Self-storage Value Pricing involves assigning “good”, “better”, and “best” pricing tiers for the same unit type based on attributes of a unit. These attributes include things like climate control and accessibility (for example—drive-up, ground floor versus upper floor, etc.). But if we pull back a bit, what is Value Pricing really about?
In a word: convenience.
Why is the concept of convenience so important? After all, units of the same type look the same and have the same dimensions. You take a picture of one, and that can be used for all units. It follows then, all the prices should be the same. Right? The customer, after all, sees the same picture you do.
Or do they? Sometimes we think we know the customer more than we really do.
To get a better perspective of convenience, let us say you are about to book one airline ticket for yourself in economy class. You have selected the flight online and are about to book a seat. The airline’s reservation system displays a diagram of available seats. Some seats may be available at a base fare and others for a supplemental payment. Quick…what do you find yourself doing?
You start deciding which of the identically priced seats you prefer. You start deciding which seat is most convenient to you. It might be a window seat where you can peer out and have a wall to lean against. Or maybe an aisle seat to quickly get in and out. Or it might be any seat if it is closest to the aircraft exit. For many, you try hard to avoid that dreaded middle seat, especially if it is priced the same as other seats.
What if the airline charged just a little bit more for that “desired” (read: convenient) seat? You might not pay more, but some will. What if the flight was for 5 hours? 12 hours? Is the flight for business or pleasure? Now we might be even getting to the point where the importance and meaning of convenience may start to change for you.
The seat price might increase just a little for the more convenient seat. But to the airline, with so many seats and aircraft, it can make a big difference to the airline’s bottom-line. And, for those who truly want to spend as little as possible, booking the middle seat may be preferable to paying more for an aisle or window seat.
To be sure, airlines may or may not charge for convenience quite this way. People often travel in groups and want to sit together. The airline does not necessarily want to charge differently in this case. Airlines, however, do have other, rather sophisticated ways to differentiate pricing.
In fact, it is no secret that a person in an identically convenient seat on the same flight can pay significantly more, or less, than you. We have come to accept that.
But we do not have to go that far. Convenience is something that we are often willing to pay for, whether we are aware of it or not. For many self-storage facilities, we have found that 25 – 35 percent of customers will pay more for a more conveniently located unit, within a specified unit group such as a 10 x 10, climate controlled, upper floor unit. And for stores in lease-up mode, the upgrade rate can be quite a bit higher.
In the past, a barrier to implementing value pricing was keeping track of the sheer volume of units and tiers of value prices. Now, with easy-to-use revenue management systems and software, this has become a non-issue. In fact, these systems more than pay for itself, increasing profits net of any system costs.
The focus now, is really appreciating the value of convenience.
Warren joined us for a virtual workshop and live Q&A where we dove even deeper into value pricing. Watch the full Session for free below!
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