Harley-Davidson's Rough Ride To Success

Knowing there are many more miles on the road ahead, Harley-Davidson continues its biker-optimism over the direction of the famous motorcycle company.

The latest leg of this journey started in October 2015 when the company unveiled plans to get in front of and be the motorcycle choice for a wider variety of riders. Already one of the best-known motorcycle brands, Harley-Davidson wants to further improve its public profile and turn a household name into much-needed sales.

The company will be spending 65 percent more than they did the year prior in advertising and marketing efforts. The American motorcycle manufacturer has also increased its budget for new product development by approximately 35 percent. Add these two together and Harley-Davidson are spending over $70 million through 2016, give or take.

But many at Harley feel they’re already on the right road.

"We continue to sell more Harley-Davidson motorcycles to today's young adults than we sold to Baby Boomers when they were young adults," Harley CEO Matt Levatich said recently at the company's annual shareholders meeting held at the Harley-Davidson Museum.

Source - Harley-Davidson

This line of thinking follows that expressed in the recent review of Harley-Davidson’s financial results for the first quarter of 2016. According to the iconic motorcycle manufacturer, 2015 marked the straight eighth year Harley was the number one seller of new highway motorcycles in the United States to adults ages 18-34.

The keyword there is ‘highway’ motorcycles which surely points to the larger engine motorcycles, a segment which is causing concern for the entire industry, not just Harley-Davidson. More on that later.

Those looking for positive motorcycle trends don’t need to rely on press releases prepared Harley-Davidson. In April, the 28th annual EquiTrend Study was released by the Harris Poll naming Harley-Davidson as the number one motorcycle brand in the United States. The study polls more than 97,000 U.S. consumers about more than 3,800 brands across nearly 500 categories.

To further emphasize this latest poll, Harley have won the honor three out of the last four years. Admittedly, the poll doesn’t qualify whether the respondents are riders or not and just as ‘google’ is synonymous for internet searches, Harley-Davidson enjoys the same honor for motorcycles.

At a glance, all this positive news contradicts the dire warnings seen in news reports and financial opinions which point to the company having an aging customer base of retired baby-boomers. This, the line of thinking goes, will eventually lead to the company ‘aging’ itself out of a customer base.

Indeed, the two groups who seem to perpetuate this storyline are the media-at-large and financial analysts.

Although said through ‘corporate-speak’, Harley defends its tough time with motorcycle sales by pointing to the company holding firm on its needed profit margins. They are charging what they feel their motorcycles are worth, both in the quality of the brand as well as the actual bike that rolls off the factory floor.

Harley-Davidson's large advertising budget at work - 2016 Roadster #LiveYourLegend 

Price tags and MSRP’s are an industry-wide concern with many motorcycle manufacturers trying to find the perfect sticker price, low enough to attract new sales but still allow for a profit. In other words, not selling their product for a loss, or close to it. Add to this magical number, the less a manufacturer makes on their motorcycles, the fewer dollars they have to re-invest in product development and improvements to its manufacturing process.

To quote a certain welsh room mate in the romantic comedy ‘Notting Hill’, Spike, ‘Vicious circle if you think about it.’

Another statistic cited in the recently released financial results, Harley-Davidson was the top seller of motorcycles to women, African-Americans and Hispanics, as well as Caucasian men ages 35-plus, according to motorcycle registration data.

Not surprisingly, Harley feels it’s making inroads with the buyers that will continue to ride for years and broadening its appeal. While Harley-Davidson may say they have long stood by the quality of their motorcycles as a reason for riders to buy its product, a simpler and quantitative point can be made about any success the company may have.

Harley-Davidson are marketing at precisely the demographics the company appears to be making inroads with.

A visit to Harley-Davidson’s website shows categories for Harlistas and Women under the ‘community’ section. This checks off the boxes of women and Hispanics. The promotional pictures Harley-Davidson not only uses on its websites but those it allows media outlets such as Clutch and Chrome to use when reporting on their motorcycles includes all the demographics mentioned above. The range of bikers who populate America’s roads are represented in those action photographs and incredible pictures of Harley-Davidson’s latest, greatest models.

Special workshops and fashion shows are held across the country at Harley-Davidson dealerships in an effort to bring women into the showrooms and up close to the latest motorcycles.

Source - Harley-Davidson

However, many motorcycle manufacturers have noted sales for larger motorcycles have been flat over the last few years. Between the increased availability of smaller and less expensive motorcycles and the latest trend of café racers, new riders have a wide range of smaller-engine bikes to choose from unlike anything seen in a while.

To be fair, the current trend of smaller motorcycles came about in no small degree by Ducati’s incredible campaign to market its Scrambler line as the new, hip way for American youth to find adventure without any perceived biker-clichés.

Regardless of how they got here, a rush of these new riders is great for the motorcycle world, unless you happen to be Harley-Davidson whose models tend to live in the larger bike segment.

To satisfy this particular customer base Harley-Davidson have been heavily promoting their Street line of motorcycles which feature 500 and 750 cc models. Not only are these the motorcycles Captain America and other blockbusting movie stars are seen riding on-screen, it’s the motorcycle of choice for Harley’s Riding Academy.

Go to any rally or motorcycle event and interested riders will find themselves sitting on a Street model to get a feel of being in the saddle while being sold the idea of signing up for a safety course.

If those watching Harley-Davidson’s bottom-line think the company are looking to solely ride these smaller models to success, they have obviously never ridden a motorcycle before. Yes, we’re referring mostly to the media at large and financial analysts mentioned earlier.

Anyone who has spent any time in the saddle knows the smaller motorcycle a rider starts their biker journey with isn’t necessarily what‘s parked in their garage years later.

It’s sound and often repeated advice for new riders to buy a motorcycle they can comfortably handle for their early miles. This was explained perfectly when Clutch and Chrome interviewed Suzuki’s Public Relation Manager, Tim Olsen at Daytona Bike Week.

“The biggest thing, as we’ve learned, it’s like riding a bicycle,” Tim said. “Your confidence is what you need to grow and if you get yourself on a bike that’s way more advanced than you are and more capable than you are, you’re not going to build confidence you’re going to shut it down.”

The interview with Suzuki’s Public Relation Manager, Tim Olsen is found at the 40 minute mark

However, once that confidence is there, riders tend to look to larger, more powerful motorcycles to suit their current confidence and skill sets. This desire brings them into the line-up offered by Harley-Davidson.

While, Harley-Davidson may have been hesitant about slashing prices to move motorcycles, they are aggressively sharing everything that makes a Harley-Davidson a ‘Harley’ with their entire line. Essentially bringing more value to a wider range of models with the obvious hope it’s an offer enthusiasts find hard to ignore.

Many of the quality features and pure power found on its high-end models, most of which live in the line of Custom Vehicle Operations (CVO) are being brought to the entire range. The most recent example of this was the release of the Low Rider S model in January. Powered by the Screamin’ Eagle Twin Cam 110 engine, the Low Rider S model joined the Fat Boy S and Softail Slim S models as the third member of Harley-Davidson’s S Series cruiser lineup, and offers upgraded suspension and brakes complete the performance package of a motorcycle that’s stripped down and according to Harley, ‘ready for action’.

Harley-Davidson's Low Rider S - Source Harley-Davidson

Like many other industries during the recent world recession, motorcycle manufacturers faced tough choices and compromises to encourage sales and quite frankly, keep the doors open. Each motorcycle brand took its own unique road to ride through the financial storm and Harley-Davidson appears to have chosen a longer journey to get there.

There’s no reason why they shouldn’t make it, albeit it little worn from the rough ride. When arriving at the end of this journey, aside from enjoying a robust financial picture, they would’ve kept the prestige of the Harley-Davidson brand intact. As the corporate world will tell you, that is priceless.

Source - Harley-Davidson

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