Business Tools

SEMA Show Seminar: How Harley-Davidson Reinvented Itself With Customer-Driven Vision


Harley-Davidson has come a long way since filing for bankrupcy in 1986 once the company realized how to connect with potential customers.

If businesspeople can learn to understand the basic drivers of human behavior, leverage them and use them to their advantage, it will give them more weapons in an increasingly competitive market. This according to Ken Schmidt, Harley-Davidson's former director of communication, who hosted the “Make Some Noise” webinar at the 2009 SEMA Show.

Schmidt noted that consumers never do what they say they’re going to do. For instance, most say it’s necessary to go into a store, look at and feel the merchandise and ask questions to the salesperson on the floor. But if given the option to purchase online, that suddenly gets thrown out the window. Our attraction to the things we love far transcends the physical aspect.

“We don’t compete with hardware,” Schmidt explained. “It only creates pricing pressure. Instead, we use the hardware as our shield and the process behind it as our weapon. Our weapon of choice is getting potential customers to like us more than our competitors. From a hardware and utility standpoint, everything does the same thing, so we do business with people, brands and organizations we like.”

When the Japanese competitors entered the U.S. market, they all said the same thing: ‘Buy from us. We stand for quality and reliability.’ But the word ‘quality’ is the most useless word in the English language from a market-building standpoint, and the word ‘reliability’ cannot be defined. Supporting the ‘quality and reliability’ message with data is also useless in the world of demand creation because humans are not a rational, logical species. “We are an emotional species,” Schmidt said. “Nobody has ever made a decision using only their brain unless it’s a life-or-death situation. Every other decision comes from the gut.”

“The more we throw rational, logical information into the market, the more we create price pressure because we’re all selling the same thing,” Schmidt continued. “When all things are the same and we feel no inclination to do business with one particular company over another, we buy from whoever is willing to sell us a cool piece of hardware at the lowest price. We are all consumers; the things we buy, the reasons we buy them, regardless of how much we spend, do not make sense.”

Notice Your Customers

When we’re noticed, reacted to and validated, it makes us feel good about ourselves for a few short seconds. Today, the human species has rendered itself completely invisible. The world we’re competing in is moving deeper into the digital realm because it’s an easy way to do business and it gives us opportunities to connect with people. But the deeper we go, the more humanity suffers because human beings need validation and recognition from other people.

“Whether you’re calling your health insurance or car company, it’s become increasingly difficult to speak to a live human being because we are invisible,” Schmidt explained. “We buy and consume so many things over the course of a week that we have no memory of it. Our lives have been reduced to a continuous cycle of faceless, baseless, nameless, emotionless, non-memorable transactions.”

Speaking from past experience, Schmidt said something powerful happens whenever a visible effort is made to pull someone up out of his/her invisible existence for a few short seconds. According to him, more than 95% of people entering a place of business for the first time will turn right while looking down. They know what they came in for and are aware of their surroundings but do not want to make eye contact knowing full well they are about to be hit with the single stupidest, most predictable comment in the world of retailing: “Can I help you?” This phrase is heard so much that our brains have been conditioned to not react.

On the other hand, if you walk into a place of business for the first time and someone unexpectedly comments on your watch or pair of shoes, the human psyche immediately recognizes that something different just happened. Someone noticed you. Your head comes up, you make eye contact and you engage in conversation with this person, who by taking a few short seconds out of his/her life for you, has now been permanently burned into your psyche.

At the end of the day, we’re going to do business with people we like. We are as magnetically attracted to a passionate, energetic person who clearly enjoys what he/she is doing as we are repulsed by someone who don't like what he/she is doing because nobody wants to spend time with an unpleasant person.

Rework Your Business Strategy

In 1986 after Harley-Davidson had filed for bankruptcy and laid off 40% of its workforce, the company thought it could dig itself out by vastly improving the quality and reliability of its product. “For 1985, we brought to market our most innovative, thought-provoking, industry-leading, bulletproof hardware we’d ever introduced,” Schmidt said. “It had new engines that addressed every competitive issue we had in the marketplace. It was business as usual. We were going to send bikes out to motorcycle magazines in Southern California and allow them to do product tests, hoping we would get positive reviews.”

No one would ever buy a car without test-driving it first, but the motorcycle industry didn’t do that because manufacturers and dealers were afraid of liability. At that time, Harley-Davidson was a quarter-billion dollars in debt and all of its physical assets were more than 80 years old.

“It was the ‘Sue Us We Ain’t Got Nothing’ school of risk management,” Schmidt said. “So, we rolled the dice, took our entire marketing budget, loaded two semi trucks up with bikes, went anywhere motorcyclists were likely to gather and allowed anyone who had the guts to take one out for a 15-mile ride. Afterward, we asked them what we could do to improve the bike, and all they wanted were simple pieces of bent metal that could be bolted on to their motorcycle that would allow it to fit their body size and riding style and make a statement about their personality.”

From that point, Harley-Davidson salespeople decided to continuously ask potential customers what they wanted, produce that product and sell it to them at a profit. “Everyone says they’re customer-driven or customer-focused; it’s become the language of business,” Schmidt added. “But when was the last time anyone you did business with asked you as a customer what you’d like to see them do different or better?”

When customers are made to feel a little better about themselves they tend to share their story with somebody else because this practice rarely happens in the business world. There’s no stronger inducement in doing business somewhere than when a friend, associate or someone you trust recommends a product or business to you.

Social Networking

Harley-Davidson realized that it needed to proactively bring motorcyclists together to create a social network around motorcycling. Today, there are 1,300 Harley dealers worldwide, 650 of which are in the United States. Each one sponsors a local social chapter of Harley owners that meets at least once a month on the grounds of the sponsoring dealer. Because more people are entering the stores to become a part of these events, they are spending more money. They see something on the shelf that they might have missed the previous week, so they buy it.

The groups are getting larger and as a result, fundamental changes are taking place. The salespeople are using different language to describe the people they serve. They no longer refer to them as “customers”; instead they are “friends.” The more people you delight and do the unexpected for, the more people you make feel good about themselves. They, in turn, go out and spread the word, which helps build more “friends” for your brand. They are not giving any thought to what they are spending because price becomes less important. Instead, it’s the relationship that far transcends the physical hardware.