What are KTM's marketing strategies




2 CONCEPTION AND DEVELOPMENT OF A TEXTILE ACCESSORIES COLLECTION TAKING THE EXAMPLE OF POWERWEAR FROM KTM-SPORMOTORCYCLES Published in: Wolfgang Fischer / Manuela Eckstein / Georg Blenk Brand Management in the Motorcycle Industry The Success Strategies of Motorcycle Manufacturers 2005 Fashionable courage makes not only the collection more interesting, but also the sender. Courage is a virtue that shows determination and dynamism, which suits the brand personality KTM well.

3 2 BECAUSE SOME PEOPLE WANTED A RALLY DAKAR T-SHIRT In 1995 a few people sat together and discussed the upcoming Paris Dakar rally. They were enthusiastic about the myth of the toughest rally in the world and would have liked a T-shirt with the famous Dakar logo on it. Because one of them was advertising for KTM, it was decided to propose the idea to the then managing director of KTM Germany, Toni Stöcklmeier. He showed himself to be quite open-minded, but did not really believe in success: KTM did not want to be active here, but was happy to allow the KTM logo to be used for such an action on its own. So you did it yourself: T-shirts were printed, a sample was photographed and a simple brochure flyer was designed and printed. The offer consisted of exactly one item: an ordinary T-shirt in the color sports gray with a large, dark blue KTM-DAKAR print on the front. You could order a single T-shirt for 19.90 DM or a double pack for 34.90 DM. Payment was made by cash on delivery. This offer was then sent in January 1996 during the Paris-Dakar Rally to addresses of KTM customers provided by KTM. What happened next still conjures an incredulous amazement on the face of anyone who has ever dealt professionally with response rates from direct mails: On the first day, orders were received for 7 T-shirts, on the second day for a further 23, and on the third Day the postman rang because the orders didn't fit in the mailbox. In the end, over T-shirts were ordered. And on many of the reply cards the question was asked: Are there more?

4 3 Just nine months later, in September 1996, the first KTM Power Wear collection was presented at the IFMA in Cologne. It consisted of 11 parts. The now 10th KTM PowerWear Collection 2005 comprises around 200 pieces. Almost half a million KTM PowerWear items are sold every year, with growth rates between +30 and + 100%. In times when textile retailers in Germany are reporting falling sales for the 12th year in a row, used KTM PowerWear items are being auctioned on ebay for more than the original price. What began so by chance, just because a few people wanted a Dakar rally t-shirt, has turned into a remarkable success story. It doesn't sound that complicated: You take a motorcycle brand and simply put the beautiful logo on all kinds of clothing items. For someone who makes technically highly complex products like motorcycles, that little bit of clothing can't be the problem. As is so often the case, it is not that easy and the devil is in the details. RAINKOMBI, BAYERN MÜNCHEN AND MARLON BRANDO: CLOTHING IN THE MOTORCYCLE INDUSTRY Functionally, motorcycle clothing can be divided into 3 areas: motorcycle protective clothing, fan articles and lifestyle articles. The individual segments differ fundamentally in terms of their proximity to the core product motorcycle, the competitive environment and the marketing strategy to be selected.

5 4 FUNCTIONAL MOTORCYCLE CLOTHING Clothing for motorcycles was initially always clothing with a specific functional use: First and foremost, it was protective clothing. Protection against external conditions and protection in the event of an accident. The origins of motorcycle clothing go back to the beginning of the 20th century. Before the First World War it was used by motorists, pilots and motorcyclists (actually more like motorcycles). After the First World War, the need for protective clothing for fighter aircraft pilots provided a technological boost in the development of functional clothing. Numerous features from aviation found their way into clothing for motorcyclists after 1945. In aviation and automobiles, there has been practically no need for special protective clothing for a long time. Apart from some special purposes, such as motorsport. If the worst comes to the worst, the motorcyclist still holds out his head (or his skin). With the increasing need for safety, the need for special functional protective clothing has risen. There is highly specialized and technically mature clothing for every purpose: touring riders, road racing, MotoCross, rally, etc. Hundreds of established brands and retail brands fight for market shares in the respective segments: Dainese, Alpinestars, Spidi, Rukka, Fox, Thor, Hein Gericke for just a few Name. From a marketing point of view, functional clothing is closest to the original motorcycle product. Anyone who drives a motorcycle needs a helmet. Every motorcyclist has an immediate need for functional clothing. For a motorcycle manufacturer, functional clothing is a vertical diversification of its product portfolio.

6 5 FAN ARTICLES World brands from the field of sport, such as Bayern Munich or Formula 1, have consistently expanded their merchandising range over the last 15 years and made them an important profit factor. Michael Schuhmacher's official team cap is sold millions of times, top international football teams visit Asia or Dubai to boost sales of their merchandising items and to open up new markets. According to estimates, around million were sold in the sports fan article business in 2002 in Germany alone The technical marketing starting point for fan and team items is obvious: Identification with the sporting successes of one's own team. Motorsport is also a defining element of the marketing strategy for many motorcycle manufacturers, so it makes sense to develop and market clothing items in this area. They make a significant contribution to the presentation of the brand to the public and to fan loyalty. One advantage is that there are practically no competing products: Those who identify with KTM's racing successes naturally want the original KTM team shirt in orange, the green Kawasaki shirt or the red Honda shirt are not really an alternative. On the other hand, the number of enthusiastic hardcore motorsport fans who must have every item from their favorite team is naturally much smaller. This means that the target group is relatively small and difficult to enlarge. And: if you have an original KTM logo t-shirt, you don't need a second one.

7 6 MOTORCYCLE FASHION Originally, riding a motorcycle was all about getting from A to B as cheaply as possible. The dominant field of motivation was the specific product benefit. In the past, the image of motorcycle brands was therefore shaped by clearly defined and above all technically oriented factors: specific driving characteristics, powerful engines, innovative technology. However, the motorcycle is no longer primarily a means of transport, but a lifestyle product. There is a fascination with motorcycles that other products hardly ever achieve. Many motorcyclists identify strongly with their brand and have their very own dream motorcycle. Or in the words of the theory of motivation: Purchase indication is no longer primarily the specific product benefit, but identity. Motorcycles are a means of articulating one's individuality to oneself and to third parties as desired. Films like The Wild One from 1953 with Marlon Brando or later Easy Rider used to express an identity-creating motorcycle culture. The American-influenced feeling of freedom and adventure manifested itself prototypically in the tough biker with his (of course) black leather jacket. A fashionable protest statement was made from a piece of functional clothing. Logically, the motorcycle jacket was no longer only worn for motorcycling. After all, rebellion doesn't stop when you get off your bike. The specific safety aspect takes a back seat in favor of a fashionable statement. This type of motorcycle clothing is fundamentally different from the original protective clothing or team clothing. This is about fashion, lifestyle, pop culture. The competition in this area is not the motorcycle accessories industry, but the fashion industry. So you are in a completely different world with completely different laws. Not only at the manufacturer level, but also at the dealer level: It is no problem for a classic motorcycle dealer to sell a helmet. But fashion? On the other hand, Motorcycle Fashion is of course particularly able to contribute to the development of a brand world and to the creation of a very special brand experience. As always with lateral product diversification, the risk is great, but so are the opportunities.

8 7 CO-PROVIDER ANALYSIS In the meantime, a number of motorcycle manufacturers offer their own clothing range. Most of them are active in all three of the above-mentioned product areas, but with different focuses: The Harley Davidson accessories program is also best known outside of the motorcycle industry, which allegedly accounts for around 20% of its earnings worldwide with non-motorcycle products (parts, merchandising articles, clothing ) to generate. The roots of Harley clothing lie in functional clothing: Harley Davidson leather jackets were already available before the First World War. The focus is now on the motorcycle fashion product area. The historical background and the myth of rocker are successfully cited here. The Harley Davidson example shows what motorcycle fashion can do for brand image. In contrast, BMW successfully focuses the clothing line on functional clothing. The comprehensive functional competence is proven time and again through outstanding product innovations (e.g. the world's first wind- and waterproof motorcycle leather suit). Ducati, on the other hand, focuses primarily on the motorsport enthusiasm of its own clientele and the brand's racing legend with fan articles.

9 8 DOING THE RIGHT THINGS: THE STRATEGY OF KTM POWERWEAR Definition of goals Already in a first meeting with KTM in 1996, the goals and key points of KTM PowerWear were determined. Even if the development of the division could not really be estimated by all those involved at this point in time, the defined goals are still valid: Supporting brand strength: KTM PowerWear should support the development of a KTM brand experience world and make a significant contribution to the credible staging of KTM Deliver brand personality. Independence of KTM: Sustainable differentiation from the competition; unmistakable collection statement from KTM PowerWear. Competitiveness: The price / performance ratio of KTM PowerWear must be able to compete with providers from the fashion industry. Generating relevant contribution margins Although the image-building effect already justifies the development of KTM PowerWear, a relevant earnings contribution should be generated in the medium term.

10 9 THE KTM BRAND IMAGE In the mid-1990s, KTM marketing caused quite a stir in the industry. The central brand value of (racing) sportiness was a stable brand foundation that was successfully expanded to include value-oriented character traits such as extreme, pure and adventure. The advertising was bold, personable, funny, self-deprecating and refreshingly different. The term Hard Enduro, coined by KTM, has not only become a generic term for a certain category of off-road motorcycles, but also an expression of a philosophy of life. KTM was the aggressive and charming brand that was ready to take risks in terms of product policy and communication. The main driving force behind the brand image was the repeatedly surprising, provocative tonality in advertisements and brochures. A feature that has been retained through several changes to the brand in the corporate design. KTM was the exciting brand with a buccaneer appeal. Maybe not always politically correct, but definitely charming. As a KTM rider, you automatically got part of this charm. You were just as confident, fresh, courageous and uninhibited as the brand itself. Not least a result of communication. Example from KTM advertising in the 90s

11 10 POSITIONING OF KTM POWERWEAR The multi-dimensional brand personality of KTM was the starting point for developing the PowerWear strategy. Basically, the KTM PowerWear collection covers all central areas: functional clothing, fan articles and motorcycle fashion. Separate terminology has been developed for the individual groups: Functional clothing (broken down according to areas of use): KTM Offroad Equipment / KTM Onroad Equipment / KTM Riding Equipment Fan / team items: KTM Team Equipment Motorcycle Fashion: KTM Style Equipment There are also functionally structured sub- /or. Secondary categories: KTM Racegirl Equipment (fashionable women's sportswear) KTM Racekid Equipment (children's sportswear and functional clothing) KTM Orange Equipment (non-textile merchandising articles) KTM Offroad Equipment: Enduro jacket 2005, Motocross shirts 2005 KTM Team Equipment: Team shirt 2005, Logo T-Shirts 2005

12 11 The most important area for the image of the KTM PowerWear collection is KTM Style Equipment. With Style Equipment, KTM PowerWear has developed a sustainable differentiation from the competition: Current trends from streetwear and sportswear fashion are consistently picked up and implemented in KTM Style Equipment: materials, cuts, styles - KTM PowerWear is the accessory collection with the highest degree of fashion in the Motorcycle industry: a white leather jacket made of broken leather with the imprint Show us some money and we ll show you some speed, polyester retro training jackets, a T-shirt with the start number 0 printed on the back, styles with an extremely used and destroyed look KTM Style Equipment is different than any other - more courageous. Because fashionable courage not only makes the collection more interesting, but also the sender. Courage is a virtue that shows determination and dynamism, which suits the brand personality KTM well. KTM Style Equipment: leather jacket made of crashed leather with graffiti print 2004

13 12 It would have been normal if KTM had simply printed a few basic styles with the KTM logo that won't hurt anyone. Relying on a fashion-oriented collection was much more risky: What does a motorcycle dealer understand about current streetwear trends? How will he explain to his customers that stains and holes are wanted on a new T-shirt? Would the KTM customer accept fashionable styles from the motorcycle brand they trust? Or would he just like the famous logo T-shirt from KTM and would prefer to buy the rest from a well-known fashion label? KTM Style Equipment: Examples from the 2005 T-Shirt Collection

14 13 The KTM Style Equipment collection has rough edges, but it's always the rough edges that irritate. Normality leaves you cold. Or to use a picture from motorcycle racing that Jean-Remy van Matt likes to use: the ideal line is the lane on which you can drive around a racing circuit the fastest and safest. The problem with the racing line: Because they all use them, you cannot overtake on it. If you want to overtake, you have to use the battle line, which is dirtier and riskier. But the only chance to get ahead. As a brand deeply rooted in racing, KTM has chosen the battle line. With success: In the clothing sector, around 60% of sales are generated with casual and sportswear. An impressive number when you consider that it takes 10 sportswear T-shirts to generate sales for a single functional enduro jacket. No less important, albeit more difficult to quantify, are the positive effects on the overall brand: KTM PowerWear increases brand loyalty and thus strengthens brand loyalty and customer loyalty. Not to mention the fact that hundreds of thousands of sportswear items that are worn and seen make a contribution to brand awareness that should not be underestimated. For a niche manufacturer like KTM, which does not shape the streetscape with comparatively small numbers of vehicles, this is an important factor. KTM Style Equipment: Girlie shirt with glitter print, trucker cap, girls sweat jacket

15 14 DOING THE THINGS RIGHT: OPERATIONAL IMPLEMENTATION OF KTM POWERWEAR Setting ambitious strategic goals is one thing, operational implementation is quite another. Especially when you are in the more or less foreign fashion market. Or as Mick Jagger claims: It's the singer not the song! ORGANIZATIONAL IMPLEMENTATION: SYSTEM PARTNERSHIP The core business of KTM is sporty motorcycles - technology-oriented and highly complex products. The product differentiation is primarily based on technical features: innovative technology, specific driving characteristics, powerful engines. On the customer side, you have to deal with long-term beliefs and purchase decisions. So pretty much the exact opposite of the fashion industry with its fast, irrational changes, spontaneous purchases and products that are largely beyond a technical assessment. Fashion articles are non-standardized goods with a high degree of non-technical specificity.If you take a closer look at accessory programs from various industries, word of this does not seem to have got around everywhere. What can you do wrong with a t-shirt? is the motto. After all, anyone who has ever been to a textile store and does not leave the house naked in the morning understands enough about fashion. An all-too-human problem that often arises when professional and private experience have points of contact: everyone is a fashion professional (because they know how to dress well), everyone understands something about advertising copy (because they once wrote an essay) and everyone who already has a Formula 1 car can drive a car that has been flashed at excessive speed. The fact is: Even a basic T-shirt has thousands of different variants (and most of them are not fashionable): raw yarn, fabric finish, cut, seams, cuffs, processing, printing technology The layman likes to wonder what can be done wrong . KTM Style Equipment: Longsleeve-Shirts in different fabric qualities with different processing details

16 15 COLLECTION DESIGN If you understand KTM PowerWear as a fashionable accessory collection, this has a fundamental impact on the collection design: KTM PowerWear has extensive freedom in the collection design. If the KTM corporate design were a corset into which all decisions are forced, the appearance of the PowerWear collection would be clear: Everything in orange and non-colors (such as black or white) and everything with the KTM logo in accordance with the current CD regulations . But the general sportswear fashion is not based on the KTM corporate design color worlds and typography. So if the color yellow is an important fashion theme, it will of course also be found in the KTM PowerWear collection. Regardless of whether yellow happens to be Suzuki's traditional off-road color. A few basic rules have only been defined with regard to the use of the KTM logo, otherwise the collection has maximum design freedom. On the other hand, this of course also means an increased coordination effort. In particular, there is always the risk of brand overstretching. The KTM brand identity defines the corridor and occasionally you have to discuss the individual part as to whether you have ventured too far. And when in doubt, just show courage in fashion. But as stated earlier, courage is a virtue. In any case, a merchandising program with dog food and diapers, as Harley-Davidson offers, especially in the USA, is unthinkable for KTM. On the other hand, a baby pacifier, which KTM is selling very successfully under the term silencer system, does. Can you do that? If it comes along as a KTM mini silencer and is so personable, yes.

17 16 PRICE POLICY If the sportswear market is the benchmark, then the price / performance ratio of KTM PowerWear must be able to hold its own in this very market. This means that a KTM PowerWear style must be able to compete with the prices of fashionable streetwear brands. An ambitious goal when you consider the multi-level sales channel in the motorcycle industry: system partner, motorcycle manufacturer, importer, dealer. Ideally, the later recommended retail price must therefore be taken into account when designing the collection. KTM PowerWear is the sportswear collection with the recognized best price / performance ratio in the motorcycle market. The sales prices of KTM Sportswear are cheaper than the accessory programs of other motorcycle manufacturers or well-known accessory brands. A basic item, such as a black logo T-shirt with a logo print, has an RRP of EUR 18.30 at KTM. The price of a comparable Ducati logo shirt is 29.00 euros. With classic fan articles, such as a logo T-shirt, there is definitely a relevant price margin: Since it is a must-have for brand fans, so to speak, one can assume that the price elasticity of the demand is below average, i.e. even a higher RRP would not be large in the market Enforce reduction in the number of units. In other words: If I am an ardent admirer of the XY brand, then I am quite ready to spend 29 euros on the logo shirt, but of course I register that my brand madness is being exploited and I have to pay an inflated price. KTM has made a conscious decision to take a different approach in its pricing policy. The success of KTM PowerWear is not least due to this pricing policy. And the fairness that is expressed in the PowerWear prices naturally also has an impact on the brand as a whole. KTM Style Equipment: Longsleeve-Shirts in different fabric qualities with different processing details

18 17 COMMUNICATION POLICY The most important communication medium for KTM PowerWear is the annual general catalog. It is distributed via the KTM authorized dealers and has several functions to fulfill: on the one hand, it is the main sales tool for end consumers, and on the other hand, it is a work and order document for dealers. As a result, the PowerWear catalog has to fulfill both an image function (end user) and an information function (dealer) at the same time. It should make you want to buy KTM PowerWear and contain all the relevant information (overall collection, material descriptions, sizes, order numbers, etc.). Combining the image aspect and the information aspect in one medium is rather unusual for the fashion industry. As a rule, image-heavy media are specially developed here for end users. As a result, consumers are used to fashionable image advertising at a very high level. For KTM, if you want to be perceived by consumers as fashion with PowerWear, then you have to try to keep up with the fashion level in a communicative way. However, with the handicap that a lot more information and practical utility is required in the PowerWear catalog. As is so often the case, the solution is courage and creativity. The first KTM PowerWear model shoot was carried out with well-known motorsport stars. The special thing about it was: They were completely naked. The campaign sparked some discussion and, at pressure from some importers, a defused version of the first nude catalog was even reproduced. Naked MotoCross and Enduro stars for KTM PowerWear

19 18 The follow-up shoots for the KTM PowerWear catalog also stood out from the usual: Although now with dressed actors, the scenery, staging and models were much more authentic, direct, immediate and real than usual. Authentic, direct, unadulterated: examples from PowerWear catalogs

20 19 DISTRIBUTION POLICY As part of the KTM dealership policy, the entire hard equipment accessories program (PowerWear and PowerParts) is an important component in supporting and strengthening dealers. The number of customer contacts in the motorcycle industry is falling continuously. The causes lie primarily in longer maintenance intervals and lower annual mileage. (In the automotive industry, there are only 1.3 customer contacts per year on average.) Of course, that means fewer opportunities for customer care. An important effect of accessory programs such as KTM PowerWear is therefore the increase in customer frequency and the number of customer contacts. Fashionable, faster changing items can do this better than more durable (and more expensive) functional clothing. You buy a fashionable sportswear item more spontaneously and more often than a high-quality driver's suit. The KTM PowerWear collection is sold exclusively through KTM authorized dealers. The exclusivity supports the retailer in his efforts to develop a differentiation strategy. He can distinguish himself through well-known branded articles that are exclusively available from him in the immediate regional area. A representative shop system is available to dealers for an optimal presentation of the accessories program. The strategic decision to offer a fashion-oriented collection with StyleEquipment initially brought with it some special difficulties: fashionable textile items are a completely new business area for motorcycle dealers as well. Many retailers have expertise in functional clothing, but their fashion experience is limited to private use. Accordingly, there was initially great skepticism and uncertainty among the KTM dealers. The entry point and door opener for the PowerWear collection were therefore mostly functional and team clothing. After the dealer had success with these product areas that were more closely related to him, he was ready in the next step to venture into the more fashionable parts of the KTM style equipment. KTM dealers are now reporting that they have customers for KTM style equipment who are not at all interested in motorcycles.

21 20 Zeno Busch, Managing Partner, büro3 Zeno Busch, born in 1967, studied economics with a focus on marketing at the University of Würzburg. He began his professional career as a copywriter and concept designer while still studying. From he developed motorcycle advertising for KTM. During this time, he founded the Hard Enduro concept with Tobias Busch Büro3 in Gaukönigshofen near Würzburg. The Büro3 Marketing department specializes in the interface between fashion and marketing. The focus is on developing merchandising collections for companies that don't really know much about fashion and sportswear. Büro3 Communication implements design and advertising concepts for national and international customers from the Hamburg office under Creative Director Marcus Kraus. Büro3 was involved in the development of KTM PowerWear from the start. As an external system partner of KTM, Büro3 is responsible for the conception, design and production of the sportswear collection and the communicative appearance.