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Triumph eliminates ‘static’ en route to sales growth

CEO Greg Heichelbech sees retail sales rise 30 percent in 2011

Greg Heichelbech marked his first anniversary as CEO of Triumph Motorcycles (America) Ltd. in November. His first 12 months of tenure brought significant changes in both personnel and processes. Alas, the end result was retail sales growth of 30 percent year-over-year as of October. Looking back on a 2011 that brought its challenges and a restucturing, Heichelbech provided Powersports Business with insight into what to expect from the brand in 2012. Excerpts from the interview are below. To read the interview in its entirety, go to PowersportsBusiness.com.

PSB: You made some significant changes this summer at the corporate level. What brought on those changes?

GH: We’re not downsizing, but we are retooling. One of the things you do when you first come in is survey the business, figure out what’s strong, what’s weak and what you need to change, and what processes need to be improved or eliminated.

Along with that you formulate your strategy and determine if you have the right team to execute it. In some cases we had the wrong staff with the wrong skill set, and in other cases we just didn’t need that skill set anymore because we’re not going to run with that program anymore.

So we’re modifying the team and we’ve hired a couple of different people with different skill sets to help us out and we’re adding a couple of [regional managers]. We’re doing great actually. We’re having a great year and we’re trying to tool up for next year and beyond, and for the growth of this brand. We needed a different type of skill set and person to help us grow the brand.

PSB: How difficult of a proposition is it to come in and determine what processes need to be revamped or shelved?

GH: I had the advantage of knowing Triumph pretty well, being in the business and working over at Buell. We benchmarked Triumph there and I knew dealers that carried Triumph. I had a unique opportunity to understand the Triumph brand. And then once you get here, then you uncover all the other pieces.

Was it hard? Yes and no. Obviously there are some surface issues that you look at and go, ‘Yeah, we can make this change and that change and see an improvement.’ Then there are others where you’ve just got to roll up your sleeves and dig in and find out over time. You can’t find out in first 90 days how everything operates. So I went on a fact-finding mission not only inside the organization but also outside, visiting dealers and using the dealer council to get a feel for what we needed to address, and came up with basically a list of issues that for the most part were driven in collaboration with the dealer body.

I shared that with them in January and told them this was the direction we were going to go based on feedback I got. We recently had four town hall meetings across the country and I shared with them those same issues and our results year to date. They reconfirmed that those were still the right issues to address, so we’re going to continue to work on them.

PSB: How has 2011 been?

GH: For retail sales on a rolling 12 months, we’re up 30 percent. That’s them — the dealer. Yeah, we’ve got good product, but good product doesn’t get sold without good dealers. That was the first measure of success.

PSB: What was your reaction to that number?

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GH: I think it’s a good number but we could have done better. What I mean by that is Triumph’s execution on the launch and delivery of not only the Tiger 800, but some of our parts, accessories and clothing delivery was hampered by our basic inability to deliver in a timely manner. Our warehouse got overwhelmed. We came to the dealer conference and the dealers rode the Tiger and saw all the new product and placed a large amount of orders, and it basically overwhelmed the system. Since then we’ve taken measures to address the volume and to handle the peaks and valleys. In fact, for approximately 90 to 120 days, I brought in 17 extra people just into the warehouse alone to get rid of the bottleneck.

PSB: What feedback did you get from dealers upon sharing the retail growth news with them?

GH: Profitability is up. Dealers are making more margin on our product because we changed our inventory position early in the year, and did quite a few promotions and different types of marketing to get down the dealer inventory and that worked. They’ve got less inventory they’re carrying into the winter, and with the product that they’re selling, they’re able to get more margin. We told the dealers that we wanted to change the conversation for them on the floor and get away from always discount conversations and get back to more of ‘Why is Triumph unique? Why is this motorcycle unique? How is it positioned and what’s it going to do for the customer and how are they going to feel about the motorcycle?’ That’s why people buy anyway. The 1 percenters may buy on features and spec, but most of them are emotionally tied to the motorcycle with the brand and that’s where we want to take our message.

Those are some things we covered along with plans for the spring to continue to reposition the brand in the consumer’s mind and continue to build awareness for the brand. Those are the two biggest things that I really think are holding the brand back right now. People have a hard time explaining their enthusiasm or affinity for the Triumph brand. They just like it. They don’t know why. They really aren’t sure exactly what it represents, so we’re going to bring back that heritage and the history and the story of how Triumph became great.

PSB: What’s the status of the Triumph dealer network? Will we be seeing any new dealers in 2012?

GH: What I’ve been working on with the dealer council is dealer profitability. To me, dealer profitability is the key to success for any OEM, and those OEMs that are truly focused on being a partner with the dealer are the ones that are going to stand the test of time.

Yes, we’re going to add dealer points, because we don’t have enough representation, but we’re focusing right now on dealer points where we have no representation at all. There are markets where there is not a Triumph dealer, so we’re going to take care of those first, and try to grow the brand that way.

We’re going to add dealers, but I see us being a relatively small dealer group, trying to get to a smaller dealer group running higher volume, pulling higher margin and providing better customer service.

PSB: Going back to the retail growth, what was it about the 2011 product that allowed you to post 30 percent year-over-year growth?

GH: We did a couple of cool things. No. 1 we totally went into a new segment with the Tiger 800, and flat out that’s a great product and was very well received. That got the dealers very, very excited because it expanded their offering in a time where most are not introducing new product and expanding into new segments.

Not only that, we brought out the 675R, which was a huge success. We brought out two redesigned cruisers with the America and the Speedmaster, and the new Speed Triple. They were telling me it was great to see new product.

PSB: Triumph unveiled its new models for 2012 at EICMA. What’s the dealer reaction been to the Tiger Explorer, Speed Triple R and the Steve McQueen Edition?

GH: They want ’em and they want ’em fast. We’re actually having shortages in several of our modern classic lines. There’s pretty tight inventory on Thruxtons and T100s, some of the Bonneville classes, the 675 R. As soon as they land, they’re being sold.

We’ve gone to a pre-sold setup where dealers get deposits and send it in as pre-sold. We’re prioritizing those. That has helped some with the consumer, but we’re telling the dealers that they need to continue to work on taking deposits and scheduling the delivery for the consumer. Right now we’re running between 30 and 45 days behind in sales, and we’ve probably left some sales on the table. There aren’t enough Classics and 675 Rs and some Americas more recently on the table. We had a good close of the season and that kind of wiped us out the last couple of months.

PSB: Since you’ve come on board the focus on the pre-sold system, with pre-orders and deposits, has risen. Why did you decide to turn to this type of approach?

GH: We changed our ordering system in July. We used to forecast ourselves and then just hold inventory and have the RMs go out and try to sell the inventory that we have in the warehouse to the dealers.

We recently changed over to a demand-driven, build-to-order program, where the dealers are ordering exactly what they want. We go out every 90 days and take their orders and put them in the build production cycle. We come back every 90 days to allow the dealers to adjust color and model mix. We go a little bit further into the year so that we have greater visibility. Rather than us trying to guess, we have the dealers, who are as close to the market as possible, give us a forecast with the ability to make adjustments.

That’s worked really well, along with what we instituted at the same time, the pre-sold concept, and they take priority over all shipments. If they designate a pre-sold and have a deposit, they work with the RM and we will put them at the front of the line when that product becomes available. July was the beginning of our new fiscal year. We made some pretty dramatic changes, and that was one of them.

PSB: How have those changes been received by the dealer network?

GH: Of course they have some concern about forecasting themselves. They say ‘Six months out can I really predict what I’m going to sell?’ In the end, it’s going to be them or it’s going to be us, and I’d rather do it with them together, because they can get the trends a lot quicker than we can on a model, a color. The whole idea behind the 90-day order cycle is that they can always make changes and adjustments to model and color, so as long as we can give them that flexibility and with the pre-sold, it works pretty well.

We also introduced a wish list, where dealers can put down orders which are outside what their build-to-order plan was. We can try to find those bikes for them, either by increasing production or by moving inventory around in the network. That has worked really well, and has significantly increased moving the right product in the right market at the right time, and reducing days on hand of inventory.

We’re just trying to take a common sense approach to the business. It can be pretty simplistic — it’s selling motorcycles.

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