
 
(Source:www.reuters.com) 


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