Harley Davidson And Ad Agencies

Let’s Start With Ad Agencies

It is nice to see that ad agencies are willing to pivot.

I read today that Cal McAllister of Seatle’s now closed Wexley School For Girls is starting a new agency. Having visited Wexley in the now distant goodish old days, I am not surprised that Cal has shifted from running a super creative ad agency to a specialized ‘new and improved’ version. The new Paper Crane Factory is dedicated to growing early stage business and is teaming up with VC’s in Seattle and Silicon Valley. As Cal says in ADWEEK (strangely at Cannes — well, I guess it’s a good old-fashioned place to launch a new age agency)…

“The opportunity to do game-changing work with brands is happening at a much earlier stage,” said McAllister during last week’s Cannes Lions.

McAllister is initially opening offices in Seattle and Silicon Valley, taking a leaner and digitally focused approach with his client base and building more around equity with partners, as opposed to the traditional agency model.

“The billable hour—I think is broken,” noted McAllister. “The fact is, the way agencies make the most money is by putting more people on jobs and having it take longer. This is precisely what clients don’t want now. We are focused on taking clients who are willing to pay part of the fee in equity, so our wins are their wins, and their wins are our wins.”

A New Model Ad Agency

Let me start by saying this type of agency isn’t a brand new idea. However, aiming to work with start-ups for equity plus fees is a decent 2018 idea for a new agency.

A key point for my readers is that the agency is highly specialized. Wexley worked with a range of clients. Paper Crane Factory is dedicated to a much narrower category. It is a hell of a lot easier to be distinctive when you are specialized that a generalist.

Harley Davidson And President Trump And Advertising $

I never get into politics here. However, it is becoming clear to me (and, I hope you) that Donald Trump does not actually understand big business.

The news that America’s great brand Harley Davidson is moving manufacturing and jobs to Europe and, a few months ago Thailand, is a direct result of two #MAGA policies that clearly do not get how large-scale manufacturing works. Or, how a public company should work for its shareholders. As in, grow sales and profitability. (See below.)

Europe’s tit-for-tat motorcycle tariffs are obviously a result of the #MAGA trade tariffs (and an interesting aim at Wisconsin) and the move to Thailand is a direct result of America’s withdrawal from the Trans-Pacific Partnership (TPP.)

Why does this matter? More of this type of movement of USA dollars to foreign countries is, I think going to accelerate. This move will result negatively on large brand USA advertising.

According to S&P, 43% of Fortune 500 sales happen overseas. If, as in Harley Davidson, your USA sales were in decline while sales in Europe and Asia were growing, where would you put your ad dollars?

(Below…)

Harley Davidson would have to raise the price of each motorcycle it ships to the EU by $2,200 if production doesn’t leave the U.S.

That’s a dealbreaker, considering Europe is Harley’s second-biggest market (driving 15% of its revenue).

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One Comment

  1. Preston Bealle
    | Permalink

    Way to jump on a very current story and comment astutely, as always. Harley would seem to have an “America First” constituency, but also a number of corporate challenges and a declining stock price. Big bikes are not growing in the US and it makes sense to produce where the growth is, which is overseas. If we are happy to have Mercedes Benz produce in Alabama we can’t have it both ways.

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