The Top Ten Bike Business Lies, #7: Interbike Is Dead

March 2, 2010 by Rick Vosper

Note: in the following weeks months I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike Business. For your reference:

#10: Bad News Is No News

#9    It’s All About The Bikes

#8:   New and Improved, (Part 1) and Newer and Improveder (Part 2)

Here’s #7:

The Lie: Interbike is dead, Man. August shows are where it’s at.

The Reasoning
In the past several years a number of big companies (Specialized, Trek, Giant, Felt, sometimes Cannondale) have switched to holding their own retailer events earlier in the season and/or focusing on demo fleets or dealer tours. And you just can’t have a successful trade show with a bunch of the industry’s major players missing. So Interbike must be teetering on the brink of disaster, mumble mumble.

The Reality
Of course if all the exhibitors pull out, any show is over. But that’s a case of looking at the wrong end of the problem. The crux of the biscuit is not the number of exhibitors, but the number of retailer open-to-buy dollars. If there’s critical mass of latter, there will always be plenty of the former. The value proposition for a trade show (or jsut about anything else) is always about customers, not competitors.

Bike companies with a stable and limited number of retailers are facing an entirely different marketing problem than equipment suppliers or, for that matter, bike companies interested in increasing market share or finding new retailers.


Case(s) In Point

Numero Uno: Very Large Bike Brands. Since retailer dollars are (usually) pre-committed to their major bike brands and therefore not open-to-buy in any realistic sense of the term, the net result of Trek or Specialized’s or similar companies’ presence (or absence) from Interbike has very little effect on the show’s net value for the rest of the exhibitors. In fact, you could make the opposite argument: that retailer time and attention not spent with the very largest companies at trade shows equals that much more retailer time and attention for everyone else.

I’ve heard some exhibitors complain that Interbike has lost value for them because some of the larger retail business owners aren’t there anymore. And it may be true. Perhaps after being bribed (with free air travel) or coerced to take time out of the most profitable month of their season by one or more a primary bike brands, they’ve decided too much time has already been spent away from their core business. And who could blame them? If the middle of September is a dumb time to have a trade show— as just about everyone involved agrees it is— the first week of August is exponentially dumber.

But let me suggest that this is a red herring when it comes to judging the actual value of a trade show: while business owners are arguably more valuable than other checkbook-wielding folks, as long as the ready-to-buy dollars are there in the form of empowered buyers, the presence of business owners is not nearly as important as these exhibitors seem to think. And as to the question of when to have a Bike 2.0 trade show, we’ll come back to that one.

As we’ve already discussed, large bike companies pretty much need to have dealer events nine months ahead of when consumers are going to actually buy their products. But here’s the dirty little secret behind the literally millions of dollars large bike companies are paying to have their own show.

Sit down sometime with a reasonably honest rep from one of those big companies some evening (it may help to get a few beers into them first). And when the moment seems ripe, just ask how many honest-to-goodness actual firm (= non-cancelable) orders they actually get after one of those shows. And— if they’re really being honest— to a man or woman they will tell you, not that many.

Oh, they may get “Pro Tem” orders or “”Subject to Confirmation” orders or “Sales Forecasts” or whatever they’re calling them this year, but here’s the truth: they’re not real orders.  Or not really real, if you know what I mean and I think you do.

As one of the leading retailers in the country told me, “You want to know when my preseason order becomes ‘real’? Just as soon as they send me the notice that they’re ready to ship it,  and I confirm it. And not before.”

So if the orders generated at those August beer busts-cum-one-brand-trade-shows aren’t “real” orders, what are they good for? Two things:

1. They’re used to forecast production for at least some of the bikes that will be warehoused at retailers (on credit) before there’s any actual sell-through. (Hey, if you had tens of millions of dollars of inventory being produced half a world away and no idea whether it was going to sell, you’d want some kind of security too.) So while those preseason orders aren’t spot-on, they do offer a pretty good general idea— and more importantly, they’re accurate enough so that the purchasing department can make some corrections before it’s too late.

2. They’re also used to keep retailers accountable. If your retailer says her business is going to buy a thousand pieces from you next year, and ends up only buying five hundred, it’s really useful to have something in writing before you cancel her dealer agreement (as opposed to the Bad Old Days, when you’d just open up another retailer in town and not tell her about it.)

But back to you and a sales rep over a beer someplace. Because after you get told your rep doesn’t write very many firm (= non-cancelable) orders after those summer dealer shoes, you’re going to have a very logical follow-up question. Something along the lines of “well, why the heck not?”

And your rep is going to look at you over the top of that beer glass and say almost exactly the following words: “Because they want to wait until after Interbike to see what else is out there before making their final decision.”

In other words, those guys with the August shows don’t write many orders until after Interbike anyway.

Numero Duo: Any Other Exhibitor. Let’s say you’re a helmet manufacturer, like Giro/Bell. Or a wheel builder like Shimano or Easton or Mavic. Or a shoe vendor like Sidi or Shimano or Mavic. Maybe you’re  one of the not-so-huge bike brands. Or any up-and-coming brand in any segment of the market. Do you really think your retailers aren’t going to at least take a good long look at your next year’s line before committing all their hard-earned dollars to Specialized or Trek/Bontrager products?

Of course not. Retailers are a lot smarter than that. And if there’s one thing retailers are exceptionally smart at, it’s investing their dollars in products they think they’re going to be able to sell.

But first you need an opportunity to earn some of those dollars. And that involves getting some intensive time in front of your primary customers. Which is to say, retailers.

Not with a grassroots racing effort. Not with product seeding. You need real, genuine eyeball-to-eyeball time the people you want to have selling your products in order to earn your share of their ready-to-buy dollars.

You can’t “make” dealers come to you. In fact, unless you’re one of those companies who command enough retailer dollars to be in the Concept Store business (more about that in Lie #3, but don’t tell anyone), you can’t “make” retailers do much of anything, unless it involves drinking free beer. And maybe not even then.

So there’s not much point of having your own show: even if you could afford it, no one’s going to show up. And unless you have a very small group of retailers that you’re not interested in expanding, it makes a huge amount of fiscal sense to go someplace where the retailers already are rather than trying to chase them down, either individually or in groups. Someplace where they’re out of the shop and all in one place for the express purpose of finding out about brands and products like yours. Someplace like, um—wait, I’ve got it!— a trade show.

So how do I propose to make all this work? Tune in next Tuesday morning to find out.

Tags: , , , , , , , ,
Posted in Bike 2.0, Bike Industry insights, Top 10 Lies | 2 Comments »

The Top Ten Bike Business Lies, #8, , Part Two: Newer And Improveder

February 16, 2010 by Rick Vosper

Note: in the following weeks months I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike Business. For your reference:

#10: Bad News Is No News

#9    It’s All About The Bikes

#8    New and Improved

So What’s All This Got To Do With Bike 2.0?

I thought you’d never ask.

If the trap of the Model Year is one of the things holding the bike industry back, it’s nothing compared to the business’ innovation/boom/bust processes, which goes in approximately ten-year cycles. Those of us who’ve been around long enough will recall that in the the mid-seventies to the early eighties, it was the Ten-Speed and Touring boom. In the eighties, it was the Mountain Bike Boom (which got a little help into the nineties with the introduction of suspension). Mid-nineties through about 2007, it was all about racing-style road bikes.

And now we’re waiting for the next one.

Now I don’t claim to know what the Next Big Thing is. But whatever it ends up being, I suspect it will be something that’s difficult for old-style bike companies to stay on top of. Not because those companies are dumb, but simply because so much of their corporate attention and culture is directed elsewhere, specifically at protecting their existing hard-earned territory from each other.

The great marketing lesson of the Cola Wars was not how Pepsi won, or even how they forced Coca-Cola into their famous New Coke misstep. The real story is that, while those two dinosaurs were busy circling and growling and lashing their tails at each other, a bunch of sneaky little egg-eating mammals with noncarbonated products like Snapple and Sobe came along and snatched away some 90% of the new dollars in a growing market.

That’s why Specialized is so smart to carve off a little brand-within-a-brand enclave for their Globe effort, and one reason why Trek has been so successful with its by-women-for-women approach to selling bikes to the female demographic.

But in general it will be very difficult for the established giants to compete with smaller, faster, more agile companies in a rapidly changing marketplace. As for what might be driving that marketplace, here are four suggestions:

  • E-Bikes. Sorry to bring this up, but there is a huge movement underway to circumvent the specialty retail channel and put these electric hybrids into mass market stores. This is not so much because Walmart and Best Buy stores are more profitable or easy to do business with (because they aren’t), but because the specialty retail channel has refused to get interested in the e-bike business. And they might be right; I just don’t know. But if they’re wrong, the consequences to the specialty retail channel will be, to quote Dr. Raymond Stantz, “Real Old Testament stuff.”
  • City Bikes. I don’t mean poseur tech like one-off $5,000 crusiers or fixies in places like San Francisco; I mean regular $350-750 utilitarian bikes for people who need to travel no more than a couple miles and in neighborhoods where buyers are more interested in utility, fun and fashion than in grams and time splits.

I mentioned earlier what a great job Specialized did with their Globe launch. But companies like Electra, Fuji/Brezeer, and Raleigh are already stealing the Big Boys’ lunch money and laughing all the way to the bank. And remember how Rules 4 and 5 of the original Bike 2.0 Manifesto impact rapidly changing markets: oldstyle bike companies are chained to their distribution mechanism, and at lower price points—the kind city bikes tend to be at—it’s increasingly difficult to justify higher prices when the products themselves are clearly at parity. At that point, loyalty goes to the model, not the name on the head badge.

  • Women’s Bikes. If we think that as an industry or a supply chain, we’re effectively addressing the needs of our fastest-growing demographic (and greatest opportunity for growing the sport overall), well put on your Big Girl Panties and think again: when women are actually asked what kind of service they get from bike brands and retailers, they’re a long way from the industry’s smug, self-satisfied picture of itself (unfortunately, the Comments section seems to be missing. I was hoping to quote some real doozies.)

I would hardly be the first to suggest that the reason some brands and retailers are being so successful in the women’s market is less because they’re so good at it and more because the rest of the business is so incredibly bad at it. There’s plenty of room for new players in this space, both in the supplier and retailer segments  (hey, we have women-only clothing stores last time I looked, right?) especially with a Georgena Terry-esqe (or even better, Title Nine) by-women-for-women approach.

  • Composite Bikes. There’s certainly a market for them, so why aren’t there sub-thousand-dollar complete carbon bikes? Three reasons:
    • The cost of carbon is prohibitively high and unlikely to go down any time soon.
    • The cost of tooling (molds) is prohibitively high and unlikely to go down any time soon.
    • The cost of hand-finishing frames to Pro Tour standards is prohibitively high and unlikely to go down anytime soon.

The solution— which has the potential to blow the entire cycling market wide open, just as mountain bikes did thirty years ago— also has three parts:

    • Don’t make them out of carbon
    • Make lots of them
    • Don’t finish them like Pro Tour bikes

Ultimately the solution is to stop making UCI-compliant bikes for people who have no intention of racing them (or aspiring to, of course). That paves the way for an entire new generation of all-around bikes in a huge range of fun shapes, designs, and even molded-in colors. Bikes that would be completely new in look and concept. Bikes that could integrate components as a part of their design, rather than being defined by them. And bikes that millions of people just might want to own.

So what do these four things— e-bikes, city bikes, women’s bikes, and a new generation of composite bikes— all have in common? I’ll tell you what: None of them are driven by which year’s components go on the bike. Which means none of them need a model year. Which eliminates the need for preseason dating programs, inventory reduction and lost profitability in prime selling season (summer), and the need to have our trade shows in September…all the problems outlined way back in Part One.

Best of all, the move to a much more flexible fabrication base (low-cost composites instead of metal) would effectively end both the ten year boom-and-bust cycle and our reliance on third-party component manufacturers to define (and ultimately control) our bikes’ identities.

Which in turn means that all four of these technologies are perfect opportunities for companies not heavily invested in the current business model. Which is to say, companies from an emerging new model called Bike 2.0.

Posted in Uncategorized | 2 Comments »

The Top Ten Bike Business Lies, #8: New And Improved

February 10, 2010 by Rick Vosper

Note: in the following weeks months I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike Business. For your reference:

#10: Bad News Is No News

#9    It’s All About The Bikes

Here’s #8:

The Lie: This Year’s Stuff is (a lot) Better than Last Year’s Stuff.

The Reasoning: We see the new model year stuff sometime in the  August-October time frame and it looks collectively great next to the stuff we’ve been selling all year long. Plus the magazines are going over it all spoke by spoke, and gushing over what they see, and consumers are getting interested. So it must be as exciting as we say it is, right?

The Reality: Bikes and equipment do get better year after year, and product managers work their butts off to make it happen. But the changes are incremental, even imperceptible, except to fanatics like ourselves. Really big changes— the kind that drive millions of consumers into bike shops convinced they absolutely have to have a new bike— only come along every ten years or so.

Part of the problem is that we pretend otherwise, especially to ourselves. One reason for that is just basic marketing (we have new products, we want potential buyers to be excited about them). And that’s fine, by itself. But the larger reason is because we’ve always done it this way, whether it’s good for us or not.

In fact, the whole “model year” concept is horribly flawed, and hurts every part of the supply chain far more than helps it.

By emphasizing third-party equipment (i.e., which Shimano group is on the bike) rather than the bike brand itself, all brands are genericized and devalued. By obsolescing inventory already on retailers’ floors, average prices are reduced and brand value right along with it. (Not surprisingly, retailers especially hate this process, since they have to discount perfectly good product they (generally) paid full price for months previous; suppliers tend like it because it flushes more product through the pipeline and transfers 100% of the risk to the retailer). And by putting huge markdowns on end-of-season inventory, consumers become convinced that retailers are ripping them off the rest of the year (check online consumer forums sometime to see just how rampant this notion is).

Of course, unless you live in Miami or SoCal,  the bike business is a seasonal one. That’s just reality. But an industry interested in maximizing its own value (and therefore, profitability and quality of customer service) should be working to mitigate these effects, not increase them.

More about this point in Part Two. But for now, let’s get back to the “major breakthrough” notion.

Case(s) In Point

Quick, name a major innovation in bicycle or equipment technology developed in the past ten years that has achieved commercial success. I’m talking about things on par with carbon frames or offroad suspension.

  • The best one I’ve been able to come up with is tubeless wheels, a concept patented in 2001 by Mavic. There may be others, but neither I nor any of my circle of friends have come up with them (suggestions welcome). And while it’s somewhat successful in racing MTB and ‘cross world, the roadies are still holding out.
  • SRM/PowerTap watt meters are very cool, but just miss our criteria for both “introduction” (although we could argue  that Power Tap got serious after its acquisition by Graber in 2001) and commercial success.
  • Another good candidate might be belt drives on commuter bikes (which are a heck of a good idea, by the way). For the time being Trek is getting the lion’s share of business from this technology, whose primary advantage is that people understand the difference right away (try that with “Fiber Area Weight”) and more important, often want to buy it. But belt drives have been with us for awhile, as this 1990 Bridgestone Picnica folding bike shows.

And what about the proliferation of very hi-tech, very expensive composite frames? Surely something is powering sales of these 5-figure machines. But curiously, that something is neither a major technology shift nor a conveyed advantage to the rider: it’s more that Pro Tour technology has become so freakin’ expensive, and there are still a surprising number of folks willing to pay just about any amount for bona fide Pro Tour equipment.

In fact, some curmudgeons (myself, for instance) would say that, allowing for weight savings and aerodynamics, bike racers don’t go any faster nowadays than they ever have. If bikes are getting better in some measurable sense, surely that benefit would show up in the palmares. But, generally speaking, they don’t.

Now both weight and aerodynamics are certainly huge performance boosters, of course, but they’re also incremental. Attempts to make bikes lighter have been going on for as long as there have been bikes. (e.g., Eddy Merckx’s 1972 hour record machine tipped the scales at 5.75Kg (12.65lb) and would be banned today.)

The same is true of composite materials. Brent Trimble’s original concepts & patents for the monocoque-format composite frame that’s the basis for all modern carbon frames were licensed to Kestrel in the mid 1980’s. (Kestrel’s huge failure was not in the realm of products & technologies, but that they couldn’t afford to aggressively defend their IP from encroaching competitors.)

The benefits of applying aerodynamics to (conventional-format unfaired) bicycles arguably began in 1978 with Cyrille Guimard putting Bernard Hinault into the wind tunnel (team sponsor Renault just happened to have one sitting around their automobile factory) to optimize his saddle height/bar drop position. Interestingly, the “revolutionary” Guimard position (later adapted by Greg Lemond and now standard) looks remarkably similar to one from a previous generation’s sta: Eddy Merckx.

So point is, virtually nothing on bikes in the past ten years is actually New…although it  may in fact have been somewhat Improved.

(If any of your tech wizards out there have nominations for major last-ten-year product innovations (except for oversize bottom brackets, a topic so murky it makes my head hurt), send ‘em on.)

But Wait, There’s More.

When we actually look at how innovations come to industries like ours, it’s nearly always from the outside. (I know this is hardly an original idea, but bear with me.) Examples include:

  • Mountain Bikes, from a bunch of pot-smoking hippies (you know who you are) who were  treated like pariahs until they started making cash registers ring.
  • Clipless Pedals. From a couple of ski companies (Look who brought them out, & Time who made them usable), unless you count your old Cinelli M71 “death traps” and earlier designs.
  • Aero Bars. Triathletes were laughed at for two years about their funny-lookin’ bars before Greg Lemond put them to such good use the 1989 Tour de France finale.
  • Indexed & Integrated Shifting. (I mention these so it doesn’t seem like I’m ignoring them. They actually were developed exclusively within the industry.)
  • Disc Brakes. From our friends in the motorcycle world.
  • Suspension. Ditto. And despite the cross-pollination, it took us almost ten years to figure out how to make bike suspensions that really worked.
  • Hollow Cranksets. From the Pong family at Magic Motorcycle.
  • Tubeless Tires. Only took us about 25 years. Via the automotive industry.

(Again, if you have more to add, I’d be happy to hear about them. Use the Comments feature, OK?)

Coming Tuesday, Feb 16th: Part Two:
What’s all this got to do with Bike 2.0?

Tags: , , , ,
Posted in Bike 2.0, Top 10 Lies | 4 Comments »

The Top Ten Bike Business Lies, #9: It’s All About The Bikes.

January 11, 2010 by Rick Vosper

Note: in the following weeks months I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike business. For your reference:

#10: Bad News Is No News

Here’s #9:

The Lie
The bike business makes its money selling bikes.

The Reasoning
Bike brands sell a lot of bikes. Bike shops sell a lot of bikes. Consumers buy a lot of bikes. A bike costs a lot more than, say, a pair of tires. Therefore, bikes are the lifeblood of the bike industry. Duh.

The Reality
The bike business is a lot like the movie business. Despite the sticker shock at the cost of your tickets, your local theater famously ends up with very little of that money, functionally turning the downtown multiplex into a very expensive popcorn stand with an interesting marketing gimmick. Which, given the quality and pricing of multiplex food, is a very fortunate thing for them.

Nor do the studios do much better. For every box-office hit, there’s a dozen lesser-grossing movies that fail to make back their production costs. (And when you see those box-office-vs-production-costs numbers on the local entertainment channel/website, keep in mind that those costs don’t include all kinds of other bottom-line-sapping fees, percentages, and overall cost-of-doing-business expenses.) In fact, when you get right down to it, big studios make the majority of their profit on license fees, DVD sales & rentals, video games and other spinoffs, and of course, the endless reruns available 24/7 on your local cable channel.

So when you come right down to it,  the bike business is a whole lot like showbiz. Only, you know, without all the fame, limos, starlets, money, and cocaine.

But we still have more fun.

Case(s) In Point
Retailers. According to the National Bicycle Dealers’ Association (that’s NBDA to us insiders) and their annual Cost Of Doing Business studies, the typical bike shop hasn’t turned an appreciable  profit on bikes in the last decade or more. Bike profits hover within a point either side of the break-even mark, and attempts to get bike brands to raise published SRPs to allow retailers a little breathing room are inevitably pulled down by competitors offering comparably specced product for less. While most distributors now publish (and enforce) perfectly legal anti-discounting policies to control the perceived value of their brands, it certainly hasn’t shown up on their retailers’ bottom line. Not is it likely to anytime soon. At least not under the current business model (that’s called foreshadowing).

Bike Brands are in a similar pickle. The industry is so competitive price-wise, and competing models so comparable in spec, that raising the price of a $500 retail bike by an extra ten bucks at wholesale will almost certainly render the bike unsellable at retail. The best product managers can do is try to hide lower-priced components (often found in front derailleurs, pedals, stems, headsets, and tires) among more prestigious ones, thereby lowering their cost. Product managers are amazingly good at this, which may explain why the best ones are so very well paid. But retailers and, increasingly, consumers have learned to spot these tactics, with the latter abetted by online buyers’ guides and the ubiquity of incredibly detailed information on the internet. (Retailers still have to do it the old-fashioned way, and the ability of a top bike shop buyer to memorize, recall, and compare spec is a thing of wonder.)

Another tactic is to negotiate discounts with suppliers. Shimano is famous for maintaining pricing even to its very largest customers, so this is typically done by putting non-Shimano brakes, cranks, or whatever on the bike. The component’s manufacturer offers up  top-of-the-line parts at a deeply discounted price (thereby raising the credibility/perceived value of both the part itself and the bike it’s going on)  while the OE manufacturer scrambles to make up the discount via economies of scale (production volume) and/or increased sales in its aftermarket channel.

But the real profit-killer for bike brands lies in preseason programs and the cost delivering them. A huge part of the Bike 1.0 business model involves tying up (larger) retailers’ open-to-buy dollars (floor space) with preseason orders, and that in turn necessitates discounts and dating (financing) programs. By my admittedly rough estimates from published BPSA figures, bike brands financed US $300-400 million in inventory in calendar year 2008 for lengths of time between 60 and 120 days. And all those associated costs are subtracted right from the brand’s bottom line.

One of the reasons bike brands invest so heavily in high-end race machines is because those are the only bikes they can turn a reasonable profit on. But the arms race is at work there, too, with profits being funneled into R&D and marketing, which includes the literally millions of euro spent every year by bike companies on pro racing teams.

In fact there’s a much deeper level of irony at work here: the only way most bike brands can afford the backbreaking costs of Pro Tour racing is by spreading them across the entire product line…which means that the $10,000 bikes the pros ride are quite literally subsidized by all the $500 bikes regular folks ride. You know, the same bikes and cyclists that the guys who those $10,000 bikes are so contemptuous of.

But Wait, There’s More
So the bottom line of all this is that very few people in the bike business are making very much money off the sale of bikes. Even the Asian factories that actually manufacture the frames & components are sweating bullets and scraping by on EBITDAs that would be laughable in other industries.

Under the Bike 1.0 business model, pretty much the only guys with double-digit net margins are the kingpins like Trek and Specialized and their affiliated factories (primarily Giant and Merida, respectively), plus a few— a precious few—component suppliers, notably Shimano.

The real money is in the aftermarket side of the business, which may explain why so many bike brands use the economic leverage of their bike sales dollars to force equipment of various assorted quality and value onto retailers sales floors.

Of course retailers are glad to have the good stuff. It’s the not-so-good stuff they’d rather not give floor space to, and that’s where the leverage comes in (it’s the same with the weaker bike models too, but let’s stay focused on the equipment side of the business for a minute for another paragraph or so).

Because equipment margins—both for suppliers and retailers—are typically half-again (or more!) what they are for bikes. And because bikes take up many times the square retail footage per profit dollar times inventory turn (yes, even when stacked vertically), there’s a huge struggle on both sides to focus on the relatively small number of square feet in the typical bike shop with the most dollars available to be squeezed from them. And who could blame them? After all, they got into the bike business at least in part to of make a living. Or thought they did, anyway.

But let’s step back a minute. All this is going on under the old business model which, remember, only directly involves about 40% of the bike sales dollars in the industry. But it’s impacting much of the remaining 60%, too, because those 60% companies are playing by the same crazy rules as the more successful 40% ones. Which is either dumb or completely nuts or both. You don’t run a successful corner coffee shop by trying to be as much like Starbucks as possible. If fact, if you’re smart, you try to the opposite, and try to be as un-Starbucks-like as possible.

The whole Bike 1.0 system runs on level-loading factory production to get the best price (and avoiding the big month-long production gap around Chinese New Year). Which means big bike brands have to take a lot of production at times when consumers don’t particularly want to buy it, like October through January. So they turn the situation to their advantage by getting retailers to inventory that unwanted production for them, and they do it by extending free credit and/or discounts until consumers are ready to buy. And of course that means they have to have the best-possible factory pricing to help pay for the whole Rube Goldberg cost structure in the first place.

The Bike 2.0 Solution
But what if some smart Bike 2.0 bike brand paid a little more for their production, shipped it after Chinese New Year, and sold it on a more timely basis to smart Bike 2.0 retailers, who took delivery when the product was actually sellable? The business model would offset slightly higher production costs with savings on discounts and credit, effectively taking those dollars out of the banks’ pockets and putting it back into the channel that actually makes and sells the bikes. And then what if those smart brands split the savings with their smart retailers?

Retailers would make more profit, either by making higher margins or by selling more product or both. Bike brands would make more profit, allowing them to offer more models or more R&D or lower prices overall. Consumers would end up paying less for fresher (that is, with up to 6 months’ worth of product & cosmetics updates incorporated) bikes. And Bike 2.0 brands and retailers would be able to compete effectively with the larger names who remained shackled to an industrial revolution-era production system that cuts off a big slice of their hard-earned profit and gives to a bunch of bankers who probably never rode a bike in their lives.

Tags: , , , ,
Posted in Bike 2.0, Marketing Master Class, Top 10 Lies | 7 Comments »

The Top Ten Bike Business Lies, #10: Bad News Is No News.

November 20, 2009 by Rick Vosper

Note: in the following weeks I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike business. Here’s Lie #10.

The Lie: Reporting bad news might hurt the industry. Ignoring bad news will make it go away. And if you think otherwise, you must hate bikes.

The Reasoning: There, um, isn’t any.

It’s like a four-year-old who suspects there are monsters in his closet waiting to devour him. But whether they’re actually behind the door or not, he knows that they can’t hurt him as long as his head is tucked firmly under the covers. Make sense? Didn’t think so.

Case(s) In Point:

1. The Great 2009 Inventory Debacle. Bike suppliers (BPSA) carried record amounts of inventory into 2009, but said that was OK. Then they stopped reporting their inventory numbers for several months and hoped no one would notice when they had the exactly fame fifth-of-a-billion-dollars worth of inventory coming out of the prime selling season that they’d gone into it with.

Now, according to retailers around the country who spoke on condition of anonymity, a number of bike brands are offering discounts of 15-25% from wholesale on leftover ’09 and even current ’10 models…but don’t want to tell anyone because it might start a panic, OK? (Glub forbid we should drop retail prices and actually move any of those units.) So savvy retailers are snapping up discounted inventory, plus dating terms…and then selling it at full or near-full SRP to consumers as demand warrants, realizing fat profits in the process.

lemond trek armstrong cycling "lemond v trek"The punchline? Because there’s no real price incentive at retail, there’s no real stimulation of sales, and the net inventory situation is therefore more or less the same as it ever was…only with the suppliers giving their profit away to retailers and then paying the retailers to warehouse it for them.

So, largely due to an unwillingness to  deal with bad news like adults—to open the closet door and see for ourselves whether there’re any monsters therein—the inventory glut is going to be with us for many, many months to come.

2. LeMond v Trek Opening Arguments. You may be unaware that there’s been some boilover in the long-simmering dispute between Greg Lemond and the Trek Bicycle Company, and that Lemond attorneys have gotten the judge to more or less agree to turn the entire trial into a referendum on Lance Armstrong’s alleged ongoing record of in-competition doping. The reasons for this are pretty interesting, and if you want to read about it, the subject was well-covered, both by the excellent British semi-trade site Bike Radar and by a thoughtful, well-researched, 3,000-word analysis in the New York Daily News.

Now as cycling fans and/or people who actually make our living in this quirky little industry, you or I might think the looming specter of an acrimonious micturition contest between the two greatest champions in the history of American cycling might be considered at least newsworthy, if not actual Pretty Big News…if not for the pure courtroom drama of the thing, then at least for its potentially devastating impact on both US and world cycling.

But you won’t read about Lemond v Trek in the USA cycling press. Websites like VeloNews, Bicycling, Cycle Sport, Road Bike Action, all the usual suspects? Not a single. Freakin’. Word. And here’s the headline the industry journal of record, BR&IN, gave the topic (with zero mention of the Armstrong tie-in):

Trek, LeMond Case: Settlement an Option

That’s like the headlines on September 12th 1989 reading

WTC: Window Damage May Be Less Than Expected

So who’s covering the actual event? Exactly one fan blog, that’s who: Red Kite Prayer (Disclaimer: I have a comment on that article under my own name and occasionally place pieces there, usually by disagreeing with my friend Patrick Brady and saying something snotty about it).

Read the article. Now read the Comments section. Even if the “traditional” cycling press try to shove it under the carpet and declare it’s “not real news”, the cognoscenti certainly think otherwise.

(Note: I don’t have an opinion on the merits of the case; my point here is that it’s both potentially huge and being ignored by the cycling press.).

The Reality: To paraphrase the Prophet Bobke Roll, Have a warm steamin’ cup of Grow the Hell Up. There is either bad news on the horizon or there isn’t. And no one likes bad news, because it generally means that prices and therefore profits tend to go down. So suppliers like to hide bad news it from resellers, and resellers like to hide it from consumers*.

Plus, as Fred Clements, who is president of the NBDA and sits on the board of the BPSA told me in a recent interview, “There’s even a perception among both suppliers and retailers that if you’re the bearer of bad news you’re somehow trying to ‘hurt the industry’.”

But as the internet makes the world more transparent, it inexorably makes the stonewalling of unpleasant information increasingly difficult, and its consequences increasingly disastrous. So why are we still hiding the elephant in the middle of our sport/industry/livelihood room and pretending that the Bad News doesn’t exist, and even if it does, it’ll go away if we just hide under the covers long enough?

Besides, whether it’s good news or bad, professional businesspeople working in a professional industry require professional-grade, accurate, and timely information on which to make professional—which is to say, informed— business decisions. The more timely and accurate that information, the more informed and therefore sound the business decisions will tend to be. Which means that as an industry, high-quality information can help us all benefit more from good times and get hurt a lot less in the bad.

So if we want to become a more professional (and ultimately profitable) industry, maybe we should start by growing the hell up and acting like one.

*Note to Consumers: Sure, there’s a short-term consumer benefit to an industry downturn as cyclists get to pay less for stuff for awhile, but there’s already plenty of price competition in the bike market, and margins all around are already among the lowest in the consumer products world (we’ll deal with those issues in more detail in Lies #9, 8, 3, 2, and 1, promise). And in the long run, a profitable cycling business is a healthy cycling community, with a lot of the business’ profits getting reinvested in things that directly benefit cyclists, from bigtime teams and local fun events to advocacy & trailbuilding, increased R &D that results in more new cool products that consumers like, to increased breadth of sizes, colors, and specialty products that encourage women and other emerging demographics to become more involved in the sport.

Tags: , , , , , , ,
Posted in Bike 2.0, Bike Industry insights, Top 10 Lies | 3 Comments »

Bike As Dial Tone: Bikes, Pop Culture, Fashion, & Sparkly Eyeshadow

October 31, 2009 by Rick Vosper

I haven’t posted in awhile, partly out of laziness, and partly because the stream of comments still coming in about the Bike 2.0 manifesto. It’s great to get all this quality of response and feedback.

If you’re interested, the next couple of projects are:jopo

  • A 2-part, 2400-word  Bike 2.0-style guest commentary on The Future of Interbike over on Patrick Brady’s Red Kite Prayer. It’s been up for about a week, and it increased traffic to my humble industry blog by a factor of six. So if you haven’t read it, it may be worthy of your outcheckery.
  • Follow-up Bike 2.0 post back here on RVMS on the Top Ten Lies We Tell ourselves In The (USA) Bike Industry. As the title suggest, it’s in ten parts, and I’ll probably upload a couple parts at a time for your delectation.
  • And a couple of other projects I’m working on right now. Plus, of course, the normal work that clients pay me to do.

LCMDF-logo_smIn the interim,  here’s something a little more fun, but which nonetheless speaks directly to the power of Bike 2.0 in the market. It’s a music video from the “experimental pop/tropical rave/corky rapping/alternative noise” girl-band out of Helsinki, Le Corps mince de Françoise (LCMDF for short). Checkitout below:

remarkableThis is very cool— pretty good tune, too, in a sugary pop kind of way. But what’s remarkable to us cycling types is that these young, hip, fashionable women are riding bikes all over the nighttime city (Helsinki, presumably)…and that fact is considered completely unremarkable.

Compare and contrast with the USA, where every time some fifteen-minutes-of-fame faux celeb  throws a leg over a top tube, it’s a Media Event.

Partly this is because, although the band sings in English, the video takes place in Scandinavia, where—as in much of Europe, too—riding bicycles is just a regular part of people’s  lives, not something they need to put in the newspaper or blog about or even notice much. When riding a bike is really part of your culture, it’s like dial tone: you don’t even think about it. It’s just there.

dial-toneThe video also speaks volumes about the seamless integration of bicycles into both pop culture and women’s fashion. It’s just part of the story: the girls ride bikes to a disco, dance and perform in the same modestly stylish clothes they rode in with, and then ride home in the dawn. This is intercut with studio take where they’re all dolled up, dancing around and only pretending to ride bikes…which is kinda unreal, but there it is.

I love the fact that—during the live scenes, anyway—these girls can really ride. They sit well, saddle height is correct, arms and shoulders relaxed. There’s even a couple scenes where they overtake other young folks on bikes, ride together awhile, and then ride away. All the time they’re turning around, flirting and yakking the way folks that age do, having a great girls-just-wanna-have-fun time while holding their line (well, pretty much) through corners. Cleaner, in fact, than any number of club rides I could mention.

And the bikes themselves—although there are all kinds of others in the video—aren’t tricked out carbon racers or too-cool-for-school fixies with 16″ flat bars. They’re  Jopos, a ubiquitous mid-60’s Finnish design recently resurrected by manufacturer Helkama.

joposJopos are sort of the ultimate bike-as-dial-tone design, in some ways even more so than the classic Dutch utility bike:  one gear, kickstand, luggage carrier, enclosed drivetrain and integrated lock. They’re also utterly unpretentious, in the same fun sort of way as the Volkswagen Beetle, which is one reason they’re considered a classic bit of Finnish design. The new version is selling all over Scandinavia and Europe for  €379, or US$561 (just about $600 for our Canadian friends), so they ain’t cheap, either.

All of which makes Jopo a classic example of  Bike 2.0: a viable, highly profitable brand with a unique design concept set completely outside the standard industry business model—even on the other side of the Atlantic.

Did Jopo pay a placement fee or give away bikes to be in the video? Oh, probably. I don’t really  know and it’s not really the point.  What is the point is this:

jopoTo give you an idea of how popular Jopos are, they’ve only recently been re-introduced to the market and the Jopo Facebook page has some 4,645 fans. And it’s in freakin’ Finnish.

Trek, for comparison, has 5,144 fans as of this writing– just 11% more. Add in the English-language Jopo group of not quite a thousand, and Jopo’s Facebook presence is actually bigger than Trek’s…and more than half the size of the mighty Specialized Social Media juggernaut (although Specialized also boasts another 3,300 Spanish-language fans, including 300 diehards in Chile).

For the record, the population of Finland is less than 2% of the United States‘. So on a per capita basis, it’s not completely unreasonable to say Jopo’s  Facebook popularity in Finnish is 25X Specialized’s in English.

That’s a popular 2.0 bike. And it’s not even sold in North America.  Yet.

Tags: , , , , , , , , , , , , , ,
Posted in Bike 2.0, Bike Industry insights, Social Media, Web 2.0 | 7 Comments »

The Bicycle Retailer Interview Reloaded: A Five-Point Manifesto

October 6, 2009 by Rick Vosper

Some of you (hi Mom!) have been kind enough to comment on my interview in the show issue of Bicycle Retailer. Heck, a few of you may even have read the darned thing. For those who haven’t already gagged at my shameless sense of self-promotion, a copy is available here.

nascent_realityThe piece was a rather long, rambling conversation between Marc Sani & myself about interesting things that are happening in the bike business, and the War & Peace-length result shortened to about 500 words. It introduced several topics I want to talk about here in more detail:

1. The bike business is not “changing”. It has already changed, and we just haven’t figured it out yet. As an industry, we (well, the North American portion of us, anyway) still think it’s 2003; business is going nowhere but up (at least for the “A” suppliers and retailers), and those small-fry upstart brands and retailers just don’t matter. In reality none of those things are true. The nascent  reality of the bike biz sector requires not just new products, but a fundamental shift in how the industry conducts its business. And itself. I call this new reality Bike 2.0.

brands2. The Bike 2.0 Polarization will continue— but formerly “niche” players are already part of the mainstream. I didn’t express this very well in the article, and either Marc or I (probably me) missed an important point in getting it to print. Here’s an outlined version:

2.1 No More “B”s. Ten years ago, the bikes portion of the market was divided into “A” (Trek & Giant), “B” (Cannondale, Raleigh, Specialized, et al), and “C” players (everyone else). Now there are only “A”s, which is to say, Trek/Fisher or Specialized, and everyone else. This polarization is also reflected in the retail side of the business where there are one or two dominant players in each market carrying one (or sometimes both) those “A” brands.

2.2 Specialized and Trek have consolidated their dominance by getting into the largest/strongest retailers and by locking down as many of their retail dollars as possible, systematically driving “B” players off the sales floor. The Concept Store is merely the logical conclusion of this process. (The interview goes on to quote me as saying “Trek and Specialized are much more tolerant of sharing floor space with Giant or Bianchi.” What I should have said is “Trek and Specialized are much more tolerant of sharing floor space with perceived “niche” brands like Surly or Orbea or Intense than with more mainline brands like Giant or Bianchi.”)

I should point out that despite the grumbling, there’s absolutely nothing unethical in this practice. (It’s just standard business tactics, kids; get used to it.) But it has profound effects on the brand landscape, as we shall see:

monkeys3. Paradoxically, this polarization process will allow formerly “niche” brands to flourish, increasing the value and diversity of the brand mix overall and paving the way for entirely new business models at both wholesale and retail.

3.1 Desptie conventional wisdom, not every roadie wants to ride Lance’s bike. The very success (and don’t get me wrong, technical excellence, too) of monolithic brands creates increased cachet for boutique brands & products. Sure, it’s cool to show up on the Sunday morning ride with a new Tarmac SL. But it’s so much cooler to show up on a BMC SLT 01. Ditto on the offroad side, of course. And the same goes for fixies, commuters, 29ers, e-bikes; helmets, shoes, wheels, pedals…you name it.

3.2 The same process opens up new and exciting opportunities for retailers as well.

3.3 Ditto for equipment, although to a lesser extent, since equipment suppliers  can sell in more (or even all) locations.

4. The “A” Brands (and retailers) aren’t going away. But neither can they be all things to all cyclists.

4.1 Even in a shrinking market, there are still about 3,000 specialty bike retailers in the USA. And less than half of them sell either Specialized or Trek. Which leaves—in addition to the “niche” positions I mentioned earlier in Trek/Specialized shops, more than a thousand retail businesses wide open to other brands. Many of these retailers are smart, savvy, financially sound businesspeople (they have to be— a contracting market already killed off the dumb ones years ago.) To say nothing of world class Big Box stores like REI, Sports Authority, et al.

4.2 Big (and profitable) is good. But small or medium-sized (and highly profitable) can be better.

4.3 Cervélo. Orbea. Electra. The new Raleigh. Felt. Santa Cruz. The ASI (Fuji) Group. I could go on, but you get the idea.

4.4 The next wave of successful brands—both supplier and retailer—will tend to be (and in some cases, already are)  smaller/quicker/faster/smarter/more focused. With business models to match.

4.5 The Internet—and especially Web 2.0 and Social Media— Levels The Marketing Playing Field. That one’s worth an entire separate column, so we’ll leave it at that for the time being.

5 . Welcome to the Bike 2.0.

5.1 The “A” Brands and their retailers are at saturation. Suppliers can’t open more retailers for territory/exclusivity reasons, and the retailers can’t take on new brands—even in new locations—because their suppliers won’t let them. It’s like two monkeys with their fists in either end of a double-sided cookie jar who can’t see the forest of bananas growing just over their shoulders. Whatever that means.

chart_smHere’s the Bottom Line: Even though the market is shrinking, even after we subtract out the mass market sales, there’s still almost three million units— and more than Half a Billion Wholesale Dollars— worth of business that the Big Guns can’t touch. And that’s just for bikes. Aftermarket equipment adds at least 50% to this figure. Know anyone who might like a slice of that action?

pie_sm5.2 Technical innovation in traditional product categories has slowed. Five years ago, advanced composites technology for monocoque road frames were advancing at a rate that mean only the biggest or deepest-pocketed companies could keep up. And at the same time, production has become incredibly agile, not to mention good. So nowadays I can make a Skype call to Asia and there’ll be a can of Pro Tour-quality Vosperini™ road frames on my doorstep 120 days later. Less if I airfreight them.  (New developments will occur in less mature— but also less technically demanding— product areas.)

vosperini5.3 When products are at technical parity, either Design, Service, and the ability to build Communuity with customers rules, or else Price does. Let’s hope it’s the former. (underlined  text is an edit– I am indebted to Jason Cardillo’s thoughtful comment  for making this very important point.)

5.4 The Balance of Power has already shifted from suppliers to retailers (so get used to it). The reason for this is simple: consolidation at retail is almost ten years farther along than at wholesale. Which means there are more technically advanced high-quality products than there are retailers to sell then (or, come to think of it, consumers to buy them). And that means—sparing you a bunch of Keynesian economic theory about how this happened in the first place—that retailers, being the point of scarcity in the supply chain, are going to be calling the shots for the next few years. I’m not sure, but I suspect this will be a Good Thing.

blood5.5 As Bike 2.0 evolves, supplier consolidation will increase. Barring any major upscrewage (and there’s nothing in the last five or six years to suggest such a thing is likely):

  • The “A” players on both sides of the fence will likely remain relatively stable, perhaps losing some market share as new market sectors develop and old ones deteriorate.
  • Some 2.0 retailers (which is to say, those not locked in to Trek or Specialized relationships) will prosper from increased revenues and market share; doubtlessly a few more will die off.
  • But the real fast- and-furious action will be amongst the remaining players in the bike brand sector where, make no mistake, There Will Be Blood.
  • These wholesalers will either change radically or die (or perhaps both). A few new names will emerge.
  • Some may reorganize along the lines of large-scale customization, as Seven has already done. Others will move increasingly into semi-specialty (chain sporting and/or Performance-style retail) channels, as Schwinn/GT and Fuji are doing.
  • But the plain and simple equation of a shrinking market with relatively few opportunities for channel development means that inevitably a large slice of the less fit bike brands will be dropped or turned into mass-market fodder for their name equity.

So, as I said earlier, welcome to Bike 2.0. Nobody— especially not me— knows how it’s going to end up. But I guarantee you it’s going to be one hell of a wild ride.

Tags: , , , , , , ,
Posted in Bike Industry insights | 21 Comments »

The Eurobike Report: Why “Sell It With Sex” Hardly Ever Works For Bikes

September 2, 2009 by Rick Vosper

Carlton Reid of Bike Biz UK et al has been posting a number of interesting Eurobike bits (known hereinafter as Eurobitztm) including a very fun photostream on Posterous.com.

Lazer_helmets_smOne of Carlton’s photos is of Euro helmet brand Lazer’s display, which is shown at right in all its splendor (or, in deference to Carlton, splendour).

As far as I know there’s nothing wrong with Lazer helmets, except that their sense of marketing seems to’ve been left behind in the 8th grade (sixth form, for you Anglophiles) locker room.

So exactly what– aside from some locker-room humor– is this advert trying to tell us?

The obvious intent is to pay off the make you faster tag: see, the guy got home early and caught his wife (or maybe that’s his boyfriend and the woman is just a neighbor who dropped by to borrow a cup of sugar– who knows?). But the rest of the image is so downright weird as to raise a number of doubtlessly unintended alternate interpretations:

  • Just who is this guy, anyway? Apparently, he’s just come back from a training ride on his TT bike (note disc) wearing his Lazer TT helmet. But he’s wearing mufti– no logos– so he’s obviously not a sponsored rider.  And he doesn’t know enough to use shoe covers. Or to take his cleats off before he marks up those nice wooden floors. Obviously he’s a poseur.
  • He got home earlier than anticipated. But are Lazer claiming the helmet made him half an hour faster? No, that would be silly. So clearly, given the sexual context, the “faster” claim has to with the cyclists’ own sexual performance. No wonder the wife/boyfriend is hooking up with someone else. So, whether straight or gay, in addition to being a poseur he’s sexually inadequate. And we thought the saddle companies were in charge of that message.
  • But at least the house is clean. Wait a minute. It’s not just clean– it’s empty. There’s no furniture; not even a bed, apparently. So in addition to being a sexually inadequate poser, he’s destitute.  Perhaps everything’s been repossessed and he’s being evicted because the doofus spent all his money on overpriced cycling equipment. That silly Lazer TT helmet, for example.

Conclusion: This is a helmet for wankers whose sex life is in the toilet and spend all their money on cycling equipment instead.

Wait. Come to think of it, maybe that’s the perfect target audience.

Tags: , ,
Posted in Bike Industry insights, advertising | 2 Comments »

Worst (Inventory) Fears Confirmed: Tilt Your Head Back, Here Comes The Drill

August 12, 2009 by Rick Vosper

straight2hellBicycle Retailer’s Matt Wiebe has an excellent article about the long-awaited BPSA shipment-to-retailers numbers on today’s BR&IN web page. You may recall the BPSA hasn’t published these stats since way back in March and some folks were beginning to suspect that this might be because there’s a heck of a lot more inventory in the pipeline than many of us would be comfortable with.

<smug>And as it turns out, those folks were right.</smug>

But if the First Deadly Sin of journalism is “burying the lead,” BR&IN is going straight to Hell. Because the meat of Matt’s story—what we in the trade call the actual “news” (that’s a technical term)—is way down in the fourth and fifth paragraphs, and the Big News isn’t even mentioned until the final two sentences:

As shipments to dealers plummeted suppliers kept importing bikes and are now sitting on historically high inventory levels as they were in December. At the end of June suppliers had 285,098 more units in warehouses than last year, with 744,568 units total. Four categories have more than twice the inventory suppliers were sitting on in June last year. Hybrid, road and 26-inch cruiser and comfort inventory is up 216, 114, 117 and 109 percent respectively.

Suppliers claimed they were slowing imports this season to flush the bikes through the channel, however, it is clear from the June report they were importing a bike for every bike they sold. Right now suppliers are sitting on about four months of inventory assuming sales during the rest of the year match last year. On hand June inventory in some categories like cruiser, comfort, rigid and full-suspension mountain bike could last through November. (emphasis mine)

Since this is supposed to be a blog about marketing, here’s a graph, some observations, and a conclusion or two:

inventory_sm

Observations:

  • Holy Moley (that’s another technical term), that’s a lot of inventory.
    • just shy of two hundred million dollars’ worth.
    • At wholesale.
    • And it hasn’t changed in the last six months. What were you guys thinkin’?
    • Looks like things were starting to get under control, and then April/May sales fell well below expectations.
  • There’s only two ways out from under an inventory glut:
    • Stimulate demand (=sell-through =price reductions)
    • Reduce factory production, ride out the inventory through natural sell-through
  • Neither will be easy. Or pleasant.
  • Because no matter how you slice it, it’s hard to see how the industry’s going to move through four months’ worth of inventory in the few months remaining in the current retail season, so:

Conclusions:

  • This is going to hurt.
  • Bargains Galore at Interbike.
  • See you there.

Tags: , ,
Posted in Bike Industry insights | 3 Comments »

Social Media Final Exam: The Test Is Over, Here Are Your Grades.

July 29, 2009 by Rick Vosper

Quick, who won the 2009 Tour de France?

contadorIf you answered ‘Berto Contador, you’re half-right. But the biggest winner in Le Tour each year is not the guy standing atop the podium in yellow, but the bike company that gets the most benefit from the mind-boggling marketing bet each places on the table each season with the potential to turn a month-long road race into a public referendum on what legions of cycling geeks are going to spend their hard-earned shekels on over the next twelve months.

Assuming the bike companies actually realize positive ROI on their sponsorship/ advertising/promotion investment (we’ll have to tackle that oft-debated question another time), it’s not much of a stretch to suggest that the benefit from winning the Tour de Marketing is as much as  tens of millions of dollars in incremental product sales, spread across the brand. And an eight-figure prize purse is enough to get just about anyone’s attention.

Especially this year, when the battle was not just waged in print, on TV, and via the web, but in the nascent category killer Medium of All Media that is Social Media. All the Big Guys came out swinging, and when the virtual smoke cleared, one name towered over all the rest: Cervélo.

Now before you reach for your W, T, and F keys, let me explain.

robert_gourley_smI spoke for almost an hour yesterday with Robert Gourley, Creative Director at Mojave Interactive, a San Francisco-based agency specializing in Participation Marketing (also called Interactive or Conversation or Participation Marketing, which is delivered though a number of channels, not least of which is social media).

In addition to being a guy with impeccable agency credentials (Interactive Creative Director at Young & Rubicam San Francisco; work for Apple, Cisco, Microsoft, 7Up, et al), Robert also happens to be something of a bike geek, having raced both on- and off-road competitively over the past ten years. So what better way to showcase his company’s expertise in social media metrics than with a running tally that follows four major bike company’s social media performance through the ups and downs of Le Tour?

Which is exactly what he did. And now we—or at least the industry’s marketing geeks who find this sort of thing interesting—are the beneficiaries. Here are the results (all can be clicked to enlarge):

bar_chart_sm

piechart_smMojave Interactive’s conclusion:

As our audit shows, both Trek and Specialized use Social Media well. Specialized edges over Trek in some key areas, like integration and user engagement. Cervélo has great organic buzz, despite having a smaller corporate Social Media strategy.

The charts clearly show the Big Guns at Specialized and Trek have out-spent their competitors (or at least they’re tweeting more often), but the return does not seem to be commensurate with the amount of the investment. To understand how this might be, I asked Robert to tell us a little about the strategy, tactics and results of social media.

linechartFirst of all, how does Mojave work with clients? How do you add value to their social media programs?

What we do is step in at the beginning to help companies develop a playbook for social media—how you’re going to use it, and what they want to get out of it. And that’s very helpful, because if you don’t, you can easily turn your audience off. And I don’t think the bike industry has gotten there yet. I haven’t yet seen a unified strategy from a bike brand.

I’m a cycling fan, raced some back in the day, and a lot of execs in our core businesses are racing fans, so it was a natural for us to analyze the buzz level at the Tour as a thought leadership project for Mojave.

Does the ’09 Tour mark a coming of age for cycling and social media?

I think this Tour gave social media a huge boost with the chalkbot and the racers blogging from the road. To me, it seems more like a groundswell. It seems the brands don’t really have a social media policy in place, but it’s like a lot of the riders and team managers and product people are getting involved.

What would you say to comments floating around the blogosphere that cyclists themselves are way ahead of cycling brands at adopting and using new technologies?

I would agree. The brands are focused on product, and their marketing is all about that product. The Marketing folks have a lot of other channels to manage and they’re saying, “how am I going to handle all my other stuff if we invest in participation marketing?” So in addition to not “getting” the medium, they’re hesitant to take the resources from other programs to fund it.

Are we—the bike business, I mean—doing social media right?

Social media is very off-the-cuff and conversational, and if you’re trained to deliver product platforms and targeted messages and features lists, it’s very hard to change that mindset. But no one wants to talk to a brand, They want to talk to a person. That’s what makes social media powerful, and if they’re already struggling with traditional media, it scares them. I would hope that they start to get more serious about social media and spend the time to develop a clear strategy moving forward.

Which interactive metrics tools did you use to develop this picture?

We’re partnered with a bunch of different tracking tools analytics companies. But it turns out none of those tools really give you a complete picture. We’re a small group, and we have our own internal analysts, and we use them to develop a much more complete picture of what’s going on, and that’s how we put the Tour comparison together.

And with respect to the individual companies profiled:

Trek_logoHow much of Trek’s social media success is attributable to the Lance Effect?

Probably a lot. It’s like the association between Trek and Astana isn’t as strong as it is with Lance. They’re a one-rider brand, and the fact that another one of their riders won the Tour is almost secondary. Even with Postal, there was more of a connection between the team and Trek. But this year, it’s like the connection to Contador just doesn’t exist for them. (Or next year either –rv)

specialized-logoHow is it that Specialized, which is putting out as much presence as anyone and is arguably the industry’s marketing giant, has the least “buzz” of any company?

We see that in a lot of social media with marketers who approach it as a channel, but social media is not a channel—it’s a conversation. You don’t go to a party and just talk about yourself or your bikes or your coupons. It’s really about creating a dialogue. I imagine they’re very active, but not so good at conversation development. The goal in social media is to get people talking about you without you doing it yourself.

cerveloHow do you account for Cervélo’s strong performance from a relatively small brand?

I think they have more visibility because they’re an actual team sponsor. They also have something of an outsider identity. I think people find them sexier for that reason. The connection with the team is really strong, and that makes it more interesting for people to talk about the bikes. A year or two years from now, that may change, but right now they’re very good at flying under the radar. It may be there’s a small group of people creating a lot of buzz (“velocity”) and I bet Cervélo has a smaller group of power users who are both very connected and very passionate about the brand.

cannondaleAnd what about Cannondale?

Relative to the size of the company and the management changes they’ve gone through, they’ve performed extremely well, frequently posting updates, especially on Twitter. They also house their own photo and video galleries.

They seem to keep a steady buzz amongst users, however was unsuccessful in efforts to boost engagement and word-of-mouth during the Tour. Users (want to) do things like share content amongst themselves. Cannondale needs to get in and be a part of that. Finally,  There’s a possibility that users may feel like Cannondale doesn’t care about them: they have 1400 Followers on Twitter, but they only Follow 8. That could make users feel like Cannondale’s uninterested in conversation.

Questions for Robert? Post ‘em in the Comments Section and we’ll see what we can do.

Tags: , , , , , , , , ,
Posted in Bike Industry insights, Social Media | 11 Comments »

« Older Entries