KTM $$$ money shift

[Fred1956]

This was posted on our state series' board by our contingency chairman under the heading-
'No KTM contingency for 2013'
I got a phone call from my KTM rep yesterday and then an email today. I am passing along the email.

"As I mentioned on the phone KTM has reduced the number of offroad series per region. For 2013 some of the contingency focus has shifted to MX in hopes of increasing our motocross market share. We are not giving up on our offroad supporters that have bled orange since the beginning. However offroad budgets have been reduced and I was forced to analyze each offroad organization to determine which one would improve KTM sales the most. The AHSCS has a strong KTM showing and my focus has to be on areas of weak KTM market share. To accomplish this I look at total attendance vs KTM riders. My focus was to sponsor a series with the highest attendance and fewest KTM racers with the hopes that contingency can improve that number.

I will keep AHSCS on my radar for 2013 with the possibility of adding to the 2014 contingency."

 

[singletracker]

Offroad is becoming the redheaded step-child of motorcycle racing. First Suzuki then Kawi and now KTM.

 

[MotoAdventure GasGas]

Be careful lumping Kawasaki in with the other fellas. They are disbanding their factory team, but are still supporting the sport. We have 2 of our 5 Team Green sponsored riders for 2013 as offroad enduro racers, not MX'ers. And as far as we know, contingency will still be paid for enduro events, where as the big Orange monster is stating explicitly that they are dropping all money for the offroad side. We do wish that the Japanese would build some off-road bikes like we know they could, but in the mean time, I'll keep riding my Gasser.

 

[singletracker]

I was referring to them dropping their factory team in order to pay the high salaries required of the MX stars. To me it shows that they are switching their resources around as well.

 

[tm_enduro]

I suspect that we will see KTM offroad $$$ shifted to Hbg. Lafferty and Bobbitt have signed for 2013. I expect offroad contingencies to go to the blue / yellow bikes.

 

[jpelaston]

I suspect that we will see KTM offroad $$$ shifted to Hbg. Lafferty and Bobbitt have signed for 2013. I expect offroad contingencies to go to the blue / yellow bikes.

Husaberg is where they are putting guys as a last chance. Bobbitt had a 2 year deal with KTM. They moved him to berg to make room for Baylor. If he doesn't win a lot this year, he will be following Fahringer right off the team.

 

[ScottyR]

Husaberg is where they are putting guys as a last chance. Bobbitt had a 2 year deal with KTM. They moved him to berg to make room for Baylor. If he doesn't win a lot this year, he will be following Fahringer right off the team.

This is correct. I have it from a very good source that Bobbitt could either ride a Berg in 13 or nothing. If he isnt a top 2 rider next year he will be walking.

 

[celler]

"My focus was to sponsor a series with the highest attendance and fewest KTM racers with the hopes that contingency can improve that number. "

This makes total sense to me. I'm actually surprised KTM/Husaberg continues to sponsor as many riders as they do. They dominate offroad market share. I would guess they believe that the current level of spending can maintain and grow their market position. I believe their brand and dealer network is strong enough in offroad that they could actaually spend less and be just fine. I'm not in the motorcycle industry but as a customer I'm not buying a bike because of a large factory race effort. I do think for development reasons a factory race effort is important.

Clay has stated he sponsors people that sell bikes. That is what it is about. The motorcycle business is tough to make money in. I sort of like it that the Japanese are doing such a poor job undertstanding the offroad market because it has alowed the smaller companies like GASGAS and BETA to enter the market in bad times with bikes that are really built for a purpose. Before my GASGAS I converted Japanese MX bikes for 20 years. Innovation is not comming from Japan. Probably got off topic a little but I think it is all related.

 

[jpelaston]

This is correct. I have it from a very good source that Bobbitt could either ride a Berg in 13 or nothing. If he isnt a top 2 rider next year he will be walking.

It will actually be good for Russ. When I talked to him last, he was really praising the PDS over the linkage. He spent most of the season trying to get the suspension working on his XC. Notice that the last two or three races, he was nearly unstoppable? He had spent a couple days at RidePG with Bart Hayes to dial the XC in. It was too little, too late. With the Berg having the PDS he will revert back to suspension he had been using two seasons ago.

 

[roostafish]

"My focus was to sponsor a series with the highest attendance and fewest KTM racers with the hopes that contingency can improve that number. "

This makes total sense to me. I'm actually surprised KTM/Husaberg continues to sponsor as many riders as they do. They dominate offroad market share. I would guess they believe that the current level of spending can maintain and grow their market position. I believe their brand and dealer network is strong enough in offroad that they could actaually spend less and be just fine. I'm not in the motorcycle industry but as a customer I'm not buying a bike because of a large factory race effort. I do think for development reasons a factory race effort is important.

Clay has stated he sponsors people that sell bikes. That is what it is about. The motorcycle business is tough to make money in. I sort of like it that the Japanese are doing such a poor job undertstanding the offroad market because it has alowed the smaller companies like GASGAS and BETA to enter the market in bad times with bikes that are really built for a purpose. Before my GASGAS I converted Japanese MX bikes for 20 years. Innovation is not comming from Japan. Probably got off topic a little but I think it is all related.

It's good business sense, and now that KTM owns the market share pretty much nation wide, adjusting their effort makes sense. I'm riding KTM this year because they did a demo day and I got to see in real time which bike worked best for me on the stopwatch. I'd be riding that bike, whether I had help or not. Good thing for me, the local KTM dealer is helping me. But bottom line, I got to ride the KTM, and thought I needed a big change to push me over the edge to qualify for the ISDE.
It is a big investment to do a demo day, but KTM sold every one of those bikes and then some. It was a big production, with a semi, and a forced evaluation. Plus, Mike Lafferty was on hand, and it felt like the staff was very interested in any critical feedback. If GG could pull off something even half that organized, the bikes would sell themselves. The Gas Gas is a great bike and deserves to be considered equally, unfortunately it seems that it takes big money to get the word out.

 

[Clay]

Some interesting things about contingency....
Back in the day when contingency started, the Japanese Yen had strengthened and then weakened. Prices on a lot of Japanese products went up then back down but not on Japanese MX bikes. The Big 4 used that money to fund contingency. I was reminded of this went I went to work for KTM and there was a lot of discussion about increasing orange bike MX sales. In a meeting one of the sales guys said that KTM should pay contigency like the Japanese did. Rod Bush said "We can do this if you sales guys are ok with the prices of bikes going up $500". In other words, every person who buys a bike from a brand that pays contingency is paying a "tax" to fund the program.
In the early to mid 2000s, KTM did not pay contigency but each sales manager had a pretty substantial budget to use in his region as he saw fit. In the east we did a lot of payments based on year end results rather than individual races. Later in the 2000s the Euro got really strong and then weaker a year or two later. KTMs went up in prices but did not come down and KTM began paying contigency. Riders who buy a KTM are paying a tax that goes to pay contigency. Why would a company like Gas Gas that builds 8000 units be able to compete in cost with a company like KTM that sells 80,000 units? I guarantee there is a cost on each orange bike to fund the contigency tax.
It certainly makes sense to pay in weak series to increase sales in that series but I personally think KTM is screwing the guys "who brung them to the dance" by using the tax to pay motocrossers. I pointed this out more than one time when I worked there (prolly one of the reasons I am no longer there!) but the orange company owner wanted to out sell BMW and he believed he needed to be stronger in MX to reach this goal....which he did when he sold more MX bikes and a ton of 125cc Dukes made in India.
The only thing that baffles me is that the core KTM customer is ok with this.

 

[gasgasman]

The only thing that baffles me is that the core KTM customer is ok with this.

That's why we don't drink the orange kool aid.

 

[roostafish]

There is question that bikes are over priced. The problem is, they don't cost more than a GasGas, so how are consumers to sort that out. There is certainly a larger profit margin for KTM. They offered $300 off of a bike if you aattended the demo day, or $500 in hard parts.

 

[GasGas]

We have a pretty small market here, but KTM drives the units down the dealers throat until their drowning in stock anyways. 3 years is about the max that KTM dealers last around here. Now they are applying the same to the Husaberg dealer and they dropped the line this fall. Now the KTM dealer gets 10 more blue KTM's to sell at 10-11k a pop. Good luck to them.

 

[dcg141]

Bottom line is contingency is a tool to drive sales. If you are weak in a certain area you use it to boost sales. Also you know if you are weak then only a certain precentage will be claimed. Remember when Husqvarna had that crazy number for contengency? They knew full well that there were not enough bikes out there to claim even 1/10 of that. But it looks good in advertising and it helps sales. When you dominate a series there is no incentive to offer money. Kawasaki did it with the Mid South series until they started selling bikes then pulled back. Also the guys that really go for contengency money have zero brand loyalty. Its not a great tool for getting long term customers.

 

[roostafish]

Bottom line is contingency is a tool to drive sales. If you are weak in a certain area you use it to boost sales. Also you know if you are weak then only a certain precentage will be claimed. Remember when Husqvarna had that crazy number for contengency? They knew full well that there were not enough bikes out there to claim even 1/10 of that. But it looks good in advertising and it helps sales. When you dominate a series there is no incentive to offer money. Kawasaki did it with the Mid South series until they started selling bikes then pulled back. Also the guys that really go for contengency money have zero brand loyalty. Its not a great tool for getting long term customers.

Those Husky contingency bucks were only good for Husqvarna branded things. It's not like there was an extensive hard parts catalogue at the time. Not like KTM. If anybody wants some old Husky bucks let me know...

 

[Clay]

Bottom line is contingency is a tool to drive sales. If you are weak in a certain area you use it to boost sales. Also you know if you are weak then only a certain precentage will be claimed. Remember when Husqvarna had that crazy number for contengency? They knew full well that there were not enough bikes out there to claim even 1/10 of that. But it looks good in advertising and it helps sales. When you dominate a series there is no incentive to offer money. Kawasaki did it with the Mid South series until they started selling bikes then pulled back. Also the guys that really go for contengency money have zero brand loyalty. Its not a great tool for getting long term customers.

Good point. It's not what you post.....it's what you pay. Being very successful in a series almost makes it cost prohibitive. A brand could offer $100 million if there's only one guy racing their bike.

 

[nambo-trev]

We have a pretty small market here, but KTM drives the units down the dealers throat until their drowning in stock anyways. 3 years is about the max that KTM dealers last around here. Now they are applying the same to the Husaberg dealer and they dropped the line this fall. Now the KTM dealer gets 10 more blue KTM's to sell at 10-11k a pop. Good luck to them.

It's so strange how different it is from country to country, up here in calgary Canada all of our 300's and most 250's in the ktm lines are sold out on pre orders before they even hit the show room floor. You would never see a dealer here having a tough time selling units because there is that much demand for them.

 

[GMP]

He is in Canada too. I think its more the type of bike, most 2stroke KTMs sell on preorder, 4strokes litter the floor. Its like that here and has been for awhile. Don't dealers have to take a "package" not just what they want?