Four Business Lessons From The Sturgis Motorcycle Rally

As I write this post, I have just returned from a motorcycle rally in the Black Hills of South Dakota. This rally is often referred to as just “Sturgis.” As always, the trip was full of lessons for entrepreneurs. Now, you may be surprised by that, but stick with me and you’ll discover these lessons too.

When I mention Sturgis to the uninitiated, they think it is one big party hosted by the Hell’s Angels with sex, drugs, and rock and roll. Having been to the rally eight times now, I can confidently say that the hard-core image most people think of when they hear the words “motorcycle rally” or “Sturgis” could not be further from the truth. In the 1970’s and 80’s, the outlaw bikers may have claimed the rally as their own, but times have changed. The vast majority of Sturgis attendees these days are men in their 50’s, gray, and balding. Many also bring their wives. Most of the people I meet are either business owners or well paid salt-of-the-earth employees. After all, you need a substantial income to afford the $20,000 – 30,000 it costs to buy a new motorcycle. The typical participant drives what are known as “baggers,” or cruiser bikes, that are generally made by Harley Davidson, Victory, Indian, or my personal preference, Honda Goldwings. Yet, more and more folks are riding trikes since they are getting too old to hold up the heavy bikes. Many in attendance don’t even make the pilgrimage on their bike anymore, but instead tow them in trailers behind their Class A motorhomes.

The first lesson here is that people often rely on old, outdated information that colors their perception. Even though the internet has been a catalyst of major change in business issues such as marketing, many people still play old tapes that prevent them from seeing the way things really are these days, just like the old perceptions many people have of Sturgis.

Harley Davidson was the iconic American ride for years. When someone discovered I drove a motorcycle, they would naturally assume that I rode a Harley. Harley’s have been the most popular brand of bikes at Sturgis for many years. However, in the past few years, their popularity has been eroded by Victory and Indian. In fact, this year I took stock of the brands outside our Rapid City, SD accommodations after returning from dinner one night. There were four Victories, three Indians, two Honda’s (mine and my son’s), and only one Harley.

Polaris, a manufacturer of snowmobiles and ATV’s, saw the sales Harley Davidson was enjoying and decided to enter the heavy cruiser market. It created its own Victory line and then acquired the old Indian brand in 2011. As each year passed, the Victory and Indian product lines have grown in popularity, mostly at the expense of Harley Davidson.

The lesson here is that you can never rest on your laurels. Just because you have a cult following, and Harley owners are seriously brand loyal owners, it does not mean that you have control of the market forever. The more successful you are, the more the competition targets your brand. In fact, takeover speculation continues to surround Harley Davidson as sales continue to erode.

Vendors selling everything from t-shirts to custom seats (and of course beer and food) were set up along 14 blocks of Sturgis’s Main and Lazelle Streets. Most vendors sold commodity items with little differentiation and no price variations. Many of their wares had a very limited shelf life. After all, who wants to buy a 2016 Sturgis Rally t-shirt or souvenir after the rally is over? Given the very limited marketing window, you better be good at matching inventory and pricing so you sell your last t-shirt on the last day.

T-shirts are a low cost item with a decent margin, and therefore attract lots of vendors year after year. However, this is the classic red ocean market. Since there is a relatively low barrier to entry, competition in this market segment is fierce. This compares easily with many low barrier entry businesses such as lawn care and housekeeping. Price or location becomes the primary differentiator. Moreover at the rally some naive vendors opt for locations off the main path presumably to save a few dollars in rent, eliminating their primary leverage, or they hire temporary and unmotivated cashiers to staff their tents. Both of these “cost-saving” strategies really only cost these vendors sales.

20160810_142902One of the last booths we visited was that of AirHawk Comfort Seating Systems. At this booth, we learned that Lars Roulund was the founder and principal of HESS LLC, the parent company of the AirHawk brand. He realized that he could take the interconnected air bladder concept used by ROHO Inc. designed to reduce hot spots and sores suffered by bedridden and wheelchair patients and apply it in a new and innovative way.  Lars Roulund realized he could use this technology and apply it to motorcycle and truck seats and acquired the technology from ROHO Inc. Unlike the ubiquitous t-shirt vendor, AirHawk carved out a piece of the blue ocean for themselves. Moreover, after a long ride to the rally plus several long days in the saddle riding through the Black Hills, customers like myself were primed to make a purchase. After all, we were facing the prospect of a long ride home with an already sore and tired butt.

The lessons here are twofold. First, a tool like the Business Model Canvas can be applied to any existing business model. In this case, the Business Model Canvas turned wheelchair seat into motorcycle seats, exemplifying the blue ocean strategy. Using the Business Model Canvas to come up with a blue ocean strategy, a whole new and profitable business model was created simply by changing the customer segment. Second, it is always better to sell coffee on a cold day and ice water on a hot one. By understanding your customer segment and offering the right product at the right time, you have the key to successfully marketing your business.

Business lessons are everywhere. You just have to keep your eyes and ears open to recognize them.

What business lessons can you discover from your latest experience to apply to your business?

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