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Masstige : A Public Service Announcement

BEWARE OF THE MASSTIGE TRAP! A cautionary tale of boutique motorcycle brands that venture downmarket in search of volume, broad public appeal and the mythical ten-fold exit.  Warning : The following contains graphic descriptions of branding failures that may cause irritation, changes to PowerPoint decks and in some cases the need for several alcoholic beverages with senior members of a motorcycle organization.  Reader discretion is advised. 

This, is MV Agusta. A small, cheeky sport motorcycle company nestled in the Italian Alps, MV has it all: a magnificent history full of international racing glory; a suite of beautiful, hand-made motorcycle models desired around the world; and of course, a brand reputation suggesting that it is “the Ferrari of motorcycles”.

Over here is EBR, also known as Erik Buell Racing, previously known simply as Buell Motorcycles. EBR is a proud American manufacturer of boldly designed bikes that are respected by small cadre of esoteric motorcyclists around the globe.

Both of these brands were founded by maverick innovators who dreamed of re-imagining the motorcycle, and both have small but devoted followings. All looks well for our two motorcycle companies.

masstige

But wait! What’s this?

EBR, so recently restarted and reinvigorated by new money, is swerving dangerously close to masstige territory. And look over there! MV Agusta is out of cash again, having committed to masstige themselves.

Oh dear. I’m afraid our friends have succumbed to the siren-song of masstige, and it’s irresistible promise of exponential growth without brand sacrifice. EBR and MV have discovered, only too late, that this is the primrose path towards motorcycle brand destruction.

The Count, The Tinkerer and the Venture Capitalist

MV Agusta was founded by some crazy Italian nobles who wanted to make exotic motorcycles. Like many rich and bored European aristocrats, Count Agusta had a penchant for fast and pretty things. His company initially built sport airplanes but the Allies banned a defeated Italy from aerospace construction after the second world war so the company turned to bikes.

Wanting to make the best motorcycles in the world required the best people in the business, reasoned MV, so they hired away the entire Gilera research and development team (who had pioneered the first winning transverse, twin-cam, four cylinder engine) and set them up in a new factory.

Authentic old time cool is pure branding gold, and MV Agusta has that in spades.
Authentic old time cool is pure branding gold, and MV Agusta has that in spades.

MV’s golden years would be from the mid 1950’s until the mid 1970’s, where they would go on to win an amazing 37 world championships in Grand Prix motorcycle racing. Sadly, the street bikes didn’t sell well in modern times forcing the company to close, but it was reanimated a number of times to much fanfare.

Finally, in this century MV found itself in the unusual position (for MV) of being both liquid and possessing of a solid cadre of highly desirable consumer motorcycles. They were exotic and expensive as motorcycles go, but still within the reach of anyone with a decent job who wanted something special. Among investment bankers, Hollywood celebrities and moto-philes, MV was the aspiration.

What could go wrong?

Erik Buell is less a man that a motorcycle force of nature.
Erik Buell is less a man that a motorcycle force of nature.

Erik Buell is motorcycling’s Captain America. A quiet man, he was raised on a farm in Pennsylvania then moved to the midwest to work as an engineer for Harley-Davidson, where he discovered his super-power: he could make Harleys fast.

Leaving the safety of corporate work to found a motorcycle company, he followed in the tracks of countless American entrepreneurial tinkerers like the Dodge brothers and indeed, the Davidsons. The Buell Motorcycle Company would grow slowly but amass a cult-like following who believed in brother Erik’s prognostications on motorcycle chassis design.

Buell later sold out to his old bosses at H-D, but he remained at the helm of the technical office. Like MV, the Buell Motorcycle Company was closed when the money got tight, but Erik rose anew with the help of foreign investors and a shiny superbike prototype. Erik Buell Racing, known simply as EBR, was born.

Not cheap. 2011 EBR 1190 RR looks every bit worthy of its lofty price tag.
Not cheap. 2011 EBR 1190 RR looks every bit worthy of its lofty price tag.

In 2011, the year of the EBR launch, the little company claimed to have sold 65 motorcycles at the eye-watering starting price of $50,000. Within a few years Indian motorcycle guggernaut Hero Motors invested tens of millions for nearly half of the company, while Erik announced racing plans. But by 2014, it was all over. Drained of money, lacking sales and left with an acrimonious split with Hero, EBR closed.

But then it re-opened. And now they are promising to build more bikes with Erik at the designers table.

What could go wrong?

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Somewhere, in a glossy high office tower sits Venture Capitalist man. He is, in this new guilded age, the master of the universe. He and his MBA army seek out companies with “brand equity” that they can exploit for monetary gains. Once found, a weak, once great brand is courted and pumped full of money and consultants, none of which have any understanding of motorcycles or the vaguarities of the fickle motorcycle market.

By the fourth quarter after the initial investment, Venture Capitalist Man is hungry. His investment is growing slowly. Some engineer has the temerity to tell him that the new chassis program needs at least four months of road testing. What nonsense! These hillbilly motorcycle people may be pretty good, but compared to the technicians at his Silicon Valley investments they are positively medieval.

“Why, those 23 year olds running my new parking software app hacked together a beta model and delivered it to the market in three weeks!” Thinks Venture Capitalist Man.

Meanwhile, the marketing department is saying something about some kind of motorcycle show on a cricket lawn in England, where they connect with their affluent customer base. What these biker folks need is a dose of reality, concludes Venture Capitalist Man. Enough with these exotic marketing channels and paying homage to some grey beard in leathers, this company is about making cheap models available to the masses that suggest luxury.

What could go wrong?

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What Goes Wrong

Discovered at the dawn of the industrial revolution by such brands as Royal Doulton and later perfected by Apple, AUDI and Starbucks, masstige has become the holy grail of product market placement. Derived from combining mass market and prestige, the masstige concept postulates that if the right balance of design, quality and price are found, consumers will buy mass market quantities of semi-luxury goods, sending profits soaring.

Manufacturer profit margins on luxury goods are much, much higher than those on mainstream, mass market goods. However, being expensive both to make and to buy, this obviously limits the existing pool of potential customers. Mass market goods are accessible to the bulk of consumers, which explodes sales, but the profit on each unit is proportionally smaller. Also, the commonality of mass market things reduces product desirability, and allows many competitors into the same place, which commoditizes them further reducing their perceived value.

What Royal Doulton chinaware figured out over a century ago was the selling slightly nicer, slightly more expensive plates with an aire of luxury hit all the buttons. Victorian middle class consumers could afford the Royal Doulton products while feeling like they were indulging themselves with upper class products normally unreachable to them.

Urbane professional vs suburban parent; bus driver vs hipster. In consumer culture one is clearly worth more even when it isn't.
Urbane professional vs suburban parent; bus driver vs hipster. In consumer culture one is clearly worth more than the other even when it isn’t.

These days, you buy a $5 coffee from Starbucks instead of one for $2.50 from Tim Horton’s because simply by entering Starbucks’ premium environment, with its soft lighting, curated indie music soundtrack, and deep chocolate leather sofas, one feels rewarded with an experience that worth the added cost.

It is also hugely profitable. The cost to make a Starbucks cappuccino is not double that of Tim’s, just as an iphone does not require three times the resources than a generic device. The prices, designs and brands create a perception of superiority and prestige which millions of consumers are willing to pay extra for.

All this adds up to a virtuous cycle of colossal profits, soaring share prices and an ever increasing luxury market position that becomes harder and harder for competitors to match.

MV and EBR : The Mass Effect

New owners mean new directions when companies are in trouble. But when it comes to luxury brands, expansion is always fraught with dangers.

Tinted, clear-coated carbon fibre body wearing the flag made the EBR 1190 RS rare indeed.
Tinted, clear-coated carbon fibre body wearing the flag made the EBR 1190 RS rare indeed.  Photo : Asphalt and Rubber

Both MV and to a lesser extent ERB are perceived as being exotic. When they are seen from across the street or mentioned in media, the context is always as outside the mainstream, products that demand a discerning customer. In the harshness of mechanical reality, both manufacture motorcycles that cannot compete with common, less expensive rivals.

But that is irrelevant. The market for both MV and Buell is so small, their brands so unknown, that their very rarity and anonymity are their unique selling point.

In a motorcycle market saturated with amazing products from universally known brands and that all look the same, an MV Agusta or an EBR 1190 RS stand out. They are unicorns in a field of horses.

When MV last found itself in good financial standing, they continued along with the overall expansion plan that previous owners Harley-Davidson had mapped out: go broad on models and go downmarket. The 675cc, three cylinder motor (now bored out to 800cc) was to be launch platform for a large family of products that could be priced near mainstream rivals, but without a lot of added cost.

New models in higher numbers. The expanding MV Agusta lineup excited many in the couch-surfing classes, but few actual buyers. Photo : Sport Rider
New entry-level models! The expanding MV Agusta lineup excited many in the couch-surfing classes, but few actual buyers. Photo : Sport Rider

The F3, Brutale 800, Turismo 800, and Dragster all share common motors, chassis elements and ancillary parts. In theory this, combined with the decline in Euro currency value, should make them economical to produce and extremely attractive to the consumers in the $12,000 – $18,000 street bike market, traditionally the fattest portion of the profit pie.

But it didn’t.

Attractive as they are, when confronted by a strange exotic motorcycle from a virtually unknown brand alongside a competitor from a mainstream brand that is known to be just as good but cheaper and safer, consumers chose the latter. And this is precisely what has happened to MV. Despite new product launches every six months and getting featured on every motorcycle magazine cover in existence, the average motorcycle consumer went with the average motorcycle.

EBR suffered the same fate. In 2011, when the company was a handfull of dedicated employees working around Erik Buell and assembling $50,000+ track-only, American muscle bike exotica, they sold out. Once they started to lose that feel, and the bikes traded hand polished carbon fibre for injection moulded plastic, and retailed for $14,999 at your local dealer, sales evaporated.

Details becoming of a $7500 commuter motorcycle, not a prestige model costing three times as much. Photo : Motorcycling.com
Details and finish quality becoming of a $9,000 commuter motorcycle, not a prestige model costing three times as much. Photo : Motorcycling.com

The value of the exotic motorcycle brand is in being exotic, not flogging the brand name around. Venture capital and big business leaders from outside sectors have completely failed to see this not once, but nearly every time they dipped their toes into exotic motorcycle waters.

Indian Motorcycles, Norton, AJS, Laverda, and so many others have been pushed into the murky masstige waters and pimped their once proud names on low cost products in the hopes of bringing in the mass market volumes at prestige pricing. All have failed.

Very few motorcyclists want new MV Agustas at Honda prices. Fewer still desire EBR’s volume products at any price.

Price Check

There is good news. Both MV and EBR can have wonderful, successful and profitable futures ahead of them, if they adopt this one simple prescription: stay boutique.

Wood grain on an MV F4 "California". It's weird. It's in poor taste. It's one of a kind. Perfect. Now make sure you charge accordingly.
Wood grain on an MV F4 “California”. It’s weird. It’s in poor taste. It’s one of a kind. Perfect. Now make sure you charge accordingly.

The global motorcycle market is growing and the segment that is growing fastest is the middle market that both MV and EBR tried to play in. However, that segment is full of mass market brands that offer reliable service, vast dealer networks and frankly, superior motorcycles at lower prices. To compete with them directly is to invite corporate suicide, by going against the most basic tenets of common sense.

But in the rarified air at higher elevations occupied by the likes of the Harley-Davidson CVO Road Glide Ultra ($49,000), Ducati Panigale R ($38,000) and Vyrus (don’t ask), these machines will find worthy customers and handsome profits. Bimota, a tiny company with an almost non-existent distribution network and atrocious reliability managed to stay independent and healthy for 25 years, building at their peak only about 3000 bikes a year. With prices starting at $35,000 in 1995 dollars, that represented a tidy little business.

Hand made to order, very expensive, and in very high demand, Vyrus is privately owned and employees six people in a space the size of a Starbucks. Coincidence?
Hand made to order, very expensive, and in very high demand, Vyrus is privately owned and employees six people in a space the size of a Starbucks. Coincidence?

 

Of course, at those prices and small volumes overall profits would be tens of millions instead of billions generated by mainstream manufacturers. But for a small privately owned company with less than 30 employees, it can represent the difference between being a strong, vibrant boutique manufacturer of cool motorcycles, and oblivion.

The idea of scaling up to a masstige model, a concept that Venture Capitalist Man views like others view religion, is not one that can applied to boutique motoring brands. Exploding volume and marching downmarket only cheapens exotic motor brands, destroying the only virtue that they have in the first place.

Harley-Davidson, one of the world’s best managed and most profitable motorcycle companies failed to do it with both MV Agusta and Buell.  So why should it be any different now?

Stay small, my friends.

In the mid 1950's Harley-Davidson tried to capitalize on the popularity of Vespa and launched it's own scooter. It was not a success.
In the mid 1950’s Harley-Davidson tried to capitalize on the popularity of Vespa and launched it’s own scooter. It was not a success.

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About the author

Michael Uhlarik is an international award-winning motorcycle designer with over 16 years of experience creating bikes for Yamaha, Aprilia, Piaggio, Derbi and many others.  He is a seasoned motorcycle industry analyst and part-time industrial design lecturer.  He is based in Nova Scotia. 

 

14 thoughts on “Masstige : A Public Service Announcement”

  1. Your article made me think – thanks!

    I wonder where that recent “Lotus” motorcycle, Confederate, Magpul Ronin, Pierobon, and NCR (Just off the top of my head) would fit in with all this.

    Then I think of all the sports/racing car companies (Mostly British?) that started and sort of thrived small, then overreached (Sometimes in both directions), and collapsed: Too many to list.

  2. Neither MV nor Buell have figured out how to build a sustainable dealer network. All those plastic surgeons and orthodontists have to either do without parts and service or just keep them in the lucite case in the living room.
    At least with BMW, Aprilia, KTM, and the Japanese manufacturers when you buy one of their ‘exotics’ (think H2 or H2R) you can get an oil filter or tail lamp lens when you need one….

    1. Corrected, thanks. As you know, we are down an editor lately, so CMG appreciates help in this regard.

  3. Didn’t Ducati successfully “masstige” with the Monster line? Isn’t KTM doing that with its street bikes? Aren’t these 2 examples of boutique brands that have successfully bridged the gap. Having the support and at least the start of a reasonable dealer network is just as important to public perception (which leads to actual sales) as finding the right design balance.

    1. This PSA was really directed at the two brands indicated, not as an essay covering the whole industry.

      But yes, Ducati is a somewhat good example, although really they transformed completely from a boutique brand into more a mainstream manufacturer with one or two super high end halo models.

      And KTM was never, ever, a boutique brand.

      M

      1. I assumed KTM was a boutique brand focusing on high end dirt bikes, that then went mainstream by partnering with Bajaj to mass produce “masstige” smaller street bikes (isn’t the RC390 vs Ninja 300 a perfect “masstige” situation). As they became more successful, they expanded and improved their high end street offerings.

        Just saying that the “masstige” business strategy has worked successfully in the motorcycle industry to allow smaller companies to become more mainstream, if done properly and with a customer support network. PSA for MV & EBR, sure, but not necessarily for the “masstige” business strategy.

        1. Thanks for writing, Peter. I’m enjoying the good conversation.

          KTM is definitely good at the upmarket mass production game, but I think it would be a stretch to call it a masstige situation. They (KTM) always mass produced bikes in the tens of thousands on large assembly lines using common parts. Where they upmarket compared to Japanese hardware? Of course. But not boutique.

          Boutique off road would be brands like TM or Gresini, wherein a champagne popping production year is 2000 units across all models, and the largest consistent batch of anything is a few hundred.

          Is a Bajaj-built RC390 really masstige? At $7,000 vs $30,000 for the top of the line KTM, the price/perceived quality spread is pretty much identical to Honda or Yamaha (both of whom sell bikes over $30k), and KTM makes well over 100,000 bikes a year, most of them sub-$10k ‘crossers. I’m not sure how much prestige that provides. If anything, the market failure of the RC1200 and SuperDuke may demonstrate that the KTM brand actually can’t stretch up, rather than downmarket.

          Just my opinion.

          M

          1. You provide a good explanation of the position of KTM, Michael.

            I wonder if the failure of the large street models is that they are (in the minds of many if not most) just plain ugly, or maybe not traditional enough in appearance.

            I have owned 4 KTM’s, 2 dirt bikes, a 950 Adventure and currently a white 990 SMT. They’ve all been as reliable as I expected (more-so actually) with exceptional dealer support so I probably would be considered brand-loyal.

            Having said that the only street oriented model I have even mild interest in is the 1190 Adventure. I find the others ugly, with too many sharp angles and gaudy finishes. So maybe too much visual complexity.

            The appearance of my 990 is more subdued. The plain white finish adds to that and I’ve had many compliments on its appearance. On top of that, I’m over-the-moon happy with its comfort and performance.

          2. If the mass produced BMW 1 Series (see your Wikipedia link) and Starbucks coffee can be deemed “masstige”, I think the RC390 also fits. Bajaj-built is the “mass” part of “masstige”, and most would say it carries more prestige than showing up on just another Ninja 250 or 300.

            Also given that KTM filed for bankruptcy in 1991 and the limited appeal/market penetration of its street products (RC8, Duke 990, 950 Supermoto, SMT 990, etc) from the subsequent period, I would consider KTM to be “boutique”, at least as far as its street line is concerned. Especially if Ducati was also considered “boutique” prior to its rise in popularity with the Monster line.

            It also seems that the success does stretch up as well as down. KTM claims to be the “fastest growing motorcycle brand in the world” and reports the 1190 Adventure as its most popular model.

            http://www.webbikeworld.com/motorcycle-news/statistics/motorcycle-sales-statistics.htm

            I, for one, can’t wait to try the Super Duke GT. It’s on my very short list for consideration as a performance tourer.

            I just don’t think “Stay small, my friends” is the only conclusion that can be drawn from looking at “masstige” and how it has been used with other brands. 2 European brands have done it well (as others have said, supported by dealer networks & improved quality of product and service) and the 2 you have illustrated, have not.

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