Rate reductions should be used as a temporary means to attract customers, not an ongoing sales crutch or philosophy.
I can’t think of another business that relies as heavily on discounts as self-storage, other than maybe mattress stores. I despise rent concessions, but they’re so prevalent in our industry, it’s difficult to function without them. Still, any special deployed should be considered a temporary tool, not a permanent philosophy. For a sales promotion to pay off, you need a strategic approach. By beginning with the end in mind, you can create a self storage revenue plan that’ll help avoid the challenges chronic discounting can bring.
When I ask e operators about their self storage revenue management systems, the answers I get are often a mix of “I do what the other guy is doing” or “I really don’t know.” Too often, they choose the easy route and cut rates. Before going down this path at your own facility, put in the time to do the due diligence and build a solid business foundation. This includes training staff on sales and ensuring your property is well-maintained—things that can help you kick the crutch of discounting and justify higher rental rates.
Know the Math
Discounts aren’t as harmless as you might think. If your average unit price is $100 and the average length of stay is nine months, your average customer value is $900. If you’re offering a free month of rent and the tenant came from an online self-storage aggregator, that affects your numbers substantially. That $900 customer might now be worth only $650, which drops your average unit price to $72.Offering discounts means you’re playing in the mud with everyone else. What are you doing to set yourself apart from the site down the road that’s doing the exact same thing?
Some operators argue that discounting helps them fill their sites quickly. This might be true, but the only way to know for sure is to track the closing rate on discounted vs. standard-price rentals. Are markdowns necessary, or have managers become so reliant on offering them that they no longer know how to sell without one? Self storage revenue is a lot more than the set it and forget it.
Instead, Be Strategic
Taking a tactical approach means setting revenue goals and devising the right type of self-storage unit pricing to achieve them. This will help you avoid the common challenges associated with lingering discounts and bring in more revenue. To ensure a promotion is successful without damaging your business in the long term, consider these planned approaches:
First, find clarity.
Be clear about why you want to offer a discount. Typically, the goal of a special is to acquire new customers; but some operators may offer one as a thank-you to members of the community, such as senior citizens, military personnel, or first responders.
Typically, these types of promotions won’t be the deciding factor in whether a customer chooses to rent with you. While it’s OK to offer them, make sure you control their use. Giving 5 percent off here and there might not seem like a lot, but at year-end, when 60 customers have taken advantage of the offer, it adds up.
Keep it simple.
I’ve seen self-storage operators get extremely creative with their pricing structures, but if you’re going to offer a discount, make it easy for staff and customers to use.
Offering 25 percent off the first two months of rent isn’t a simple discount. There’s a Reddit feed I love called “Explain it to me like I’m five.” It’s great advice for marketing, too. Train staff. One of my biggest issues with discounts is, over time, employees believe they can’t sell without one. If they believe they can’t sell without a crutch, they never will, and that’s a real problem in self storage revenue.
Use a limited-time offer.
This gives new customers a reason to rent or reserve now rather than later. Consider using a callout on your website and other marketing that states, “Only 2 Left!” Scarcity is a great persuasive strategy that creates a sense of urgency, particularly online. Upsell. When you offer a discount, offer other items to help make up the margin. For example, sell the customer some tenant insurance or moving supplies. The renter may move in for a dollar, but upselling can at least increase your per-rental profit.
Focus on hard-to-fill units.
You likely have units at your self-storage property that are less desirable than others, maybe because they’re upstairs or farther from the office. To attract budget-conscious customers, consider selling these spaces at a lower rate than “premier” spots.
Try bundling.
Rather than lowering your rental rates, try selling the unit together with another desirable product or service at a “special bundle price.” For example, if you have a moving truck, offer to let the customer use it for free if he rents a storage unit of a particular size or for some specified length of time. The idea is that the individual prices of products in the package become less expensive vs. buying them individually. Get creative with the concept, and be sure to measure and record what works to increase your self storage revenue.
Tools for Tricky Times
Let’s take a moment to address the current and future situation regarding the coronavirus pandemic. As the crisis ebbs and flows, so will customer behavior. For self-storage businesses, online and phone-based demand has increased, while walk-in traffic has decreased. Even with safeguards in place, most facility operators are trying to limit the presence of people at their facilities.
It’s more critical than ever to take advantage of every phone call and Web lead you receive. That being the case, I encourage you to maximize the positive impact of whatever resources and systems you have at your disposal. Make sure your team is armed with the proper tools, including a smart discount system, to help them succeed. I suggest adjusting your phone-sales scripts and online content to promote any specials you offer.
Remember, rate reductions should be used as a temporary means to attract customers, not an ongoing sales crutch or philosophy. The moment you begin to rely on them, you’re moving in the wrong direction—away from profitability!
February 29, 2024