Austrian brand has taken share each year since 2009
In just eight years, KTM has seen its U.S. market share more than triple. From 1995-2009, KTM had seen it share grow from 1.5 to 2.1 percent of the motorcycle market. Fast forward to 2016, and that U.S. motorcycle market share number has grown to 6.5 percent midway through 2016.
But none of that success came easy. KTM North America staff worked hard to obtain that market share increase, and they’re continue to grind in order to push that number higher.
Ready to Race
The work to improve market share began in earnest in 2008. When the U.S. market crashed, and KTM was only taking about 1.5 percent of the market share, KTM North America president Jon-Erik Burleson knew a plan needed to be developed to increase that share and, therefore, sales for the brand.
After KTM North America moved to its current Murrieta, California, headquarters, Burleson and others at the company mapped out the first Ready to Race plan. “Ready to Race” has been the company’s public motto since then, but it’s also the behind-the-scenes strategic plan for increasing share.
“Since that time, when we really focused on our plan for success — it starts with the brand — that’s when we started to see the uptick in our market share results,” Burleson told Powersports Business during a recent visit to KTM North America headquarters.
Market share improvements started in 2009, and they continued to grow. As market share has increased, sales have also improved. May represented the 66th month in a row that KTM reported month-over-month sales growth.
And the OEM has no plans to slow down, with the aim to double its current market share by 2021.
“Our goal is to grow with market share,” Burleson explained. “We try and learn from the lessons of racing. One of the things you’ll hear a lot is, ‘Focus on what you can control.’ In racing, if you look at a rut and say, ‘Don’t go in that rut,’ well, probably you’re going to end up in that rut, so you have to look forward to where you want to go, as opposed to the negative, which is focusing on where you don’t want to go. So we’ve really tried hard to focus on where we want to go.”
He added, “What we can control is what we do, how we approach the business. We can control how we approach the industry, how we approach our dealers, and that focus tells us that growth is going to come more actively from market share versus passively from gains over declines in the overall market.”
If you take a look at KTM’s market share since 2009 on a line graph, it’s obvious that up is where KTM expects to go.
Branding is key
The focus of Ready to Race 1.0 and its subsequent 2.0 version has been on branding. Brand is extremely important to KTM, and it doesn’t take long for Burleson or managing director John Hinz to repeat, “Brand is the business. Business is the brand.”
“We’re investing in our brands to really make that connection to our dealers and our final consumers,” Hinz reported. “The marketplace is changing; retail is changing; consumer preferences are changing, and consumers are definitely aligning themselves with what they feel themselves and what that brand stands for.”
On top of the KTM off-road and motocross lines, KTM also added street bikes in 2009, integrating them into the Ready to Race mindset. Then in 2013, Pierer Industrie AG, a company owned by KTM CEO Stefan Pierer, acquired Husqvarna, and the brand now falls under the KTM umbrella. KTM North America also houses the North American arm of WP Performance Systems, a producer of suspension parts that is 74.9 percent owned by Pierer Industrie AG.
“We’ve got this amazing opportunity in our group with the KTM brand, the Husqvarna brand, the WP brand, to make these connections with different types of people within the motorcycling community,” Hinz said.
One example of the success KTM has seen with its branding is in the Red Bull KTM gear that represents KTM’s racing efforts and is exclusive to the North American market.
“If you went to a Supercross race three years ago, before the collection was out, you’d see kind of a myriad of KTM shirts and different things. Now, with the success of [Dungey’s team manager Roger De Coster’s] team with Ryan Dungey winning back-to-back championships, you see that Red Bull KTM stuff, plus the Troy Lee Designs collection that we have. You’re seeing people wear that stuff, and what they’re telling you is, ‘I want to associate myself with that brand,’” Burleson said. “That affiliation that they’re making physically, that, ‘I want to wear that brand and be proud of that brand,’ — it’s just a great thing to see, actually. It’s super exciting to see people excited to wear our brand.”
In fact, KTM’s PG&A overall has seen an increase over the past six years that has mimicked unit sales growth.
“PG&A as a component, it’s a huge business driver. There’s good profit margins in it for the dealer, but it’s also a good company and brand driver, so when someone puts that logo on their chest, and they make that decision to buy the helmet, the jersey, the T-shirt, the hat and really represent the brand, then we know we’ve made a strong connection to them,” Hinz said.
Dealers see improvement
As KTM has grown its market share and sales, dealers have seen improvement overall, as well.
“That same growth didn’t just come on our end, but it came in units per dealer, and the growth rate of dollars per outlet, per dealership, actually is more accelerated than that with the addition of our PG&A business, so not only are we trying to grow, but we’re trying to grow our portion of the business inside of a dealership. That’s really critical for us,” Burleson said.
KTM currently has 463 dealers in North America — a comfortable number, the executives said. Because of contraction for various reasons — buyouts, retirements, etc. — 40-50 dealers are added yearly to keep a static dealer count in the high 400s, but KTM isn’t looking to add a mass number of dealers any time soon.
“On the dealer network side, if there is growth, it’s going to be very strategic, so we’re taking a very close look at the dealer network. We’re not adding dealers broadly at all,” Hinz explained. “We’re taking a very strategic look at the market, where the markets are growing, where they’re shrinking, who the dealers are that are performing well and really looking to support the dealers that are engaged with our business and want to grow with us. If there’s an area where there’s a need for a dealer, then we’ll have to take a strategic look at that point.”
KTM’s goal instead is to work with the highest quality dealers in the industry and grow KTM sales in each store.
“We recognize that, depending on the brand, there are some brackets of units per dealer, and we want to be on the high end. We want to be able to have a really good, productive relationship with the best dealers out there,” Burleson said.
Hinz added, “It’s working with the best dealers out there that understand our brands, know our brands, want to support our brands, want to support the customer that purchases the brands, so it’s important for us to have that connection with our dealers and make sure we’re selecting the right dealers that will represent the brands at their best.”
Passion drives KTM
Driving the growth at KTM is not only a solid Ready to Race plan, but also the passion and dedication of the employees.
The white board in Burleson’s office reads “Passion + Success = Fun.” He pointed out that KTM’s employees feel fortunate to work in an industry that they’re truly passionate about, but that doesn’t mean they don’t work hard. Instead, KTM employees drive to improve the bikes and all of the products every day.
“We’re here because we love motorcycles. We love racing. We love the sport. We love everything that kind of surrounds motorcycles,” said Burleson, who has spent his entire professional career with KTM. “There’s an energy and a passion around here that really takes focus on the fact that we’re in the motorcycle business. I think we all take it very seriously that we all have that opportunity to work for a motorcycle company and an amazing group of motorcycle companies and brands.”
Burleson and Hinz are not exceptions to the rule. When Burleson rolled in on a spring Monday, the first thing he talked about was how his motorcycle didn’t trigger the stoplight near the office. The day before, he said, he was riding with his sons off-road during the day before heading out for a night street ride with his wife. The same Sunday, Hinz was at a local track, riding his bike.
“We’re very much focused on trying to drive success and trying to do it in a way that’s based on the purity of being a motorcycle company,” Burleson said.
Hinz explained that even in Austria, where the motorcycles are produced, the nearly 400 employees of the factory all ride, as it’s a company mandate.
“You can’t work in R&D unless you ride motorcycles, and you’re passionate about it. That’s what drives the motorcycles to be better because the guys that are working on them and developing them, they’re out on the weekends and doing the testing, and they want to fix the flaws; they want to see the motorcycle get better for themselves and in the end, the final consumer,” he said. “But that same passion lives throughout the entire organization. Everywhere you go, in each of the departments, whether it’s customer service, sales, marketing, the entire company has that drive to be better and always improve.”
That push to improvement is evident in the way the company celebrated factory rider Ryan Dungey’s second-in-a-row AMA Supercross Championship in the 450 class in May.
“We like to focus one step at a time, so we didn’t really spend a lot of time reflecting on how great it was, just what’s the next step, what do we need to do to improve the bike, what do we need to do to improve our infrastructure,” Burleson said. He added, “I can’t say that I’ve ever stepped back and wondered, ‘How great is this?’ It’s a lot more like, OK, when Roger De Coster says, ‘I need X,’ we’ve got to find a way to get him X.”
Although, the hard work is paying off. Dungey’s 2016 Supercross championship was his third overall, and he took nine wins during the season. And Burleson is quick to point out the success of the entire KTM factory team, as races such as Round 8 in Atlanta led to KTM riders taking four out of the top five spots. Marvin Musquin finished seventh in the standings during his first year of 450SX competition. Eleven races into the Lucas Oil Motocross Championship, Musquin was sitting third in points. (Dungey has been out of action since the June 4 race at Thunder Valley.)
Now and into the future
A variety of bikes have been performing well for KTM retail sales as of late.
“If we talk about 2015 and maybe the first quarter [of 2016], the biggest growth segment for us is still street and the introduction of our 390 line. Our adventure line is doing really, really well,” Burleson reported.
The 1290 Super Adventure R is the top-searched model on the OEM’s website, he said.
But the motocross line is also selling well. For 2016, a new generation of motocross bikes were introduced, and in June, an all-new 2017 250 SX model was released.
To introduce new bikes and plans for the future, KTM recently hosted a dealer show in Montreal, its first in Canada. About 1,000 people attended the mid-June event.
KTM is also in the midst of some future facility plans, as the OEM is building a test track at its Murrieta headquarters to offer more track time and access to employees and race teams that need to test bikes.
Plans are also to move the headquarters to another location nearby within the next two years, so each brand can be better integrated into the whole group, while standing on its own as well. Currently, Husqvarna and eight employees of the KISKA design agency are housed in one large building; KTM is in the neighboring building; the dealer training facility is across the cul-de-sac from the KTM building, and WP is in a portion of a building at the end of the cul-de-sac. A new all-in-one campus would bring the facilities closer together for easier collaboration.