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Jul. 12, 2010 – KTM’s focus: Achieving success in a flat market

July 12, 2010
Filed under Features

PALA, Calif. — KTM North America’s unit sales outperformed the industry in both March and April.

However, the company’s executives stressed the need to achieve business goals designed for a stagnant marketplace at its recent national dealer meeting.

KTM North America held the meeting in early June at an Indian reservation casino in Southern California. Making note of the event site, executives said the company was not gambling on a sudden upswing in new unit sales for this year or next.

“In order to be successful five years from now, 10 years from now, we have to have a business model that plans to be successful in an absolutely flat market,” KTM North America President Jon-Erik Burleson said to the dealers in attendance.

Part of that business plan entails taking advantage of revenue areas that in past years might have taken on less importance: parts and accessories to name one area.

“Now it’s a complete business cycle: We have to make it on the front end and on the back end as well,” Burleson said.

“A flat market means absolutely one thing: There will be winners and there will be losers. What do they say: High tide raises all ships? No high tide. This is about winners and losers.”

To end up on the right side, KTM is not only focusing on building its PG&A business, but also on its motocross sector. The manufacturer has made dramatic changes in its motocross design in an effort to bolster sales in this key, off-road market.

“This is a whole new company and a whole new brand to motocross,” Burleson told dealers of the company’s 2011 SX line of motocross bikes. “We’re not doing anything the same as we did before. We’re not approaching it like this is the next evolution. This is an absolute revolution. It’s a revolution to our approach, whether it’s sales or marketing.”

The change, Burleson told Powersports Business, starts with the product.

“We had a big decision we needed to make from a chassis perspective, to go away from the system we had been using,” he said, noting “a lot of minds had to change” at KTM in order for this dramatic step to occur. Burleson said the decision to move away from a chassis design incorporated on other KTM bikes represented not only feedback from the buying consumer but also with the brand’s “ready to race” motto in mind.

“Our CEO and our shareholders had a lot of courage to go with something that is so radical in its design that it’s really not comparable to anything else out there,” he said.

Besides the change in its motocross sector, KTM also outlined a timeline for a completely new segment of its business: its zero-emission motorcycle series.

Hubert Trunkenpolz, director of sales for KTM Powersports AG, told dealers that KTM will do field tests of the zero-emission Freeride in 2011 and then have it available for the United States in model year 2013. Bikes for Europe will be available one model year earlier.

KTM has previously said the performance capability of the Freeride is comparable to that of a 125cc, two-stroke machine. The company also said it is striving to come to market with a price tag of under 10,000 euro for the Freeride.

“I think it will be a revolution for off-road riding, especially amateurs because it’s so easy,” Trunkenpolz told Powersports Business of Freeride. “I’ve tried it a couple of times myself and I think for the classic amateur rider, it will be the best choice. No noise. Nothing.

“But the logistics behind the technology is not ready.”

Where KTM is ready is in its goal of bringing a full slate of parts and accessories to market with the introduction of a new model. Trunkenpolz told Powersports Business the company first accomplished this with its 990 Supermoto T introduction. Trunkenpolz said the company believes this further focus on parts and accessories can increase the percentage of the company’s revenue derived from PG&A to 30 percent from the current 25 percent.

“In terms of PowerWear,” Trunkenpolz said of the company’s garment line, “we have a lot of room for improvement, especially in the United States. We are much stronger in that in Europe already.”

That’s not to say the North American market hasn’t seen PG&A sales grow as well. Burleson said the subsidiary’s revenue from PG&A has grown by 58 percent over the past five years. Still, the company is currently looking at adding a staff member to oversee further growth in that area. The staff member would be “a liaison between all the regions to help the regions develop the PG&A business, whether it’s sales programs, stocking options, flooring options, inventory reporting,” Burleson said. “We have to look at that whole business in much greater detail.

“The biggest message today was the realization that, ‘Oh my gosh, look how far it’s already come,’” he said of the company’s PG&A sales, “and now we have to work that much harder to make the next step.” psb

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