Price Disparity – Are You Leaving Money In Your Spaces?
It’s against the law in Australia to fix your prices to competitor’s prices and the law takes a very dim view in markets where competition is low and prices appear to be the same. We have all seen how petrol stations appear to have the same price every day and then miraculously when one service station price goes down by $.15 a litre the others follow suit if by magic!
In the customer’s mind “petrol is petrol” and very few customers have brand loyalty. Customers usually shop for fuel on the cheapest days at the cheapest service stations. Some are even prepared to queue up for long times even if it is to save under one dollar and are of course mesmerised by the 4c a litre coupons.
Fuel is a necessity and we need it to run our cars and therefore only wish to pay the least amount of money for it. All smells the same!
Self Storage is different. It’s not a grudge purchase but it certainly fits into the “I only buy storage when I need it” category.
Self Storage does not have the industry awareness that the fuel industry does. There’s certainly a lot more petrol stations and there are Self Storage facilities especially in high exposure locations. Nevertheless, statistics show that the majority of Self Storage enquirers actually rent a space from one of the facilities that they have contacted. So it is inevitable that a Self Storage customer will pay the asking price of the Self Storage facility that for them is the best deal.
To a potential storer a Self Storage facility may be very little different in reality to a petrol station: “a tin shed is a tin shed” one customer told me one day when I was on site doing some work!
They may very well be right. Whilst we all work in the industry we could argue that not all tin sheds are the same!
Some sites offer much better service of others including security, cleanliness and much more. In the eyes of the customer though, do these differences stack up to as much as 50% difference in a small geographical area?
What is the time-honoured method of setting prices for Self Storage spaces? Many might consider that they contact their fellow Self Storage facility and conduct a “mystery shop” and find out what the prices are to help them set their own prices. That’s one way.
With the advent of rate management systems in Self Storage software like SiteLink Software, no two Self Storage units may be the same price today or tomorrow. It’s a matter of supply and demand, not unlike the airlines, or the rental car industry.
Increasingly, we are seeing smarter Self Storage operators exposing their prices on the Internet. For those that do and are competitive, they have an opportunity to do business with customers who are ready to buy. Our new age impatient, Web savvy customers, won’t spend much time on any website where the detail is confused or the price is not exposed. There are some operators that would contend that it is difficult to compete with fellow Self Storage operators who do not expose their prices on the Internet. On the other hand the operators who have exposed their prices on the Web and give their customers an opportunity to move in or reserve a space immediately, pick up customers every day who are ready to buy. Research shows that most people who enquire about Self Storage are ready to buy so therefore having a call to action on your website can lead to additional business. We are not any different to any other service business.
If customers think that a “tin shed is a tin shed”, then why is there a major disparity between prices of similar facilities in most markets?
It’s healthy to see competition, but I believe damage is done to the credibility of the industry when there is a major disparity between what appears to be the same product at similar facilities.
I am not advocating setting your prices the same as your competition – far from it. As an industry we have created no price expectations for our product in the marketplace. The average consumer would have no idea how much Self Storage space costs.
I often use the example of Hyundai and Mercedes-Benz. Most of us know how much each of these vehicles cost, we see the ads every night whilst we are watching the news. I am not in the market for either one, but anecdotally I know how much they are.
The same cannot be said for Self Storage. A few years back, the SSSA completed a demand study which proved the point that the price expectation of potential customers was about half of the actual rates charged. Generally sticker shock is pretty high in Self Storage.
So the burning question is “Are you leaving money on the table? I would suggest that some of you are by not getting the pricing right of your Storage spaces in the first place. There is little doubt that larger operators use sophisticated tools to price their spaces to deliver a return with costs that reflect the operation of the business. If you have to discount significantly to rent your spaces in your market then your prices may be incorrect in the first place. Whilst everybody expects a bargain these days it’s important to get your pricing right prior to offering any discount. Last month our article on discounting created a lot of interest, moreover the level of discounting over 500,000 discounts checked was 7%. Do you have to discount more than 7% to rent your spaces?
There is a price disparity between Mercedes-Benz and a Hyundai for good reason despite the fact that they both cars and they both have four wheels and I don’t have to explain to anybody the difference – it’s obvious. But don’t forget they are the same thing – a car.
When there is 50% or more disparity between what appear to be the same Self Storage spaces at different facilities it can be very difficult to explain the difference to a customer. Such a large disparity can also create distrust is the customer does not know which one is value. The customer would ask themselves why there is such a big difference in price – there must be something wrong with the cheaper one and of course this falls right into the trap of the facility with the highest price. Remember, if everybody bought on price alone, the larger facilities with the highest prices would be empty. This is clearly not the case. Actually it’s the reverse.
So the potential to leave money on the table and to needlessly give money away is pretty high when there is major price disparity in the market./p>
Are you too cheap or is your competitor to expensive? If they have great occupancy, you have your answer!
Many see Self Storage as a simple commodity and in reality it probably is.
If you wanted to rent a Self Storage space would you want to know the price of the website?
If you believe you prices are competitive, then tell the world. After all they are asking by visiting your website every day!
And don’t forget to give them an opportunity to buy, right there on your front page. Right now.
If you are in the market for a self storage management system that is user-friendly, can help you make money, raise rents for each tenant individually including existing tenants based on industry-leading practices, and achieve rental rate increases then you should view SiteLink Software. A globally trusted self storage software. Click here to trial SiteLink for free!