Michael Lock increased his company’s sales 100% by revising each segment of the business.

In a market dominated by Harley Davidson, Yamaha, and Honda, Ducati North America is one of the only independent motorcycle manufacturers around. Although the company barely makes a ripple in terms of sales compared to the five big commercial players, its advantage lies in the power and reputation of its brand.

When Michael Lock, CEO, came to the US four years ago, he realized the contradiction between the power of Ducati’s name brand and its poor commercial following needed to be remedied. He took a back-to-basics approach and reengineered the company’s business plan, changing everything from the inventory, production, and pricing to the marketing and branding of the sport bikes.

“The US division was losing money despite having a strong heritage and exotic motorcycles,” said Lock. “Our inventory management and our branding were entirely disconnected. We revisited how we executed our business plan rather than looking for celebrities, racing, or fashion to deliver it for us.”

Michael Lock

First gear
Lock started by retraining and reorganizing the North American distribution channel. He wanted his dealers to stop treating their Ducati stock as though it was a commodity. Although the pattern of overstocking, selling as many as possible for MSRP, and then having an end-of-the-year sale worked well for the commercial market, sales figures showed it didn’t work for Ducati.

“The people who buy our bikes want to feel as though they’re buying into a special club, not that they’re buying a product on two wheels,” said Lock. “When they buy a Ducati, they’re buying more than a bike, and we had to retrain our dealers to think about their interactions with the public.”

Less than 100 of the original 150 dealers from 2003 are still in the network, and those that are new to the distribution channel are trained with the new business model in mind—give the customers the feeling they are friends you do business with, and remember their names and what they ride.

The next step was to evaluate the ownership experience. Ducati’s price premium over the mass market in Europe is about one-third. In North America the price premium was more than 70% over the mass market. Lock realized the size of the North American audience was smaller than the cost of the bikes necessitated.

“Between 1996 and 2003, Ducati North America’s sales remained static because we had been selling to the same 5,000 people every year,” said Lock. “That works if you’re Ferrari, but it’s not the business model for us. We’re an independent and we need to stand on our own two feet.”

Lock then reduced each dealer’s stock supply by 50%, and while that did not make a drastic change in the total number of bikes sold, it did reduce his operating costs. He focused the extra money on promotion and, moving away from print advertising, developed a management team to take Ducati bikes to the streets.

“We took our brand and our dealers out to racetracks, country fairs, and Italian restaurants, and put our bikes in front of the audience,” said Lock. “It reinforced the club sentimentality; you’re joining a family when you come join Ducati.”

Second gear
After dealing with sales, inventory, and organizational issues, Lock turned his sights to dealer meetings. In 2004, he ran his first national dealer meeting. Rather than taking his dealers to Las Vegas with the rest of the industry, he took his dealers to the world’s greatest motorcycle museum in Birmingham, Alabama.

“A man by the name of George Barber built a motorcycle museum in Birmingham that holds 1,200 of the greatest motorcycles made in the past 100 years,” said Lock. “Next to the museum he built an international quality racetrack. We took all of our dealers there to ride our top-of-the-range bikes on the racetrack for a day.”

Each dealer walked away from the experience with the feeling of being part of Ducati family. Lock walked away with 150 dealers acting like staff and the true start to his new organization. “We saw this incredible outpouring of goodwill. That is worth millions in budget to me,” he said. “We treated the dealers the way we ask them to treat their customers.”

Ducati North America’s sales in 2006 were 100% higher than they were in 2003, and all without increasing the size of its dealer network. Because the stocking and inventory was reduced, bikes were being sold consistently throughout the year. Although the price premium is not yet at the one-third standard of the European market, in 2006 the North American segment surpassed the sales of all Ducati markets in the world.

Looking forward, Lock has focused on creating what he calls Ducati emporiums, stores in which customers could easily spend an entire day. With one pilot in New York City, one in Dallas, and one in Portland, Oregon, the future of Ducati North America is in dissolving demographics and serving the American public at large.

“I often get asked what the demographic is of a Ducati customer,” said Lock. “My answer is always the same: there isn’t one. Our brand transcends demographics, and our stores will now reflect that sentiment.”