Pricing is a critical element of your business. Many businesses operate in industries with margins of 15% or less and are constantly measuring their pricing policies. Yet in self storage, operators often give little consideration to their overall pricing strategy and the impact, positive and negative, this can have on their business.
Just like every other element of business, the electronic revolution has changed pricing models. Gone are the days of weekly price lists and manually updating price tickets. Now industries like airlines, hotels and even grocery retailers engage what is commonly known as dynamic pricing, changing their prices on the fly based on supply, demand and other influential elements. While dynamic pricing is used by some self storage operators in Spain, it is hardly common. Furthermore, some companies that have modern pricing systems for new customers do not have a similar process for existing customers. So, what is your pricing policy and is it maximising revenue for your business. Here are some top tips for considering pricing self storage.
Increase prices on existing customers regularly.
Customers generally expect to get a price rise at some point for services they continue to use for a period of time; particularly as we head back into an inflationary period. Most prices go up at least annually so your storage fees should do the same.
- Increase prices on the anniversary of a customer moving in. 9 or 12 months after they moved in, rather than raising all prices once or twice a year at a specific time, say January. This lets you evaluate the impact of increases on smaller groups of customers and ensures all customers get a timely price rise
- Make the price increase worthwhile. Some customers will always complain about a price increase, whether it be 2% or 10%. Make the price rise worth the effort, especially if you are only doing it annually. Remember if you put your prices up by 5% and lose 5% of customers you are no worse of financially and have more units to sell to high paying customers. It is very unusual for a self storage store to lose that many customers regardless.
- Don’t over explain the price increase. You don’t need long letters justifying why you are putting your prices up. You don’t even need to tell customers exactly how much the price is increasing. Just a short polite message saying that as of this date your new storage fee will be €xxxx
- Have a plan for dealing with complaints. Don’t let your staff undo the price rise by offering discounts to anyone that complains. Have a plan for dealing with complaints. Don’t be afraid to let the occasional customer leave, they are probably going to leave soon anyway. Especially if your occupancy is good, you have the chance to replace them with a new customer at the going rate.
- Don’t let existing customers fall below the new customer rate. If new customers are paying a certain value for your units, this tells you what they are worth. Don’t let existing customers fall behind this, otherwise they are just getting never ending discounts. Consider this when setting your price rises. Existing customers have experienced your quality service and understand the service you provide more than new customers so they are more price tolerant.
Discount for purpose
Discounting is a part of self storage. Operators use discounts to encourage new customers to use self storage. Short term discounts are used as most customers end up staying longer than they plan to. However, all discounts should be done for purpose and measured.
- Don’t discount on unit sizes with high occupancy. If you only have 2 or 3 units of a particular size left, why discount them? Wait until the right customer comes who is willing to pay the full price. After all, if you were selling your car, would you sell it to the first person that showed up offering you 10% less than your asking price?
- All discounts should be for a short period, not forever. Don’t reduce the monthly price of the unit unless its for a fixed period. So 25% off the first 3 months, or second month free, rather than dropping the actual rate. This way if a customer stays long term they return to the normal rate.
- Measure the impact of your discounts. Are they brining you more customers? How many customers are staying after the discount finishes? How many are asking about the discounts you have in your marketing? Are your sales people leading with the discounts or saving them for the customers that need them?
Don’t blindly follow your competitors
Just because your competitors are discounting does not mean you have to. You don’t know what is happening in their business. Are they opening up a new expansion while you are basically full? Have their enquiries dropped of while yours have increased due to your recent marketing campaign? Are they blindly following another competitor on the other side of town who does not compete with you? Nothing happens quickly in self storage so wait and measure the genuine impact of a competitors price change before you act. Before you change your prices bases on your competitors consider the following.
- How many enquiries are mentioning the competitors prices when they talk to you?
- Are your enquiries dropping more than they normally do at this time of year?
- Are your conversions and occupancy dropping?
- How is the competitor marketing this discount?
- Is the discount from a real competitor offering a similar level of product and service in a location near to you.
- How full are you and what impact will discounting have on your return per square meter not just your occupancy.
Act on data not emotion
Pricing one of the most crucial parts of your business, make sure you give it the attention it deserves. Most importantly measure the impact on your business and act on data not emotion. Measure the impact changes to pricing and discounts have on your business and base your pricing on this, not what “feels about right”.
