Demand vs. model mix: striking a delicate balance

I HAD THE PLEASURE of attending a Triumph Motorcycles North America event earlier this year, and it reminded me that 2014 marks the 20th anniversary of the brand's re-entry into the U.S. market.It caused me to wonder about other startups and revivals during roughly the same period that didn’t make it. Why do some succeed, like Triumph, Victory and KTM, and others don’t, like Excelsior-Henderson and the previous two Indian attempts in Gilroy and South Carolina?It seems that no matter what you do, you're going to have too many bikes, or too few.Most start out with pretty good ideas. Take MotoCzysz: its design, when it launched and probably even now, was one of the most advanced ever put forward, with radically creative suspension and chassis solutions. Excelsior-Henderson could possibly have made it; the cruiser market at the time was accelerating like a Saturn rocket.The Gilroy Indian may have had the most potential of any of pre-Polaris versions, but developing a distinctive Indian didn’t happen quickly enough and eventually those investors backed away. I didn’t follow the second attempt too closely, but I don’t think that the owners had a real grasp of the motorcycle market or what they needed to do to make Indian successful, things I don’t think will happen under Polaris ownership.Over the years I’ve been asked to consult on several revivals and planned startups, sometimes on a board, sometimes just to review marketing and sales plans, and sometimes just an extended conversation. I didn’t consult on Triumph, but I got a real education from observing John Bloor. He definitely knows how to build a company.Read Mike Vaughan's review of the new Triumph Commander and LT hereMost of the folks I’ve dealt with have good ideas about product, and most brands could be viable if the assumptions in the marketing plans were correct. Where things seem to go askew, in my view, are in forecasting sales and the costs involved in generating them.I know from my experience with Kawasaki and Triumph that it’s not an exact science, and even well-established companies like Kawasaki and undoubtedly the rest of the industry have difficulties getting future demand and model mix right. It’s a difficult and complicated process that hinges on an endless list of factors that includes the nation’s economic climate, dealer makeup, geographic distribution, financing, model mix, competitors’ model mix, etc. Some of these factors are out of the OE’s control.It seems like no matter what you do, you’re going to have too many vehicles, or too few. Unfortunately for everyone, the “too many bikes” are ones you wish you didn’t have, and the “too few” are the bikes you wish you had more of.Most plans that I’ve reviewed underestimate the amount of cash and time it will take to establish or re-establish the brand, and overestimate their ability to build a dealer organization and generate demand for their products. In the early days of Kawasaki, as an example, there was a belief among many of the Japanese that all Kawasaki had to do was build product, ship it to the United States, and people would buy everything they made. Why? Because Kawasaki was known, at least in Japan, for building a great product. In reality, it doesn’t work that way.continuedOne company I worked with concluded that they could sell 4,000 units worldwide the first year. Maybe they could have, but they hadn’t built enough time into their plan to set up the number of dealers that might be required to sell 4,000 units in the United States, let alone overseas.As far as I could tell, they’d based their entire distribution plan on the soaring demand for a similar product and conversations with that brand’s dealers who, at the time, were being overwhelmed with orders they couldn’t fill.One company said they could sell 4,000 units worldwide the first year, but they hadn't built enough time to set up the number of dealers that might be required to sell 4,000 units in the United States, let alone overseas.What the company failed to realize was not only the incredible strength of the competitive brand, but the fact that a single customer might call three, four or even five dealers looking for the motorcycle he or she wanted, thereby inflating demand. Sure, demand was high, but probably inflated by a factor of two or three. The other misunderstanding was that their potential customers would accept a similar motorcycle as a substitute.I noted all these factors, and several more. Whether they got communicated to the company who developed the plan, I don’t know; I had been engaged by a third party and didn’t have direct contact. In any case, the product launched amid great fanfare, and promptly went bust -- not necessarily due to ignoring my great wisdom. (They had other problems as well.)Starting or reviving a motorcycle brand is a big job. It requires big money, good business instincts, perseverance, knowledge, good long-range planning, and possibly most important, commitment. My hat’s off to those who’ve made it, like KTM, Victory and especially Triumph. To those still struggling, hang in there, and good luck.Editor’s Note: Mike Vaughan has been in the powersports industry for more than 40 years. Among other roles, he was CEO of Triumph North America and director of marketing at Kawasaki.http://www.dealernews.com/dealernews/article/demand-vs-model-mix-striking-delicate-balance #yashta