The Big Payoff

By Tom Steinert-Threlkeld  |  Posted 2004-07-08 Print this article Print

The Big Payoff Ten years ago, a typical high-end Trek road bike sold for $2,200, according to Andrews. This year, a typical price tag is $4,800.

Rolling out of its frame factory in Waterloo this year are versions of the bike Armstrong rides that will sell in stores across the country for up to $7,000, and possibly more.

The Madone bikes are named after a hill in southern France that Armstrong uses as his test each year of whether he is prepared for the Tour. They have been given an airfoil design that not only saves weight but stokes emotions. Customers "like it. It looks cool. Lance rides it. How can you beat that formula? asks Sagan.

Last year, Trek produced 3,800 of the Madone bikes for commercial sale. This year, it will produce in excess of 30,000. "There seems to be a limitless tolerance on price, says Sagan.

But its imperative, too, for Trek to move up the price curve. Ten years ago, Trek only imported bikes that cost less than $400. Now, with increasing competition from foreign companies on mass-produced frames and components, Trek imports all bikes that it sells for less than $1,000.

At its plant in Waterloo, tubes are still joined together by hand. Defects are sandblasted, then polished away by manufacturing engineer Zippie Huxtable and other factory hands. Paint is still applied by man, not vat. Decals are affixed by hand.

The handmade quality allows Trek to offer customers a lifetime warranty on its frames. But that also means the company constantly looks for ways to raise the average ticket price. One promising tack: Project One, where individuals come to Treks Web site and design their own custom bikes, from paint jobs to frame size to component choices. That can add a couple of hundred dollars, sometimes more, to a product before it gets built.

Of course, its mainstream customers are not buying speed, even though they want the lowest weight and the latest models that offer it. "I just came from L.A., says brand manager Zapata Espinoza. "Its all about status.

Even for pros like Armstrong, the look of the bike matters, almost as much as its physical characteristics. "If you look tough and fast, psychologically youre tough and fast, says Sagan.

What Sagan and his team may be recognizing, though, is that theres almost no weight left for them to slice off the bike for pros such as Armstrong. The International Cycling Union regulates the size, weight and other dimensions of competitive bikes, much the way the United States Golf Association and The Royal and Ancient Golf Club of St. Andrews do for golf equipment. The minimum weight of a road bike eligible to compete in the Tour de France is 14.96 pounds. The latest effort by the Orion team for Armstrong weighs a couple of tenths of a pound above the minimum, Sagan estimates.

The Holy Grail? A 2-pound frame. In practicality, that can be achieved today, thanks to the arrival of 55-gram carbon fiber sheets and the element analysis that can constantly identify points of least stress. But the effort to break that barrier will proceed carefully. "There would come a point where [the frame] is unreliable, says Sagan. "We might not be able to do much [more].

Trek Bicycle Corp. Base Case

Headquarters: 801 Madison St., Waterloo, WI 53594

Phone: (920) 478-2191

Web site:

Business: Bicycle manufacturer

Design Technology Officer: Michael Sagan, senior industrial designer

Financials: Privately held. Estimated 2003 sales of $500 million (OneSource Information Services).

Challenge: Design and make bicycles in America at a profit.

Baseline Goals:

  • Raise average ticket price of a high-end bicycle beyond $5,000.

  • Reduce weight of frame, to two pounds.

  • Help Lance Armstrong win sixth consecutive Tour de France.

    Tom was editor-in-chief of Interactive Week, from 1995 to 2000, leading a team that created the Internet industry's first newspaper and won numerous awards for the publication. He also has been an award-winning technology journalist for the Dallas Morning News and Fort Worth Star-Telegram. He is a graduate of the Harvard Business School and the University of Missouri School of Journalism.

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