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 Wendy Moon Archive
 2010 Blog posts
 11-12-3,10, 70 and 62: All you need to predict Harley's (and BMW and Polaris) ten-year future
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Moonrider
Female Junior Member
26 Posts


St. Louis, MO
USA

Honda

VFR 750F
Peer Review: Blocked

Posted - 03/04/2011 :  1:58 PM                       Like
As we've been discussing in the comments the average age of certain motorcycle manufacturers, clubs and associations and rights groups. According to industry sources it's about 47 give or take a couple years. Jim, one of my readers, pointed out, "Mid 40's is close to the sweet spot for luxury manufacturers in general and what is BMW and HD if not luxury brands?"

This is true...In fact, the peak earning years have been from 35-54. But that is the problem:

Harley-Davidson says its median age was 47 in 2008.[ i] That lends the impression that half of all Harley owners are older and half are younger than 47.

As Jim points out, Harley, BMW and Polaris have made billions off of those in the sweet spot for more than a decade. So if 47 really is the median age for Harley owners (and somewhere in the ballpark for BMW and Victory (made by Polaris) owners and motorcycling was something like RVs or luxury cars all would be very well. But it's not-especially because of 3, 10, 70 and 62:

3: For most of the past 100 years, motorcycling has been about 2% of all road vehicles. But then, beginning in the early 1990s, 76-78 million Boomers came into the sweet spot years-their 40s. This generation was better off financially than any generation before them and it appeared as though a greater than average number of people decided to ride motorcycles-particularly customs/cruisers and tourers-Harley and Polaris stock-in-trade.

As these Boomers moved through the 1990s, motorcycle sales grew every year by at least 10% over the previous year and, at the end 3% of all registered vehicles on the road were motorcycles.

In 2006, motorcycle sales peaked-and the last of the Boomers turned 42-and turned 46 this year-just about Harley's median age, but also moving towards the end of the sweet spot years.

So lets go back to Harley's "median." The median means half the ages are older and half younger and can appear that there's equal numbers of people with each age on both sides of the median. But that's not the way it works-more owners share some ages than others.

Since we know-by H-D's own account-that it's had a very difficult time attracting younger riders, it's very unlikely (as in snowball's chance) that half of all Harley owners are younger than 47. There's good reason to suspect less than one-third of Harley owners are under 47:

According to a January, 2008 Reuters article by Emily Kaiser "Economy faces bigger bust without Boomers" pointed out, two-thirds of all Boomers were already 50 and older. The heavy concentration of Boomer Harley owners and the Motor Company's inability to attract a strong young market suggests that a significant portion of Harley riders may already be closer to age spots than the sweet spot and a great many of them moving out of the sweet spot even without the recession. In fact, chances are they're even older than analysts have suspected.

Even if there had not been a recession-nor lingering Recession Fear-sales will fall off quickly as the Hog passes out of the python-in fact, ten years from now perhaps two-thirds of current Harley owners will be over 60 and well out of the sweet spot.



That elevated 3% is merely a bubble and the overall market for motorcycles will shrink as the smaller Gen X and Millenials grow into their generations' sweet spots. Iow, the motorcycle market will not recover in the next ten years because there's simply not a big enough general society base to support it-unlike the Boomers.

And, specifically, it won't recover for the luxury brands unless, of course, Harley, BMW and Polaris find a way to attract large numbers of 35 and under riders. Yet Harley-for one-has spent nothing on R&D and has cut marketing to almost nothing. Selling Buell and MV Augusta also showed a horrendous lack of vision or understanding of the modern motorcycle market.

And that brings us to the next number-

10: Industry research has found the average rider buys a new motorcycle about every ten years. This is the pattern the recession most affected. Though the effect on motorcycle purchases is unknown, study done in 2009 found that 59 percent of new car buyers planned to keep their cars more than four years. That number was up from 45 percent just one year previous-a 14% change. Since motorcycles are a discretionary purchase, it's likely the percentage is much higher.

The question is-how long will the Boomer Harley owners delay to buy? Because they are growing older, after all. In 2010 the first Boomers turned 64, and that brings us to the next and most important number:

70: The age at which most motorcyclists retire or severely limit their riding. And this is what makes motorcycling a special case compared to, say, an automobile. For example, the average (not median) age for a Mercedes-Benz is 63.6 years-old and about 45% of RV owners are over 55. Iow, unlike many other high-ticket items, motorcycling has a shorter shelf life.

62: Industry research has found riders buy their last new bike around age 62. This fits then both with the perhaps unconscious belief they will quit riding at about 70 years old and with the 10-year rule. Two things about this:

The purchase window is smaller than many might suspect since it has a relatively young 62 year term limit. If two-thirds of Harley's market is over 50 and they buy their last bike before they're 63, there isn't much time left to sell a lot of bikes.

That is if they even get to that last bike purchase. If they have delayed or will delay buying the second-to-last bike because of the recession or Recession Fear too long, they may not buy another new bike when they retire-if they retire after the hit to their investments and home prices. Iow, sales may slump even farther because of the recession and its aftermath.

This suggests that over the next 10 years, Harley may not only lose up to two-thirds of its base, it may continue to lose last bike sales if riders 55-57 continue to delay purchasing that 10 year motorcycle now. Short of reinvention and new market appeal, it's almost certain that sales of customs/cruisers and tourers will continue to plummet regardless of the overall American economy.

Nor does hope rest on the perhaps one-third of Harley owners who are under 47. According to an 11/09/2010 article on AOL's DailyFinance "Baby Boomers Are No Longer Luxury Retailing's Future", "Even as generation X hits the peak earning ages of 35 to 54, the cohort is too small to support the [luxury] market on its own." According to Unity Marketing president Pam Danzinger. "Gen X-ers are merely a hiccup. . .we have to wait for the millennials," says Danziger. Those 25- to 34-year-olds have the appetite for luxury, but not the cash - at least not yet."

As we see in the chart, Gen X is significantly smaller than the Boomers-and the Millenials, which are also smaller than the Boomers.



But not only do Gen X and Millenials prefer sport bikes, they don't value status symbols or conspicuous consumption as their Harley/Polaris/BMW elders, according to Danzinger.

"Danziger calls the new luxury shopper a "tempered pragmatist," who gets power from being a smart consumer and focuses on superior quality and performance. That means retailers will have to adjust their value message to give consumers a reason to pay the prices they ask, she says, adding: "We have to stop selling the sizzle and go back to selling the steak."

Marketing to Gen X and Millenials will require a great deal more than revamping HOG rallies and livening up club meetings. The young already have an extensive, intimate and immediate social network through social media, the internet and informal bike nights, track days and so forth. The new motorcycling is heavily supported through images in both advertising/marketing and entertainment even in peripheral ways. For example, FedEx co-markets with Ducati in a current commercial and the cable television show, Covert Affairs, features an animation of a rider on a sport-type motorcyclist even though no character rode any bike in the first season.

But it will require more than marketing-it's just as much style that's required. BMW has been trying to adapt its line to appeal to Gen X and the Millenials for several years. Only time will tell if they can take the frugality chic lessons the recession offers and continue to rebrand itself. However Polaris and Harley have shown no inkling that they are even aware that motorcycling is moving on without them.

With only about ten years left, there isn't much time for Harley and Polaris to find a way to reinvent their brands into something that has more steak than sizzle.

P. S. Just to mention the little fry-custom builders better figure out how to make marvels out of sport bikes if they want to survive as well.

The recession has only hastened the sea change in motorcycling; it did not create it. The under 40 rider has a different sensibility and sense of style, different priorities. They are tempered pragmatists that don't buy into the drink-n-ride sociability, don't see helmets and gear as social commentary.

[ i] http://investor.harley-davidson.com...graphics.cfm
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