Victory Sees Promise in International Sales

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With the U.S. cruiser market at a standstill, Victory Motorcycles is forging into its 10th year anniversary not with an explosion of domestic sales, but with an eye for overseas growth.

The company recently announced that it was moving into Germany and Australia, markets where Victory's parent company, Polaris Industries, already has a strong presence with its ATVs and sleds. And it's doing so a little older and wiser than it was back when the first Victory motorcycle, the V92C, was launched a decade ago.

The steps Victory is taking to analyze these new markets reflects the lessons learned from that inaugural effort, mainly that just because a dealership is a good Polaris dealer, it might not be a good Victory Motorcycles dealer. Dealernews talked with Victory VP Mark Blackwell at a model lineup-wide press launch in October.

"We're trying to treat each market independently and make sure we understand the market and Polaris' relative strengths and weaknesses and whether or not those dealers would also be good Victory dealers. And if they're not we're trying to be honest about that," says Blackwell, who also heads Victory's international operations.

In Australia, the OEM launched its first company-owned store in Melbourne. While Polaris is strong down under, its products are sold primarily an agriculture-oriented dealer network. With a huge base of cruiser and touring customers in the metro areas, Victory chose to set up a company-run operation in the second most populated city in Australia. "It doesn't really conflict with the dealers because they're not really motorcycle oriented," Blackwell says.

"In Germany it's a similar situation. We have good ATV dealers but they're also more in rural areas. We went in and did a geographic assessment of the market with some people who do the same thing for automotive companies," he says. "We tried this in England and it was very successful and helped us identify three areas where we need to add dealers." In fact, the move helped retails sales in the U.K. shoot up 90 percent, says Blackwell, adding that the actual increase is small, but significant.

Victory's move into Germany was preceded by articles in two of the country's largest motorcycle magazines that looked at the company's operations. This coverage and other efforts resulted in the OEM getting about 100 qualified dealer prospects at the recent Intermot show.

On the Home Front
Back home things aren't as rosy. Blackwell says that with the market being down 7 percent in 2007 and another 7 percent year-to-date in 2008, Victory's growth is lower than forecast at low-to-mid single digits. Even the Vision, which is retailing well, is slightly below the forecasted numbers. On the upside, Pure Victory PG&A is selling well and Polaris overall posted strong third quarter sales results in early October.

"Our retail has continued to grow even though the market is down. It's not growing as fast as we want it to, but the market is also a little worse than we expected," Blackwell says. "So we are growing, but we're growing at a slower rate than we wanted."

With retail credit tightening up — almost to a chokehold — and a blanket of economic worries covering the country, Victory is focusing on taking care of the controllables. Blackwell says the company has been selling fewer products into the distribution channels to bring cruiser inventory down. At the same time, Victory was filling the channel with Visions given the strength of the touring market. He couldn't share any specific numbers.

"The cruiser market had slowed. Touring was still growing, but we were worried that we had too much cruiser inventory so we've really cut back our cruiser build and our shipments," he says. "We're not quite where we want to be yet. We probably have another season of work, but I would expect by next summer that we'll have the cruiser inventory at the right level."

The OEM is also well into a companywide initiative to "increase operational excellence." This, Blackwell says, is a drive to improve in three key areas — speed, quality and cost. The goal, he adds, is to raise quality and drive waste out of the manufacturing system.

As is well noted, Polaris is looking to the hyperefficient standard set by Toyota and has been working for the past three years to streamline production and get products to market faster. Victory is basically trying to get inside their competitor's product cycle time so they can either hit back quickly with a competing product or get their motorcycles out first.

The main goal is keep dealers and customers satisfied, Blackwell says. This approach appears to be paying off as the company reports high customer satisfaction scores and favorable net promoter scores. This is a quality measurement based on advocacy and loyalty that uses the difference between the number of "promoters" and the number of "detractors" to come up with a net percentage of customers talking up the bikes.

Blackwell reports that the number of owners who expect to repurchase a Victory is also up.

Victory is also continuing its chase of a younger and more diverse audience. In 2007 about 40 percent of buyers of its Vegas Low were women, who normally make up only about 8 percent of Victory owners.

Blackwell says that the company can't fix the market, nor can it change customer attitudes but it can work hard to satisfy its customers and dealers.

"This will pass and the market will improve. It will probably take a couple years … We think we're going to be OK," he says. "It's not going to be easy but that's our formula. There's no magic pixie dust. There's no silver bullet in this field. It's not an easy business. We've got to work hard to satisfy our customers."