Oct. 5, 2009 – ‘A position of leadership’

By Karin Gelschus
Associate Editor
INDIANAPOLIS – KTM North America President Jon-Erik Burleson unveiled the company’s key objectives for the coming year at its recent national dealer meeting plus some encouraging signs in an otherwise difficult year.
“A really cool thing happened in December,” Burleson told more than 200 dealers at the OEM’s dealer business meeting, held in conjunction with the Powersports Business Conference and Expo. “We ended a calendar year, and we ended as the second largest brand in off-highway competition. That was a first for us.
“Today, we’re in second, and we’re three market share points away from the largest off-road market competition segment. I can never remember an opportunity for small brand KTM to be in that position. Our market dominance is going to come out after these down times.”
Looking forward, Burleson outlined the company’s three main objectives in 2010: Protect its dominance in the enduro segment, attack the motocross market more aggressively and put more emphasis in building a stronger on-road brand.
Burleson also noted KTM is making changes in marketing, overhauling the division, including adding new staff and redefining who its target audience is.

Current position
Being headquartered in Austria, KTM was able to somewhat foresee the economic downturn as it watched the U.S. dollar weaken, Burleson said. But, he noted, the downturn was greater than what the company imagined.
“We expected a downturn, but none of us expected it to be the way it was,” he said. “We were expecting our market to be off by about 30 percent. In reality our production numbers should have come down about 50 percent because 30 percent down means we need to reduce our pipeline.”
A positive note from the production decrease is that KTM’s dealer inventory is down 15-20 percent in the United States compared to the same time last year.
“Going through what we’ve gone through in the past 12 months,” Burleson said, “that’s a number that all of us should be really proud of.”
Burleson also noted that although KTM was down about 30 percent in new unit sales in the past 12 months, it’s not as bad as the rest of its relevant market, which is down about 37.5 percent.
“In reality our down isn’t as bad as everybody else’s down,” he said. “The more important number that gives me more confidence is the last six months. The industry is down 45 percent, but KTM is only down 27 percent. Now that’s a big difference.
“We all have to understand the market is going down,” he continued. “Down times are when new brands establish themselves in a position of leadership.”

The plan
For starters, Burleson stated the importance of hosting a dealer meeting despite economic challenges as well as dealers attending the meeting and the Powersports Business Conference and Expo, which KTM helped sponsor.
Burleson noted numerous times throughout the dealer meeting that, “Life is graded on a curve. We have to be prepared for the realities. We’re an OE. It’s not our job to tell you how to run your business. We wanted you guys in this room to have an opportunity to learn from a number of experts,” he said, referring to the speakers and panelists at the Powersports Business conference.
In addition to improving dealer profitability, KTM also is focusing on diversifying its offerings.
“It’s hard for us as a ‘Ready to race’ brand that’s so deeply rooted in off road to figure out how street fits into our business plan,” he said. Since KTM’s core business is in off road and it holds about 50 percent of the market share in enduro, Burleson said the company’s No. 1 strategy is to “protect that at all costs. The off-road business is what’s kept us alive, the past year specifically. It’s the most important part of our business.”
Not including motocross, KTM holds about 40 percent of the market share in the off-road market. “It’s going to be pretty tough to grow much bigger than that,” he said.
“There were brands that had numbers like that 10 years ago that don’t have that today and left those sales to us.”
The next area KTM is looking to boost its market share in is the motocross segment. Burleson says KTM only holds about 10 percent of that market.
“That’s not a number I feel good about,” he said. “We’ve put in a lot of effort, spent a lot of money, done a lot of racing, but what we haven’t really done is penetrated the amateur race of motocross.”
That will change as KTM goes after the motocross market in the next three-five years.
“This isn’t about growth. This is about market share,” he said of the motocross push. “This is about more KTM motocross bikes being sold in this country. The motocross market is a tough market. Part of the reason we had to make the (U.S. headquarters) move to Southern California was to be by that market. Always in that ‘Ready to race’ mode.”
KTM is looking to expand its ready to race mentality with an additional push in the street market.
“Our goal is to create a new market in street that five years from now is a solid part of our business,” Burleson said. “This is something we need to do strategically and step by step.”
Due to the street segment’s competitiveness and its current declining unit sales volume, Burleson says it won’t be as prominent for KTM as the other segments. Still, KTM has brought in a new vice president for its street bike division, Brad Hagi, who for the past five years worked with Ducati in Italy.
“The plan is to get people in our organization to build a foundation,” Burleson said. “This is a strategic long-term focus. Brad is our first real step in having a tradition of having people who get it.”

Marketing
KTM’s marketing segment went through a complete overhaul, including hiring a few new faces, says Burleson. One new face for KTM North America is Eva Mitsche, vice president of marketing who previously worked at KTM headquarters in Austria.
“What’s really exciting about this marketing perspective and bringing Eva on board is that we can approach marketing from a global perspective,” Burleson said.
“We restructured our entire marketing budget so there’s less, but we feel like we’re really doing more,” he said. “We put together a completely new race market program, which is for a street product totally focused on the track experience.”
In a time when discretionary income is tight for many, KTM has decided to focus much of its marketing efforts toward people already in the recreation.
“We’re not trying to sway billions of people, we’re getting to the hard-core people. The riders who are passionate about it. Those are the people who are important to us,” he said. “Stay close to your customers during down times. Marketing is a perfect example for us that you can have restructuring, but not have it completely cut.”
By restructuring its marketing program, Burleson said they were able to save “hundreds of thousands of dollars by being a lot more streamline. There are lots of opportunities for you to streamline your marketing with us as well.
“This is about us doing it together,” he said to the dealers. “Our company, our brand doesn’t work without successful dealerships. The brand is an asset for both of us. Lets capitalize on that. We chose to be one of the very few brands to have a dealer show. We chose to have a show that’s aimed at you and helping your business.”