Embracing the customer-built brand

Paul Nolan

Ken Schmidt participated in one of the most celebrated turnarounds in corporate history. The longtime motorcycle enthusiast’s association with Harley-Davidson Motor Company began in 1985, when he was asked to work with the then-struggling manufacturer to help restore the company’s image and create demand for its motorcycles. By the time he left in 1997 to be a partner in a Chicago-based marketing firm, Harley-Davidson was one of the most visible and frequently reported-on companies in the world. Today, Schmidt says he is semi-retired, but he’s as busy as ever on the speaking circuit, lecturing to business groups about building a fanatically vocal customer base, creating a passionately loyal corporate culture, and developing leaders who inspire and motivate.

SMM: What did you do before Harley-Davidson?

SCHMIDT: I had multiple majors working my way through college before I finally settled on a double major of advertising and journalism, although I never really ended up having jobs in either of those specific areas. I ended up getting hired out of college by a PR agency, which I thought would be my introduction to the ad world.

SMM: What was Harley’s biggest struggle when you started working with them?

SCHMIDT: Harley was in a really deep hole, half of which was self-created and the other half was media and Hollywood created. They had an image problem created by Hollywood back in the ’50s that stated that guys who rode big bikes were thugs and criminals. The public at large basically viewed the entire company and everything it stood for as abhorrent. And then you also had an incredibly exaggerated reputation for building a bad product. For a number of years, Harley got behind the eightball and built some defective product, but nowhere near as bad as word of mouth would have led you to believe. But the harsh lesson there is you’re not who you say you are, you’re who the market says you are, and the market says you’re selling junk. This all sort of spawned when Japanese products entered the market – when the Hondas of the world showed up, and they were making super-fast, super-agile, incredibly well-marketed and inexpensive products. They were rapidly accepted by the public at large. Harley’s motorcycles looked like locomotives in comparison.

SMM: Did you have specific marching orders?

SCHMIDT: There weren’t specific marching orders because the overwhelming majority of the energy and resources of the company were focused on building a world-class product. Harley succeeded in building a very positively reviewed product coming into the latter half of the 1980s. What that proved was that just having a good product wasn’t good enough because everybody in the market was building good stuff. The market said, “You’re building a better product, but what else have you got to justify the difference in price?” At that point, the company started doing what I call a series of accidental discoveries that began to pay dividends. There was talk within the halls of Harley that if everybody who was curious about riding a Harley could actually ride one, they’d see – just like the guys at the motorcycle magazines that were writing all of the positive reviews – that it’s a superior product. But there was no such thing as a test drive at that time. All of the motorcycle dealers were afraid of liability. Harley’s stance on that was, “Geez, we’re totally broke. If somebody sues us, what’s the worst that could happen?”

SMM: So test drives became a valuable marketing approach?

SCHMIDT: As we were out doing demos, taking a few truckloads of bikes out to Nascar events and blue-collar areas like Detroit and Des Moines, bigger crowds started coming out. As people got off the bike at the end of their demo, they would want to have a discussion with the Harley volunteer who was standing there, but the other people in line would start to grumble. It’s the absolutely ideal selling environment, but a long conversation couldn’t happen. So the happy accident that came from that was the need to get feedback from customers without taking any time. As they got off the bike, they were asked, “What do we have to change on this to get you to buy it?’ In my estimation, that’s when the clouds opened. People started asking for different handlebars or foot pegs. Customers started buying and the numbers started spiking upward, but there was no real scientific data behind what was driving the increase. There is only anecdotal evidence that rather than selling to a customer, we were involving that customer in the creation of the product. They had some actual creative input. People tend to support what they help create.

If you look at what’s evolved in terms of custom motorcycling and people making expressions of their individuality through their motorcycles, it is born out of that. We knew we needed to get as many of our people in front of motorcyclists as we could so we could have these conversations. And nobody was asking for a cure for cancer. They were asking for a fit for the body size or something that looked a little cooler so they could stand out in the crowd.

SMM: In your presentations, you say that the conversation stopped being about the product and became more about the experience of riding a Harley. You travel around the country talking to businesspeople who do not sell something as sexy as the feeling of riding a Harley. Can they take anything away from your message?

SCHMIDT: If you watch what I do, I never talk specifically about the product that is being sold. If you live by the product, you end up dying by the product because every industry in the world is completely commoditized now. Your product may be indistinguishable, but doesn’t the customer have to buy it from somebody? Where you compete is at the point where two people are talking. There has to be some energy that transcends the actual thing that is being sold.

SMM: Companies wonder what their customers are saying about them, but you ask the question, “What do you want them to say?” Is there a correct answer to that?

SCHMIDT: I think it’s a case-by-case basis. What I do when I work with a company or teach a class is challenge people to describe who they are, what they do, who they do it for and why they should do business with you in 15 seconds – the standard elevator speech – without using a single word or phrase that any of their competitors use. Suddenly, there goes “quality” and “family-owned.” It gets people thinking, “What do we want people to remember about us? We don’t need them to remember our quality and our delivery and our commitment to excellence because everybody says that crap. We need to say something that they’re going to remember the first time they hear it.” Hopefully, it will be interesting enough that they will repeat it to someone else because it’s not the same old dull thing. Anybody is capable of doing that, whether you are a two-man insurance business in Pocatello, Idaho, or a 100,000-employee company. It has to become as much a priority of the business as whatever it is you are producing. You need to determine as a business who you are. It can’t be just a marketing function. This needs to be the language that gets engrained in the DNA of the company so there is no doubt as to who you are and what you stand for.

SMM: That speaks to something I heard you say in your presentations: “When everybody is saying the same thing, who’s listening anymore?” I love that thought.

SCHMIDT: That’s what has lulled all of us into complacency. All industries begin to march in lockstep with their competitors. Harley was as guilty of this as anybody. If you look up commercial lenders in Minneapolis and look at the first 10 websites, they’re all going to be blue and they will all have the same “A committed member of the community since 1952…” because they feel that’s what the market expects them to say. Once you step back and look at it, you see, “Oh my god! We are everybody else and we did this to ourselves!”

SMM: Could the equivalent of a Harley-Davidson rally or riding event happen in the B2B world?

SCHMIDT: Absolutely. Any business that isn’t actively creating opportunities to bring people together is working against itself. It’s not a human want to get together and socialize, it’s a need. We want that validation that comes from having discussions with likeminded people. Engineers seem to find each other. Finance guys seem to find each other. When people can talk the same language, they love it. And yet most companies are putting infinitely more energy into developing a social media strategy than they are in developing their social strategy. They don’t realize that it’s far easier to continue a conversation through social media that has already begun than it is to start a conversation on Facebook. When I come out of my drycleaner I laugh every time I see the sign that says, “Visit us on Facebook.” For what? What could possibly be in that for me?

SMM: Are there companies that you admire that are doing things well?

SCHMIDT: Scott Forge is one, [Scot Forge is a Milwaukee-based, employee-owned steel forging company.] Umpqua Bank out of Northern California is spectacular. In an industry that’s absolutely predictable, they are doing things that shake the surface a little bit. They don’t call their businesses “banks” or “locations,” they’re called “stores.” They have lounges that have music and chocolate and a coffee bar. They just take care of the customer in a way that generates tremendous buzz while everybody else in their industry stands around with their hands in their pockets. Another company I really admire is Rick Steves [a travel company and producer of travel TV shows]. I did a Rick Steves tour four years ago and thought the way they incorporated input from people on their tours into what you’re going to do and how they structured it was amazing. It’s kind of a democratic process. And as soon as you’re done, they get back in touch with you. They get on the phone and talk to you. I thought, this is amazing.

Too many businesses are turning into Sears. Sears has wonderful stuff to sell. They don’t have high prices. Yet their business is a colossal failure right now. They’ll say, “Everybody wants to do business on the Internet now.” No it’s not. The culture in there is terrible. You feel the defeat. There is no energy. Not only is there a lack of visible passion, there’s a lack of visible anything. It’s just people staring at their shoes.

SMM: Are there business books you recommend or where do you go for new ideas?

SCHMIDT: I’m not a business book reader. I probably was about 20 years ago like everybody else, but then I started getting bored with them. I get more ideas about how the world works by reading the paper every day. I read The Wall Street Journal, the New York Times and Washington Post every day. I read magazines. I’m a huge fan of Vanity Fair, I like Esquire a lot. I’m completely addicted to motorcycle magazines.

One thing I tell kids in college is you better get in the habit of reading the paper because you have to be up on what’s happening in the world in pop culture and business. You have to be conversant on this stuff. Otherwise, you’re going to be the guy at the back of the meeting room who doesn’t have any ideas. It’s the same thing I talk about with businesses: You as an individual need to stand out. You need to have advocates talking about you as an employee so you’re the guy who gets promoted instead of the guy who gets sacked when there are write-offs. You need to put all of your energy into being different and valuable the same way we want businesses to be for the customers they serve.