Two companies, different results
Tom Dougherty, CEO – Stealing Share
16 April 2009
Southwest, Harley-Davidson and why their earnings are so different.
For those of us who monitor such things, Southwest Airlines and Harley-Davidson have been two of the more successful brands in their markets. However, each of them seem to be going in different directions. Southwest reported a greater loss than expected for its first-quarter earnings, while Harley’s earnings were stronger than expected.
What gives? Both have certainly been affected by the economy, the fluctuation of gas prices and the fact that, to many, traveling by air or on an expensive motorcycle feels like a luxury more than a need.
But one brand (Southwest) finds itself in an industry desperate for change, while the other (Harley) has taken control of its industry by speaking most directly to who their customer is.
And the lesson from both situations is that, no matter the state of the economy, there will be winners and losers.
For example, the airline industry is up for grabs. Travelers are certainly affected in their choice of carriers by loyalty programs and the hub system, but the industry has a whole hasn’t done itself any favors and expects a 9 percent decline of passengers in 2009.
The crazy thing is that there is opportunity here.
One example: Southwest CEO Gary C. Kelly said the airline was hurt by, among other things, the decline of business travel in the U.S. The general state of the economy has affected that, of course, as businesses across the country are cutting down on travel – especially as technology allows them to communicate without having to leave the office.
The question all airlines will have to ask themselves, especially in considering business travel, is what can they offer that makes more sense for business than holding meetings by video conference? Right now, there isn’t much other than the loyalty programs that allow for a bit more comfort and the accumulation of miles.
But that doesn’t help business. That just helps the traveler. In the end, what do businesses want? Bottom-line results, of course, which is why all are cutting costs and finding other ways to conduct business. But they also want productivity, and the airlines right now make doing work on a flight nearly impossible.
The rules to shut off cell phones have always seemed a little silly to me. Remember when you could make a call using the high-priced airline phone lodged in the back of the seat in front of you? How was that different? (I suspect airlines just want to keep us sardines-in-a-can quiet.)
Well, at least the Internet is coming. American Airlines announced it will test in-flight Internet service on a handful of its planes in the coming months, although to me the price seems too steep. (As much as $12.95.) But there is an opportunity for the airline that gets the pricing right – Hello, Southwest! – and markets itself so the business traveler sees himself in the brand.
Just like how Harley-Davidson does it.
As for Harley-Davidson, its brand strength is that it so effectively reflects the customer – the weekend rebel who wants to hit the road, but still live the domestic life. Harley-Davidson certainly has its own economic storm to weather. There was a decline in sales – but at a slower rate than in the previous quarter – and it plans to cut more costs in the coming months.
But it has a brand that can stand tall no matter the state of the economy. When Harley tells you, “Discover how everything changes when you get on a bike,” you see yourself transformed from a suburbanite to an easy rider. That’s a transformation that lasts a lifetime.
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