The Market for Red Fire Trucks

These markets only grow at about 1-3 per cent a year … we need to think differently in order to increase our market share.


Anyone who thinks "fire engine red" is a standard colour would be surprised by the paint laboratory at the back of the Pierce factory in Appleton, Wisconsin.


On the wall are 125 metal plates, each painted a slightly different reddish hue.


"If you're going to spend half a million dollars on a fire truck, you've got to be able to choose the exact colour you want," jokes Jim Michal, vice-president of manufacturing for Oshkosh Corporation, the heavy truck maker that acquired Pierce in 1996.


Many western manufacturers have tried to stay competitive in the face of low-cost overseas competition by closely tailoring products to their customers' needs.


Oshkosh takes this approach to the extreme, customising its trucks according to individual buyers' needs and collaborating with customers on redesigning its vehicles.


Its experience shows how such a strategy can pay off: in the past decade, Pierce has grown at an average rate of more than 11 per cent a year.


With revenues last year of $600m - up from $180m when it was bought by Oshkosh - it is now the leading maker of fire trucks in the US with a market share of about one third in North America.


Mr Michal says Pierce's strategy of working with customers is two-pronged.


First, the company tailors each vehicle, from the artwork on its grille to the water-pumping technology. "The customer has an option list for specifications," he says. "The result is that no two vehicles are exactly the same."


While that makes Pierce vehicles among the most expensive on the market, it also wins fierce brand loyalty among purchasers.


Customers are paying about $30,000 more than it would for a vehicle from a rival, but a customer will only need for a fire truck to be replaced about every 20-25 years there are other considerations, such as dependability and the unique features the company offers.


Oshkosh is so confident that its customers will stick with the Pierce brand that in April - while the US industrial sector appeared to be mired in recession - it increased the price of its vehicles, citing rising steel costs.


Charlie Szews, Oshkosh's president and chief operating officer, says the tailoring strategy has been honed over decades.


"We operate in relationship markets. These products last up to 50 years - there are still Pierce fire trucks from the 1950s that operate in the field. We have to think long-term."


The second part of Pierce's strategy involves using contacts with customers to aid redesign and spur innovation.


Before undertaking a fundamental redesign of its basic fire truck model two years ago, Pierce surveyed its customers to get ideas for improvements.


Then the company invited more than 100 firefighters to visit the factory to give them more detailed feedback. It put them in groups and asked them to design their ideal fire truck from scratch.


The company fed ideas from this exercise into the redesign: it removed a pillar from the windscreen and changed the location of wing mirrors to improve visibility; made door handles bigger so they were easier to use for firefighters wearing gloves; and installed side airbags for extra protection.


Oshkosh also used the opportunity to measure firemen - and found out they were, on average, taller and broader than federal guidelines on cab heights and seat widths had led them to expect.


As a result, the company widened the standard seats in their trucks.During a standard sales process, too, the company has a lot of time to get to know its customers.


Customers who buy a fire truck infrequently - such as volunteer departments serving rural areas - typically have three meetings with the company over the course of the six months leading up to a sale.


Up to 10,000 visitors a year come through the factory to inspect and collect their vehicles, and Pierce uses the opportunity to collect feedback.


"We line them up with a series of lunches and dinners while they're here so we can hear their ideas," says Mr Michal.


"At every meal we have a staff member from a different department go out with them to chat informally.


Then the employees document what's been said and send it on to the engineering department or the marketing department."


Bob Bohn, Oshkosh's chairman and chief executive, says the ability to listen to customers in such an informal setting is an invaluable part of the production process.


"It gives them a chance to really tell us what they like and what they don't like," he says.


It is only through taking advice on its products from their users that Pierce has been able to claim a progressively larger slice of the fire truck sector, the company says.


"These markets only grow at about 1-3 per cent a year," says Mr Szews.


"We need to think differently in order to increase our market share."


Source: Financial Times – “Truck maker heeds firemen's call” By Hal Weitzman Published: May 13 2008