Question 1: Ducati’s Value Proposition
Ducati’s value proposition under Minoli can be summed up as; to provide an exclusive and unique motorcycle experience with a focus on performance. This value proposition can be broken down further into three main parts; 1. Exclusivity 2. Unique experience 3. Performance.
Ducati’s exclusivity stems from its brand name that is deeply rooted in tradition and Italian style. This sense of exclusivity was echoed by Minoli upon joining the company when he said; We sell something more: a dream, passion, a piece of history, and the motorcycle is at its core. He promoted this attribute through strict selection of Ducati distributors with a focus on the quality of dealers rather than geographical reach. Adoption of the open paddock policy, where members were given exclusive rights to racing events, and organizing events like the world Ducati weekend further strengthened the air of exclusivity. Also, individual owners also promoted this attribute by setting-up more than 400 Ducati clubs and the company, under Minoli, established a direct link with these clubs.
Owners of a Ducati motorcycle feel that they own something unique. When customers were surveyed on their reason for purchase of the Ducati brand, uniqueness was in their top four attributes (in addition to being sports oriented and linked to competition; see exhibit 15). 27% of current Ducati customers indicated that the most important factor in their purchase was the presence of Ducati in Superbike competitions. Few motorcycle brands even come close to matching this uniqueness. Minoli continued this tradition by maintaining the company’s presence in race competitions. He also used its first global advertising campaign titled Ducati/People to emphasize the brand’s young riders and their sporty attitudes.
Ducati developed a strong reputation for performance in the motorcycle industry by continually defeating Japanese bikes (see exhibit 6). 25% of customers surveyed said that the performance results in magazine tests were a factor in their purchase of the brand. Minoli saw the need to continue improving the brand’s performance through an increased R&D spending from 3.2 million Euros in 1997 to 12.9 million Euros in 2000. The company also instituted technical partnerships like the Formula One engine development center with TWR and the High-Performance Engineering (HPE) with Ferrari.
Question 2 – Cruiser Recommendation vs. Alternatives
Based on the company’s value proposition and Minoli’s turnaround program, Ducati should greenlight the Cruiser initiative. This recommendation will help Minoli to meet his objectives of achieving double-digit growth and develop a global brand as explained below:
Double-Digit GrowthMinoli’s target of achieving double-digit growth can only be realized if they diversify their product offering through the manufacture of Cruisers. Exhibit 2 shows a 22.9%, year 2000 market share (third largest) in the Cruiser category that Ducati can benefit from. If Ducati can match the 7% world market share they currently hold (exhibit 3) with another 7% in this category, Minoli’s dream will be realized. BMW entered into this market category in 1997 with commercial success and Ducati, with superior technology and performance, could be successful too. As shown in exhibit 4, this strategy could result in adding the Hot rodders /Urban riders, with the need for a performance and lifestyle motorcycle, to their customer segments. These new customers will share the same unique experience and exclusivity that the Ducati brand offers as well as the performance of the Desmodromic L-twin engines, but the trade-off could be the cannibalization of Ducati’s sport-bikes market share.
Ducati will face the challenge of a crowded, competitive landscape as shown in exhibit 5, especially from Harley-Davidson, whose niche is the Cruiser market and who currently enjoys a large market share. To counter these challenges, Ducati should employ similar strategies they used in making Naked their best-selling product in spite of a crowded field (exhibit 8). Ducati may not be able to capture a market share as big as Harley-Davidson’s, but their aggressive outsourcing policy, better yr. 2000 cost structure (exhibit 12) and their premium pricing ($10,000 to $20,000 vs. Harley-Davidson’s $5,595 to $20,360) will ensure that they make higher profit margins.
Developing a Global Brand
Minoli stated that he wants to develop a global brand that could appeal not only to extreme riders but a broader spectrum of customers. Ducati can capitalize on their loyal following (for example through the global Ducati clubs), the repeat purchase intentions of customers (exhibit 16), and their global advertising campaign Ducati/People to launch and promote the Cruisers. They could capture customers over the age of 43 which may include older aged-out Ducati loyalists in Europe and some Harley-Davidson customers in the U.S since 30% of current Harley-Davidson customers also own a ;500cc bike from competitors (exhibit 10). This will still be in-line with the company’s value proposition by growing a new, global customer base who are eager to experience the exclusivity, uniqueness, and performance of Ducati motorcycles albeit in the form of a cruiser.
The trade-off here is the risk of alienating some of the extreme Ducati customers like the purists including Ducati engineers that Minoli described as Knee down loyalists. They may see this effort as a departure from the company’s core values. This could be mitigated by Minoli emphasizing the need for a new product offering and ensure that the new product does not compromise the key principles of the Ducati brand by combining superbike performance features with other known attributes like the unique sound from the Desmo system.