They pulled up in a nice looking pickup truck. It’s new, it’s clean and they parked right in front of the store. They’re out now, and walking toward the door. He’s in his mid-50s, and she’s about the same. Both are trim, wearing wedding rings and well dressed in Levies and leather. They don’t stop at the used bike line in front, but rather come right in, look to their left and head for the Goldwings. There’s a checkbook in the guy’s shirt pocket.
And that’s when the sales crew takes notice. Got a hot one. Looks good. Money.
Your salesperson Jill has the next ups, and she turns toward the door. There’s already a smile on her face, and the rest of the crew sits back down, disappointed that they didn’t get this perfect combination for “the big sale.”
Yeah. She got it. Cash deal, paid in full. But, did you ever stop to think where the real money is? That one deal pulled in almost $20,000. And everybody is happy. But I have been thinking: Where exactly is the big money? Is it always from that big bike that is just now rolling out the door with a happy sticker on the back?
And the answer is, no. Not really. Yes, those big ones are an important part of the metric world. But focus on them only, and you are missing the most important part of the market. You got what you think is the cream, but you are missing the meat and potatoes.
Here is how it shakes out. I looked at new bike sales from 500 motorcycle dealers around the country for December of 2009 and the first half of January. I scrubbed out all the Harley stuff (we know where they are when it comes to size) and eliminated all the boats, motorhomes and Dodge trucks that you guys just can’t keep from dabbling in. I was left with about $100 million in sales, which I then sorted by selling price (unit plus freight and handling) and grouped it by total revenue generated. The results were not unexpected, but they certainly were interesting.
I looked at total revenue and divided it into three natural groups based on selling price and dollars collected. The splits fell at:
•Small: Units sold under $2,000 (5 percent of revenue)
•Medium: Units sold from $2,000-$12,000 (80 percent of revenue)
•Large: everything sold over $12,000
(15 percent of revenue)
The “sales revenue” chart shows the result.
Yeah. 80 percent of the dollars came from the middle group, the “Medium” bikes. Those units that are priced between $2,000-$12,000 brought in 80 percent of total sales. This middle group generally ran from the 50cc to about 1000cc. Lower than that, under the $2,000, were the generators, the chainsaws, the water pumps and a few scooters. They produced 5 percent of all sales dollars. On the high end, I saw a natural division at the 1000cc mark, above which were the touring bikes and cruisers. This segment produced 15 percent of revenue.
Which then leads to the next question. If that middle group makes up 80 percent of the market, that’s big. So, where is the sweet spot?
I went back to my numbers, re-did the breakdown, focused only on the middle group and came up with the “closer look” chart. The red bars show the middle group actually has its own middle group. It settles in right at the $5,000-$10,000 range for the bulk of units and sales volume. While 4,946 units were sold in the $2,000-$5,000 range, they only produced $16 million in revenue. The next range, the $5,000-$8,000 bikes, sold fewer units (4,754), but generated almost twice the money, $31 million in sales.
Now, we don’t eliminate any one price range from our inventory based on these numbers. You will still stock the little guys, and still celebrate when you sell another Vulcan, Royal Star or Goldwing. The little ones build a customer base for our grandchildren to ride with and sell to, and the big ones bring us revenue and new friends to ride with today.
But we must never take our eye off the mark. Check your floor space. See how you have allocated the square footage. What about product placement? Are your mid-range machines there, right behind the eye-catchers? Have you trained your salespeople to be as enthusiastic about the mid-range as they are about the cruisers and the big sport bikes? Does your commission structure support and encourage the natural distribution of product that this study reveals? You have always known the counts of what you sell. Use this study to focus the placement of your effort, and follow the natural distribution of unit sales.
Flash and size will stop your customers in their tracks. But when it comes time to pull out the wallet, the great majority of our customers are there in the mid-range. Don’t worry. If you do your job right, they’ll be back some day. And when they return, they’ll be ready for the big stuff. Don’t lose them today by missing the mark. You started out small and worked your way up. Let them do the same.
Hal Ethington has been associated with the powersports industry for more than 30 years. Ethington is a senior analyst at ADP Lightspeed. He can be reached at Hal_ethington@adp.com.