C to C Interaction Management: Cases of Harley-Davidson Japan Dealers

Two dealers of Harley-Davidson Japan who are remarkably different in terms of sales performance were selected and analyzed for a case study. It was found that these dealers were very different in their management of customer-to-customer (C2C) interactions. The high-performing dealer put into practice the following aspects, which were not seen with respect to the low-performing dealer: (i) creating groups of customers in their customer community according to “new owner,” “intermediate,” and “advanced” groups; and (ii) sponsoring original events for each group. The customer vehicle replacement rate and sales performance rose not only for C2C interactions within groups for activities (i) and (ii) but also for C2C interactions between groups.


Introduction
A large motorcycle manufacturer Harley-Davidson has gained a favorable image through product design, product customizability, and product appearances in many movies, with a history and narrative extending over 100 years, strong customer appeal for its products, and a powerful brand. Harley-Davidson Japan (HDJ), a wholly owned subsidiary of US-based Harley-Davidson, is Harley-Davidson's master distributor in Japan. It began with forty million yen in capital and less than twenty employees in 1989. HDJ has top market share in Japan, even as the domestic market for large motorcycles (defined as those with engine capacity of 750 cc or more) has shrunk. HDJ has made no capital investment in any of its authorized dealers, and in 2007, all 150 dealers averaged annual sales of 550 million yen with an average employee headcount of 10.9 (Okui, 2008).
When purchasing a Harley-Davidson vehicle from a dealer, customers join the Harley Owner Group, or HOG, after paying an annual membership fee of 10,000 yen. HOG is the largest riders group in the world, covering over 131 countries worldwide, with a total global membership of more than 900,000. Japan accounts for approximately 35,000 of those members. Dealers in Japan operate customer communities termed "chapters," and HOG members have the benefit of being able to join a chapter.
Each chapter operates around a structured annual event plan. Harley-Davidson touring events are different from normal motorcycle tours as they are managed by corporations (HDJ and dealers). First, each chapter will have a regular touring event once a month as per HDJ's directions. In addition, some dealers have original touring events (ladies touring, beginners touring, and overseas trips). Other motorcycle manufacturers indicate HDJ's customer community to be a success factor. It is certain that spontaneous customer-to-customer (C2C) interactions increase the value addition of products and are even known to determine value addition (Kokuryo, 1998). In the open source area, software development is undertaken through frequent C2C interactions within customer communities Shiu & Yasumoto, 2016).
However, there have been many reports of consumers gathering on internet forums to criticize companies or to form boycotts (Kokuryo, 2001); moreover, in some cases, C2C interactions have ceased once consumers have discovered that a company representative has attempted participating in an internet forum to guide the discussion therein according to company aims (Kokuryo, 1997). In other words, C2C interactions can be skillfully managed as simply as they can be poorly managed. In actuality, the two HDJ dealers with very different levels of sales performance (high-performing Dealer A and poor-performing Dealer B) selected for this case study had major differences in how they managed C2C interactions within their chapters.

Case Analysis
This paper uses internal data provided by HDJ through 2012. Each dealer is registered within HDJ's CRM system (including vehicle data), and the HDJ stores aggregate this information. In addition, we conducted face-to-face interviews with HDJ employees (11), dealers (13 stores nationwide for a total of 17 times), and customers (2).

High-performing Dealer A
Dealer A is an exemplary dealer who has received awards from HDJ with regard to CRM. HDJ has collected information on Dealer A's customer-focused management, placed this information onto a DVD, and distributed the DVD to all its dealers nationwide. Other dealers have acknowledged Dealer A's ability to ensure high customer satisfaction. There are two characteristics in the manner they manage C2C interactions.

The sales performance comparison between Dealers A and B
This type management allows Dealer A to accomplish the following: (a) More advanced riders become a point of reference with regard to next purchases, and they provide instructions through C2C interactions between groups.
(b) Riders who are at the same level are considered rivals, and C2C interactions within groups engender a "competitive spirit" that compels riders to procure a more advanced motorcycle, In actuality, Dealer A responded to interviews by indicating that their vehicle replacement rate is high, at 25%. In contrast, Dealer B, who does not segment their customers into groups, asserted that their vehicle replacement rate is only 10%. In either case, both HDJ, which is aware of management index for all dealers, and other dealers asserted that these numbers were credible and very close to reality.
Dealer B, which does not segment customers, has been warned by HDJ that their CRM-related activities are not at the given standards, and the company does not have a good reputation among other dealers. Dealer B said in interviews, "We are requested to hold events by HDJ and have to conduct them." "All we can do is follow HDJ in whatever they tell us to do." "We know that we need to work on events, For these reasons, Dealer A has maintained its recurring profit margin, even after the 2008 financial crisis. As can be seen in Table 3 (all data is from 2012), the 2012 ROA was 3.6%, that is, 2.2% higher than the national average. The recurring profit margin of Dealer B, in contrast, was in negative territory for three years in a row after the financial crisis, and in 2012, the ROA was also negative at −0.8%.

Conclusion
Customers are possibly not entirely homogeneous (Kubota, 2003). Ignoring this and assuming a monolithic customer community for each product and service, and then working on engaging a Table 3.

Sales performance comparison between Dealers A and B in 2012
Num ber of em ployees 1 0 1 0 approx.1 4 Recurring profit m argin 1 .0 0 % -1 .5 0 % ROA 3 .6 0 % -0 .8 0 % Motorcycle sw itching ratio 2 5 % 1 0 % 2 0 % approx. 8 0 unit including approx. Unit sales approx. 9 0 unit community will not only limit the effect of the engagement but can even have a negative effect. However, as a company's organizational identity changes, along with responses to consumers of the company, C2C interactions will also possibly change (Yamashiro, 2015).
High-performing Dealer A employs an integrated approach of dividing its customers into "new owner," "intermediate," and "advanced" groups and sponsoring original events for each customer group that encourages C2C interactions between groups at regular events and C2C interactions within groups at original events for each group. This has had a positive effect on vehicle replacement rates and vehicle customizations, leading to better sales performance ( Figure   1).