Beware the Harley effect - is telecoms sitting on a demographic timebomb?

Harley Davidson BARCELONA

Problem is, most of Harley Davidson’s customers are nearer the man upstairs then anyone else. Chasing your high spend, liquid asset rich older customers could pay the bills today and keep your investors happy but may well be a wave that you won’t be able to unsurf in the future.

On the cover of the 2006 July August Issue of AARP magazine there’s a 64 year old leather clad rider perched on an Electra Glide next to the headline “Born to be wild… over 50 years ago”. Easy rider, Jack Nicholson, Hell’s Angels, Woodstock are all synonymous with a generation that blossomed in the 60s, associated the Harley brand with freedom, a health disrespect for authority and the individual.

Harley trades on its legacy and its authentic backstory enables the brand to grow from a position of strength, yet the story hides a more fundamental weakening long term that Harley is working hard to assimliate into its market position.

Half your future profits are here today - in your consumers of tomorrow. So at what point will you start building a relationship with these customers?

Rather than being  a direct play to the populist youth fetish, the need to focus on young consumers is core to the long term survival of the brand. In my private life as an investor I have sat through a number of presentations concerning business ideas both good and bad. Experience teaches me that too many presentations seek to capitalize on the obvious - eg. the aging population once described to me by a pyramid marketing company as a “basketball passing through a hosepipe”.

Skate to where the puck’s going

The figures are persuasive. Boomers in the US alone control $1 trillion of assets - they could have personally bailed out Paulson back in 2008. The average disposable income of a 55 year old is also significantly higher than that of a 25 year old. So, the logic follows that one should concentrate on the customers with the money.

Wayne Gretzky, Canadian ice hockey legend put his success down to one principle “most pros skate to where the puck is, I skate to where the puck is going to be“. His success is testament to the power of forward thinking.

Harley Davidson is very much where the puck is at. The thousands that descend upon the Black Hills of South Dakota to celebrate Harley culutre as a part of the hog fest will have to trade in their bikes for rocking chairs and the brand will be left without a market.

In 10 years, the average Harley customer will be claiming their pension

The average age of a Harley rider is now 45 (ten years ago it was 37), and 20% of their customers are aged over 55. In spite of all the company’s success in the past 18 years Harley is struggling to attract its future market - youth. However, you can be forgiven for thinking things were just fine at Hog HQ when the company returns record profits as a result’s of focusing on the high spend, high disposable income customer.

Harley sales are all good on the surface:

Year………..Sales (mil)………EPS
1996……….$1531.2…………$0.47
1997……….$1762.5…………$0.57
1998……….$2064.0…………$0.69
1999……….$2452.9…………$0.87
2000……….$2906.4…………$1.13
2001……….$3363.4…………$1.43
2002……….$4091.0…………$1.90
2003……….$4624.3…………$2.50
2004……….$5015.2…………$3.00
2005……….$5342.2…………$3.41

Yet, the warning signs are appearing. The more technologically oriented racing bikes of Honda and Yamaha are building beachheads in Harley’s own backyard just as the Japanese did with their auto brands in the 90s. Honda now outsells Harley in the youth demographic and rates as the #1 manufacturer of motorbikes worldwide.

The i-mode problem - nothing fails like success

Staying young is an essential part of assuring the future of your brand. I don’t mean putting your brand in jeans - there’s nothing worse than a bank hijacking the youth vernacular in its marketing “dnt tlk, jst txt us”. What this is about is building relationships with those customers who don’t necessary drive the profits of today, but represent the profits of tomorrow. Proactive banks know this, that’s why they throw money at student accounts and offer credit terms that adults could only dream of. The secret they’re not sharing is that you’re more likely to get divorced than change your bank account.

When I lived in Japan in 1998, at launch the average age of the I-mode subscriber was a youthful and innovative 25. 10 years on, the needle would have notched up significantly. A service and a brand’s demise are often the result of such complacency; it was Toynbee that said of great civilizations (inc. Harley and I-mode) “nothing fails like success”.

Elle Girl’s CEO Hachette Jack Kilger referred to the challenge in his own category; “every two to three years we have to market to a whole new group”.

It’s easy to become addicted to your high paying customers - they are the coffee fix of the fiscal year - but ultimately a short term solution to a longer term problem.

Technorati Tags: harley, youth, mobile youth, consumers, youth marketing

Your thoughts?

* Will telecoms face the inevitable payback for chasing high spend customers?
* Is it just telecoms or are there other industries out there similarly blinded by the lure of the top line today?
* What should brands do about revitalizing their youth offering?