HarleyDavidson

HarvardBusinessSchool9-501-015Rev.November1,2000ProfessorSusanFournier,incollaborationwithProfessorsJamesMcAlexander,OregonStateUniversity,andJohnSchouten,UniversityofPortland,andMultimediaProducerSylviaSensiper,preparedthiscaseasthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.Copyright©2000bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.1BuildingBrandCommunityontheHarley-DavidsonPosseRideIntroductionandAssignmentYouhaverecentlyjoinedthemanagementteamatHarleyOwnersGroup(H.O.G.),adivisionoftheHarley-DavidsonMotorCompany.Althoughyouhaveyettowearaleatherjacketanddon’treallyknowhowtorevupaHOG(asHarleymotorcyclesarecolloquiallycalled),you’vegotanopenandcreativemind.That’sgood,becauseyourfirstassignmentistomaketheBorder-to-BorderPosseRidewithH.O.G.fromSouthPadreIsland,TexastotheCanadianBorder:atwothousand-mile,10-daytrekacrossthecountrywith400Harleyenthusiasts.Whiletheridewillsurelybefun(andGodknowsyouneedavacationbreak),therealintentbehindmanagementparticipationrelatestothecompany’s“close-to-the-customer”philosophy.ThecompanywantsyoutoknowtheHarleyconsumerinsideout,tounderstanddeeplyhis/herneedsandwants,toanticipatenaturallyhis/herdesires.MakingtheBorder-to-Bordertrekwillineffectallowyoutosay,“Hey,IamsoclosetothecustomerIamthecustomer.”Youwillneedthisknowledgetohelpyourboss,MikeKeefe,DirectorofH.O.G.,grapplewithsomesignificantstrategicquestions.ShouldHarley-DavidsoncontinuetosponsorthePosseRide?WhatroledoesandshouldtherideplayintheH.O.G.eventmix?Howshouldtheridebedesignedtomaximizeitseffectivenessandprofit-makingpotential,ifyoudecidetokeepit?Withthatandnotmuchmore,yousetouttoSouthPadreIslandforoneofthegreatestadventuresinyourmanagementcareer.Butfirst,abitofbackground.BackgroundonH.O.G.TheHarleyOwnersGroup(H.O.G.)isafactory-sponsoredmotorcycleenthusiastclub.TheHarley-DavidsonMotorCompanyformedthegroupin1983,inparttoneutralizeandcontrolthenegativeinfluenceoftheoutlawbikergangsthatsomefeltdominatedthesub-culture,butprimarilytoenhancetheHarley-Davidsonlifestyleexperience,andtobringthecompanyclosertoitscustomers.Inordertogeneratelargenumbersofmembersquickly,H.O.G.wasopentoallHarley-Davidsonowners,andafreeone-yearmembershipwasincludedwiththepurchaseofeverynew501-015BuildingBrandCommunityontheHarley-DavidsonPosseRide2motorcycle.Firstyearmembershipreached33,000.Byyearend1999,membershiptoppedhalfamillionriders(seeExhibit1fordemographicsofH.O.G.members).About1/3ofthemembershipisconsidered“active,”andparticipateinatleastoneH.O.G.-sponsoredeventeachyear.Membershiprenewalratesareabout75%peryear.SatisfactionwithH.O.G.nationalmembershipishigh(3.7ona4-pointscale),asindicatedinayearlysurveyconductedamongactiveH.O.G.members.TheH.O.G.organization,managedasadivisionofHarley-Davidson,Inc.,issupportedonlocal,national,andinternationallevels.By1985participatingHarley-Davidsondealershipsfacilitatedlocalorganizationintheformof“chapters.”ThroughtheirlocalchaptersH.O.G.membersareabletomeetotherriders,developsocialties,participateincommunityservice,and,ofcourse,ridetheirmotorcyclestogether(seeExhibit2foraschedulefor1999Chapterevents).OftenH.O.G.membersassumeleadershipresponsibilitiesintheirchapters.LocalchapternewslettersaregenerallydevelopedbyactivemembersandsupportedthroughH.O.G..Therewere1,160activeH.O.G.chaptersin1999.TheninetiesmovedH.O.G.intotheglobalarenawithchaptersspringingupinEurope,Asia,andtheSouthPacific.BothinternationalandlocalchaptersreflectlocalvaluesandinterestsbutretaintheessentialethosofthenationalH.O.G.organization.AtthenationallevelH.O.G.providesalargearrayofprogramsandownershipbenefitsforitsmembers.Majorbenefitsofferedinexchangeforthe$40individualmembershipfeeincludesubscriptiontothecompany’sHogTalesmagazine,accesstotheFly&Rideprogram(whichallowsmemberstorentHarleymotorcyclesat39locationsthroughouttheworld),provisionofriderbenefitssuchasinsurance,roadsideassistance,andrider-safetyeducation,andsupportofralliesthatspantheentireyearandmuchoftheglobe.H.O.G.alsocoordinatesthesaleofHarley-Davidsonmemorabilia,suchasT-shirts,patchesandpins.H.O.G.membershiphasitsbenefitsfortheHarleyDavidsonMotorCompanyaswell.TheannualvalueofanactiveH.O.G.memberisestimatedat$5,575,whileinactivemembersarevaluedat$4,725.ActiveH.O.G.membersspendmoreonvehiclepurchases($4,175versus$3,725,asbasedonestimatedreplacementvalues),partsandaccessories($850versus$650),andgeneralmerchandise($550versus$350)thandonon-activemembers.H.O.G.RalliesRalliesareaparticularlyimportantbenefitofferedbyH.O.G.,bothtoridersandtotheMotorCompany.TheprimarybenefitoftheH.O.G.rallyliesinitsabilitytolinkriderstogetherintoabroadercommunity.Ralliesdrawfromth