Innovative Marketing Leads to Total Turnaround

NACS Leadership Forum attendees learned how Harley-Davidson completed a cultural reversal, leading to increased market share and stock price.

February 17, 2015

MIAMI BEACH – Last week’s NACS Leadership Forum closed on a strong note, with a session led by Greg Carpenter, professor of marketing strategy at Kellogg School of Management – Northwestern University. Carpenter re-introduced many of the concepts of organizational culture, customer-centricity and employee-centricity that had been discussed in previous days, using case studies to illustrate how each of those facets comes together to support marketing strategy and innovation.

Carpenter opened with the query for attendees to consider: Why is it that companies like Coca-Cola and Levi’s are still the leaders in their product space, more than 100 years since they were founded, in an intensely competitive space? The simplified answer is: They know their product, they know their customer and they know their organization.

This query served as the launching point for Carpenter to share a case study from Harley-Davidson, a company featured in his book, Resurgence: The Four Stages of Market-Focused Reinvention. Carpenter described the company’s history, from its founding in 1903 to its 55+ year rise, during which time it essentially eliminated more than 100 competitors, becoming the dominant motorcycle manufacturer in the United States. However, that began to change when Honda introduced its first motorcycle to the U.S. market in 1959. 

While leaders at Harley were largely unconcerned and didn’t see the Honda 50 as a threat to their business, by the mid-1960s, Hondas were outselling Harleys two to one in the United States. Because the core Harley audience — police, military and Hells’ Angels — hadn’t switched brands, Harley saw steady sales even out as Honda sales skyrocketed. By 1981, Harley held over 5% of the market share for motorcycles in the United States.

So why didn’t Harley feel threatened by Honda’s growing dominance, and why didn’t the company make moves to change their business model until well into the 1970s? “Their culture simply would not allow them to look at Honda and see it as a threat to unseat their position as market leader,” explained Carpenter. He then went on to explain how Harley did in fact institute a complete corporate and market turnaround over the next several decades.

The turnaround focused both on changing internal corporate culture and changing the company’s marketing culture. Carpenter explained that while it’s a common impulse to change the people when a company is faced with lack of success, that approach will never work. “When you bring new people into the same culture, there is no real change,” he said. “The most powerful way to initiate change process is by seeing the business through the customers’ eyes.”

And that’s what Harley did, which Carpenter refers to as customer immersion: Immersing the entire organization in the consumer experience in order to produce a holistic understanding of their customers’ wants and needs. The company recognized their key customer demographic and the intangible, perhaps even irrational, reasons that they purchased Harleys over the competition. By developing a shared understanding, Harley-Davidson developed a pervasive understanding of their customer base that started at the top level of the company and filtered down to every facet of the business model.

At the same time that Harley developed a strong sense of their core customer base, they also began branching out and recognizing the need to appeal to new customers and an entirely new generation of Harley riders. “With a market-focused culture, as the market evolves so does the culture, producing innovation and growth,” Carpenter said. The ensuing change of focus has led to a total U-turn for the company since the early 1980s, reclaiming market share and consistently (if only slightly) outselling Honda. With that reversal has come a 32% growth in stock price, far better than Toyota, Intel, Starbucks or Apple during the same period.

According to Carpenter, when asked to explain the turnaround, Harley-Davidson employees said: “We’re all ordinary but we come here and get motivated to do extraordinary things. That’s what Harley is all about – ordinary people doing extraordinary things. Once you’ve gotten people to do great things, you can’t put the lid back on.”

The NACS Leadership Forum is an annual, invite-only event, bringing together retailers and suppliers to provide thought leadership that is relevant to the convenience and fuel retailing industry, while strengthening existing relationships and building new business relationships. The event took place last week in Miami Beach. For photos from the event, click here.

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