Alicia Milner is the President of the Canadian Natural Gas Vehicle Alliance and a Vice President of IANGV. Here she outlines the factors responsible for the success of natural gas forklifts, using the Ontario market as an example.
Natural gas is a versatile low carbon fuel. The rapid growth in use of natural gas for transportation is a global success story that is increasingly attracting the attention of governments, the automotive industry, and the media. Data indicates that 85% of the 8.7 million natural gas vehicles in use today are light duty passenger vehicles, and that natural gas is increasingly being used for niche vehicles. Forklift trucks are an excellent example of niche vehicle success for natural gas.
Ontario is Canada’s largest province with more than one third of the national population. Manufacturing is an important area of economic activity with much of Canada’s automotive industry located in the province. Over the past seven years, approximately 150 industrial facilities in the province have been converted to natural gas for their forklift trucks including facilities operated by Honda, Volvo, GM Diesel, and Magna. The very successful marketing model used in Ontario is now being adopted in other parts of the country.
Marketing has been defined as ‘the ongoing process of planning and executing the marketing mix’ where the marketing mix is identified as the 4 Ps: product, price, place, and promotion. Natural gas’s success in the Ontario forklift market is a case study in achieving results through a 4P approach.
Having a product that embodies the characteristics that customers want is fundamental to market success. Natural gas-powered forklifts offer many benefits of interest to potential customers. Natural gas forklifts significantly reduce carbon monoxide emissions compared to propane forklifts which dominate the market in Canada. Better indoor air quality improves worker health. There are worker safety benefits with natural gas as the heavy lifting associated with on site propane tanks is eliminated. Natural gas has a higher ignition point than propane and due to the extensive natural gas distribution system does not need to be stored on site as is required with propane.Â
A successful product strategy incorporates an approach to pricing that is based on what the customer is willing to pay. Natural gas forklifts provide a cost savings to the customer based on lower cost fuel, reduced maintenance costs, and an innovative all-in leasing package. While Toyota makes a factory-direct natural gas forklift, aftermarket conversion of propane lifts is the most common approach. Conversion costs are approximately CDN $2,600 per forklift. Fuel cost for natural gas is approximately 50% lower than for propane. The cost to lease a vehicle refueling appliance is built into the customer lease as is the appliance installation cost and forklift truck conversion cost, so that a customer pays less per month than they would with propane. The customer also is able to significantly reduce their electricity costs as fewer facility air exchanges are needed due to natural gas’s lower emissions.
Targeting a channel where there is a good product fit in the right geographic area with the right quantities of product available is essential for success. The Ontario market’s concentration of manufacturing and warehousing facilities has provided a good fit for natural gas forklift trucks. The size and scale of facilities, 24/7 operations, increasing interest in minimizing risk, and enhancing worker health and safety are all customer considerations that fit well with the benefits offered by natural gas. In addition, there are existing customer relationships through the local gas distribution companies that provide a cost effective channel for sales activities.
Promotion is the means to inform, educate, advertise, and ultimately sell to the customer. Direct mail, fax back information requests, and breakfast sessions are used for initial contact to inform Ontario-based customers about natural gas forklifts and their benefits. Follow-up telephone calling is used to identify contacts with an interest in learning more and in-person meetings are held to discuss the customer’s specific needs. Print and web-based marketing materials including customer success stories provide additional promotional support. Modest incentive funding offered as part of the local gas distribution company’s demand side management programs assists with motivating the customer to make the change.
The comprehensive, 4P approach used in Ontario has yielded excellent results and demonstrated the potential for natural gas in niche vehicle segments. Greater than 150 Ontario-based facilities now use natural gas-powered forklifts. Approximately 10 million m3 of natural gas is dispensed as fuel and this demand helps offset recent consumption declines from the industrial and commercial sectors with level sales volumes that are not weather-dependent. And, a successful niche vehicle market has been developed that further advances the interests of the natural gas vehicle industry.