This paper examines two key feedback loops employed by Harley-Davidson: an online community-based balancing loop that aggregates direct customer feedback through social media and forums, and a reinforcing loop built around the company's traveling museum and demo program. Drawing on systems thinking concepts, the paper analyzes how each loop functions, why it is critical to Harley-Davidson's brand strength, and what organizational learning has resulted from their use. It also identifies opportunities to extend these loops to international markets and non-customers, arguing that doing so could help the company expand beyond its core superheavyweight segment and address stagnating market share.
Feedback loops are cycles of communication within companies that bring information to management, from which decisions are made. There are two main types of feedback loops: reinforcing and balancing. Reinforcing loops serve the function of encouraging the continuance of organizational behaviors — an action produces a result that promotes more of the same action. A balancing loop is one in which two actions are brought into agreement (Bellinger, 2004). The actions come together to solve a problem, restoring organizational equilibrium.
At Harley-Davidson, feedback loops are most common in the physical architecture of their bikes; however, the company also makes use of several loops in its management systems. One such loop is the use of the Internet to receive direct feedback on customer satisfaction. Harley-Davidson cultivates its fan base and customers on the web, using sites such as MySpace and Facebook, and also monitors talk in Harley-Davidson forums. This provides the company with direct, honest, and sometimes candid feedback on their product and service offerings (Hayes & Malone, 2008).
This loop is critical to Harley-Davidson for a couple of reasons. The first is that it deals with Harley's greatest strength: its brand. Another reason this loop is important is that it demonstrates Harley-Davidson's commitment to keeping their marketing within the modern sphere. The company has a rich history and traditionally a slow pace of change; however, the enthusiastic adoption of this loop illustrates that Harley is prepared to compete on all relevant fronts.
This feedback is an example of a balancing loop. The loop is an emerging structure in that it is comprised of some systems under Harley-Davidson's control and other components that are outside the company's dominion. Harley-Davidson uses this loop to aggregate information about their products. It is not as scientific as direct customer satisfaction surveys, but the relative anonymity of the Internet results in feedback that is more honest. Communities that have formed around the brand are known as "clouds" (Ibid.). Harley-Davidson, by virtue of the iconic status of its brand, has had some form of cloud in an offline format for decades. The use of the Internet is a natural extension of that feedback loop. Harley-Davidson has long been able to tap its fan base for direct feedback, but the Internet delivers that feedback in much greater quantity and, arguably, quality.
Harley-Davidson responds to the feedback gathered to help balance the company on several key issues. One is with regard to product. Harley is not driven by major technological innovations, but they do make constant tweaks to their engine and design technologies. Such a balancing loop is powerful — even a slow-moving company such as Harley-Davidson is able to respond more quickly. If we consider the struggles Harley faced during the 1970s and 1980s, we recall that the dealer network was one of the major issues because the level of consistency and customer service did not support the organization's customer base. As the customer base moved toward individuals driven more by image than by technical knowledge of motorcycles, dealers were unable to meet their needs.
If Harley-Davidson had had Internet clouds as a feedback loop during that era, they could have identified this area of weakness more quickly than they did. Today, despite a downturn in the company's fortunes in recent years, their financial performance remains strong. The fact that they have maintained strong performance in the face of sales declines and a slumping market indicates that faster responses to product and service issues can help avoid steep and prolonged performance declines.
In addition to balancing, this type of feedback loop also plays a reinforcing role. The clouds are, by definition, communities. While this type of community is not new to Harley-Davidson, the company's ability to transfer the sense of community traditional to its customers into the online setting has allowed it to maintain relevance in the Internet age. These communities are often self-governing and therefore reinforce codes of behavior and images associated with the brand. Given that the strength of the Harley-Davidson brand is one of the company's most significant drivers of new and repeat business, such communities play a strong reinforcing role.
In addition to helping build and maintain customer loyalty, these communities also help drive sales of licensed merchandise — one of Harley's most important revenue streams. Merchandise sales can help insulate the company against the impacts of economic downturns. Customers who cannot afford new bikes can at least continue purchasing merchandise, providing a valuable form of revenue diversification for Harley-Davidson.
"Road show program builds brand and customer loyalty"
"How loops reveal Harley's growing marketing sophistication"
"Extending loops to overseas markets and non-customers"
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