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September 13, 2019
Deciding what to price your storage unit rentals is a challenging endeavor.
As a self storage operator, you can do some market research to see what competitors are charging, but that process will only reveal so much. You can peruse a competitor's website or have a friend go to their facility and talk to a manager.
However, the price they offer will only get you in a ballpark. If a competitor's facility has different amenities, sizes, or numbers of units, then your rate will have to be tailored further.
In Self Storage, even a facility located down the block from your business adds different value to different customers, which will affect your facility pricing.
To hone in on a reasonable price, you can try to calculate the cost of your facility's operations and the cost of doing day to day business. Employee wages, salaries, price of software and hardware, utilities, the price per square footage to maintain are all numbers you can utilize to get closer to a rate.
However, this method is too inward of an approach by itself. Customers understand that to operate a business it has costs, but they do not care about them. They want value, convenience, and empowerment throughout the process.
The importance of finding this comparable rate will lead to increased occupancy and keep the price of your storage unit rentals from being a hurdle for most customers.
This article is not to harp on the difficulties without giving a solution.
The solution being value-based pricing.
There is a pricing methodology that is already successfully implemented in other industries. Together with my fellow co-founders of StoragePug, we are making it our mission to apply value-based pricing for Self Storage on the internet.
The pricing approach that will hurl the self storage industry forward is value-based pricing. Dr. Warren Lieberman and his team at Veritec are leading the way when it comes to value pricing for self storage. Other names for it are convenience pricing or value optimized pricing.
In the industries of hotel rentals, car rentals, and airplane ticketing, value-based pricing provides convenience to customers by allowing options to upgrade or to personalize the degree of service with each exposure.
A pragmatic, fundamental feature of value-based pricing is developing buckets, or price tiers, to place your storage units within.
Typical tiers to categorize your rentals would be; "Standard" and "Best Value" and "Premium." These tiers should read to your customers as; good, better, and best.
Value-based pricing is rooted in the concept of understanding your customers. A partial reason for value-based and Self Storage going hand in hand is because of the fixation that the self-storage industry has on providing excellent customer service to tenants.
To place your storage units within appropriate price tiers, you need to realize the convenience and value each unit provides to customers.
Organize your amenities, try and realize every feature that is associated with renting a storage unit. Then try to attribute a price for those amenities.
What should it cost a customer to have a powered unit, a climate-controlled unit, or an extremely secure unit?
Not only does this process of pricing your features help to price them correctly, but it also helps to sell, communicate about, and market these features in the future.
Other features to price and organize are the sizes of units and the locations within the facility these units reside.
The industry typically prices their services solely on the various sizes of units. However, facilities are wide-open spaces, and the specific location of units also provides convenience and value to customers. For example, a unit next to the entrance, exit, or elevator, stairs, or security cameras and office should be prioritized and attributed a cost to consumers for selecting these units.
The big takeaway is to look at these locations, features, and sizes through the eyes of your consumers. Just because you prioritize an amenity because of cost or perceived value doesn't mean customers do too.
There two significant ways value-based pricing is going to create success for all self storage operators that decide to put the work in to implement it.
Firstly, value-based was created to optimize purchasing online. That is why the hotel, car rental, and airplane industries have implemented it with success. Most modern customers exist online and want to be able to compare and act on buying decisions immediately.
By creating a value-based pricing structure at your facility, and having this reflected on your website will result in more rentals and increased revenue.
Secondly, value-based pricing can take advantage of both high and low occupancy. For a while, self storage operators have tried to achieve the "perfect ratio" of occupancy, an equilibrium of paying tenants and rentable square footage; 92% facility occupancy.
Because each customer selects the price they want to pay by finding the unit for their needs; low occupancy and high occupancy can affect your price tiers.
For example, a 10x10 climate-controlled unit close to the gate will have a different price each day, depending on the availability of each feature, location, and size.
Currently, the self-storage industry trains facility managers as salesman.
Self storage managers are in charge of so much of the day to day operations, that being responsible for up-selling is short-sighted.
Managers will either become stretched too thin or let maintenance and customer service go to the wayside because they are too focused on increasing revenue through in-person rentals.
Value pricing explicitly avoids hard selling. This pricing concept emphasizes the expertise of managers. Instead of a salesperson, value-based pricing creates problem solvers out of managers.
These price tiers will communicate the cost of features, sizes, and location concisely. Managers will then be asked to join the process to advise and help customers.
This value-based structure is different than the current self storage model of having managers sell units at whatever price and then raising rates strategically. This current model does not create convenience or value for tenants.
StoragePug hopes this article was an informative overview of value-based pricing and its role in self storage.
Here is a basic outline for implementing it at your facility.
Value-based pricing and the success it can provide to your facility and self storage operation calls for a commitment — a serious one, at that.
A commitment to research, training, and having the correct tools of execution like appropriate software and an integrated website.
Furthermore, it is an implicit belief that self storage will need to become more modern so to keep growing as an industry. Overcome this stigma and come to the realization that by compromising and understanding potential clients the industry moves forward.
Value-based pricing will remove the noise and mistrust that modern customers may experience based on current and past practices.
Customers live, look, and decide to buy online, and we need an appropriate pricing scheme to continue to add value to our tenant's lives.
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