When It Comes to Discounts, Timing Is Everything!

We can hide under a rock and pretend that they don’t exist or we can embrace them as a regular marketing tool to enhance our business. In a perfect world we would get our prices right and we would not have to discount. We don’t live in a perfect world but our SiteLink Self Storage Management Software can help!

Discounts can influence customers, especially in non-essential purchases. Everybody likes a bargain and sometimes discounts validate the original decision to purchase from a particular business. Often, customers will highlight to their friends how much discount they got from a particular store. Many consumers see it as a personal challenge to negotiate the biggest discount they can, making them feel good. They feel like they won some kind of battle.

Sometimes the business frames expectation of the customer. There is little doubt that Self Storage operators have moulded customers into believing that they should expect a discount over the standard rate. Over time, potential Self Storage customers expect a discount.

The impact of discounts other than that of the effect of the discount to revenue streams has not really been tested. When business is slow, it takes real business skills try and generate more business. some just take the “lets give discounts” approach – I call it the “Used Car Salesman” syndrome.

When these guys can’t sell cars they start to discount them. In many cases, they didn’t even speak to any customers to determine if the price was too high, let alone have an opportunity to negotiate. Often, decisions to discount are made on the premise that customers will miraculously pop out of thin air when prices are reduced.

It all depends if the customer knows your price in the first place. With the Internet becoming the tool of choice for shoppers it’s very easy for them to compare price and make a buying decision based on what is presented on your website. Make no mistake, customers are shopping for Self Storage online every day.

US Self Storage Aggregator, US Storagesearch.com, recently reported a 400% increase in online reservations during 2011. These online reservations wouldn’t exist if Self Storage their operators continued to hide pricing on the Internet – the fear that their competitors will see the price and therefore undercutting them not an issue.

Consumers make choices every day on airline websites, rental car websites and on accommodation websites. Whilst many consumers shop on price, plenty buy for other reasons, including the most important reason – convenience.

Discounting is often used as a tag or keyword for websites to attract those customers that search by those criteria. So, as an example, if I were to search “discount Self Storage in XYZ”, would your Self Storage site rank?

Recent research also shows that discounting has very little effect on the quality of the brand. Customers are expecting discounts and it’s become part of the retailing mentality of many retailers. It’s a matter of how you want your business to grow that will determine the level of discounting that you provide and to what extent customers react to the discount by doing business with you.

Paul Darden,a respected Self Storage owner developed a product called “District Manager”, designed to interface with SiteLink Web Edition. Analysing in great depth discounting, concessions and a myriad of other operational issues., “District Manager” is real insight into your business.

Paul and his team analysed the effect of discounts, how much money was given away and moreover the timing of that discounting and what effect it has on revenue streams and the results are very interesting.

The most common discount in the Self Storage industry in his sample is the “One Month Free” discount.

It may be obvious that you’re giving away one month of revenue but that is entirely dependent on the length of stay of the customer. If a customer only stays for two months, then a 50% discount is the outcome. That may not be what you wanted to achieve by giving the discount. Is the “First Month Free” the best month to give away? Paul’s research indicates that is not the case.

The “ 1 Month Free” was pioneered in the US by some of the larger operators earlier this decade, often with conditions that had to be met for the discount to be provided. Recently, “First Month Free” specials offered by some operators have been promoted with few, if any conditions.

The timing of the “Free Month” special is critical to determine the overall discount that the customer ultimately gets. Paul’s research shows that if you have a “First Month Free” discount strategy that you will attract Storers who stay for an average of 7.2 months. As a comparison, “Pay 11 months get one Month Free” delivered an average month stay at 43.2 months, reducing the effect of the discount.

Paul analysed over 500,000 discounts and by far the ‘One Month Free” discount was the most popular discount given. There are so many discount plans offered by so many operators it is very difficult to analyse which Discount type is the best to generate the most amount of business for the least amount of discount.

It would appear that discounts that offer a “Free Month” for some prepayment period into the future generate business but have the least cost.

Interestingly, his research shows that the “One Month Free” discount is best used when the facilities occupancy is less than 75%. Over 25 separate discount strategies were sampled and these were linked to occupancy rates. As occupancy rates increase, then the need to discount is reduced to maintain occupancy. For example the discount that has the least impact on facilities with a 95% plus occupancy was the “Free Merchandise or Boxes” discount. The next most popular was a $10 discount on a one-off basis. Discounts become more generous as the occupancy decreases.

The “Seventh Month Free” discount showed that customers stayed for an average of 65.2 months and it showed that discounts given for longer term occupancy loyalty that cost the least amount of money were still providing some reward to the customer who committed to stay for longer term.

Evidence that some of the more bizarre discounts that are offered by some operators, give away too much rent and in reality not that many customers take advantage of them. As an example, a “20% off for six months” special delivered less than 1000 actual discounts over 500,000 discounts. The most bizarre discount, “Rent For 12 Months, Get Six Months Free”, was only given 286 times. An unbelievably attractive discount and the reality is that hardly anybody took advantage of it.

Result from the analysis shows the top 3 discounts were:

1. One month free
2. Stay 6 Months, 7 month free
3. 5% discount