Harley-Davidson: does the image justify the price level?

The Harley-Davidson (HD) Corporation has been dominating the motorcycle industry for many decades. Today, it continues to have a strong presence in the world market for heavyweight cruisers. In the financial year 2005, the net revenues of HD were US$5.3 billion. In 2005 HD had 1,300 dealers selling 329,000 HD motorcycles worldwide and employs about 9,000 people worldwide. In the heavyweight section (651 + cc) HD is a clear market leader in North America with a 48 per cent market share.

Their market share in Europe is 9 per cent. The mission statement of the company is to fulfil dreams through the experience of motorcycling, by providing to the motorcyclists and the general public an expanding line of motorcycles, and branded products and services, in selected market segments. HD offers a complete range of motorcycles, parts, accessories, apparel and general merchandise. Strategic licensing of the HD brand helps create future generations of Harley-Davidson enthusiasts. HD celebrated its 100-year anniversary in 2003. Over the previous century the company managed to create a strong brand image and a loyal customer base within the marketplace.

Much of the value of a Harley resides in its tradition - the look, sound and heritage that has made it an all-American symbol. The bikes represent something very basic - a desire for freedom, adventure and individualism. HD maintains a close relationship with its customers through a variety of programmes (Harley Owners' Group), product offerings and events such as the Daytona bike week, motor shows and rallies, etc. However, the company is facing rigorous competition from Japanese manufacturers, specifically Honda and Yamaha. Harley-Davidson's strength is its brand image within the marketplace, but its weakness is related to production capacity and unfulfilled demand for its products.

HD tries to continue to strengthen its positioning strategy by building on the ‘Own an American Icon' slogan. As its average customer's age rises, and sales go down, Harley-Davidson faces the task of attracting younger customers. Part of retooling its image includes releasing a new motorcycle, the Buell, designed for young professionals. According to the Motorcycle Industry Council (www.mic.org), an industry trade group based in Irvine, California the women's market accounts for about 11 per cent of the total motorcycling population. Pricing The international price competition is getting tougher.

Compared to similar models from Honda, HarleyDavidson has still has a 30 per cent price premium; even though Harley bikers still wear T-shirts saying ‘I'd rather push a Harley than drive a Honda'. Today, Harley's overseas sales of motorcycles outside the United States is around 25 per cent of its annual total. Europeans like cruiser bikes, but not so much Harley prices. In 2005, the European market share of HD in the heavyweight segment (over 650 cc) was around 9 per cent. The 2004 market leaders in Europe were Honda, Yamaha, Suzuki and BMW, each with around 15 per cent market share. On 15 October 2009, Harley-Davidson Inc. announced the end of production of Buell Motorcycles to focus more on the Harley-Davidson brand.

QUESTIONS

1. Describe HD's general pricing strategy. What does the company's positioning have to do with its pricing strategy?

2. Should Harley alter its price, given strong price pressures from rivals?

3. What should HD do to improve its market share in Europe?