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When a brand is in trouble, focus on its core customer base first. Love the customer you have before you focus on the customer you don't have. When a brand is in trouble, activate, protect, and empower the core customer. It is the core customer who finances a turnaround profitably and provides the platform for the future.

According to reports in the Wall Street Journal, Harley-Davidson is in dire need of revitalization. Harley CEO Jochen Zeitz is making a radical strategic change to get Harley-Davidson back on track for sustained profitable growth. Zeitz gives up the plan he inherited. The previous strategy has been to attract new, younger customers with smaller, less powerful and less expensive models. It did not work. Harley-Davidson has shut down its core customer base. And couldn't win any new customers. In order to remove the heavy, expensive Harleys from the dealerships, the large motorcycles were reduced, which further damaged the brand's image.

From now on, instead of cheaper, smaller-displacement motorcycles, Harley-Davidson will focus on the big, expensive motorcycles that have given Harley the reputation of a biker. His first job is to focus on Harley's core customer base and what they love about owning a Harley.

The revitalization begins at the core

Focusing on core customers is the smart move for a brand that is in trouble. The immediate goal must be to restore and repair the brand relationship with the most valuable customers. This means empowering what they like about the brand. This is exactly what Mr. Zeitz does: He doesn't take his core customers for granted. This is important because core customers – customers with longstanding brand loyalty – are especially valuable to profitability.

Taking core customers for granted is marketing for death wishes. Unless you have customers who are a captive audience (airlines with specific routes), you run the risk of alienating people who are your valuable base. Love your loyalists. Adore your core.

Important research carried out by Frederick Reichheld (Bain Consulting) in the 1990s showed that as brand loyalty increases, the likelihood of a defect due to competitive pricing decreases. He concluded that a 5% reduction in defects could increase profits by 25% and more.

Other research showed that the cost of acquiring a new customer was 3-4 times the cost of retaining a customer. However, recent research by Kleiner Perkins, the venture capital company (2018) showed that the cost of customer acquisition is increasing. Acquiring a new customer costs more than satisfying an existing customer.

The loss of only a small percentage of the core customers leads to a disproportionate loss of income for a brand. Harley-Davidson's focus on attracting new customers at the expense of core customers was wrong. The result? Harley-Davidson suffered from a five year streak of poor earnings.

Coronavirus has messed up many markets. However, a relatively small group of loyal customers can wear your brand to make it through the pandemic. Branded companies that do well during the coronavirus, such as Campbell & # 39; s, Kraft Heinz, and Clorox, can continue to grow their sales.

Our research shows that an average of 10% of customers account for 50% or more of profits. A study published in Harvard Business Review (2014) using Nielsen scanner data for 124 consumer products found that 10% of customers in a category accounted for 30 to 70% of sales and an even higher percentage of profits. For example, Kraft Velveeta data showed that the brand's top enthusiasts (10%) accounted for 50% of the profit.

The Wall Street Journal stated in its analysis of Harley-Davidson: “The company's introductions over the years have also not attracted customers, and the current range is filled with slow-selling motorcycles. Eleven models together accounted for around 6% of retail sales last year, while ten popular models accounted for more than two thirds of sales. "

Commenting on Mr. Zeitz's focus on his core customers and their preferred motorcycles, a major Harley-Davidson dealer said: "The brand is returning to what we have always been." Mr Zeitz told analysts, "I've heard so many times now that our consumer is aging. Well, I'm getting older, as they say, and I want to ride now."

Turnaround strategy versus growth strategy

Of course, in order to grow and survive, brands have to acquire new customers. A turnaround is different, however. When a brand is losing customers, the priority is to stop the bleeding. After the loyal base has been successfully strengthened, the brand can focus on growth. Growth strategies are different. Successful brands are recruiting new customers while continuing to focus on brand loyalty. Expand the brand's appeal. Bring new customers into the franchise. However, do not lose customer loyalty at the same time. The brand's continued customer churn is not the path to sustainable profitable growth.

As reported in the Wall Street Journal, Harley-Davidson has "implemented its strategy." Mr. Zeitz's strategy of strengthening its core customer base resulted in Harley-Davidson increasing earnings for the final quarter that ended September 27, 2020. Focusing on the core customer pays off.

A turnaround strategy is different from a growth strategy. When a brand is in trouble, the priority is stopping the customer base from bleeding. Love your core customers when you expect them to love you. When a brand loses sales and share, the first focus must be on strengthening its core customer base. In other words, love the core or your brand is done for. Ultimately, the healthy brand goal is more customers, more frequently, more brand loyalty, more sales and more profit.

Contribution to Branding Strategy Insider by: Larry Light, CEO of Arcature

The Blake Project can help you redefine and articulate your value in: The Brand Positioning Workshop

Brand Strategy Insider is a service from The Blake Project: A strategic brand consultancy specializing in brand research, brand strategy, brand growth and branding

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