PRICINGTrick or treat?
|Copyright 2014 by Virgo Publishing.|
|By: Harley Rolfe|
|Posted on: 11/01/1999|
PRICINGTrick or treat?
By Harley Rolfe
Pricing is one of our most useful yet dangerous of business acts, and Halloween provides the perfect analogy. If you are only going to do one thing to change your marketing "mask," pricing is your choice. The plan is to be sure that there are "treats." The assumption here is that you want to maintain and improve your market stance without changing your actual offering.
You face a conspiracy aimed at making your life difficult. When the only difference among products is price, you are playing their game--that of the government and customers. The customer wants the lowest price and he also wants the buying decision to be simple, so he needs to regard all the choices as the same. Then he can play one rival off the others and just compare prices. As to the "Feds," U.S. businesses agree to abide by the anti-trust laws. These are mostly aimed at maintaining competition. Most of these laws were written as a result of excesses by suppliers and are aimed at what many aggressive marketers want. We must figure a way to prosper without running afoul of the Feds and still attract sufficient prospects to keep the joint full. It's what we marketers do for a living. Are we up to the task?
Time out for a moment here: You have a "sleeper." Self-storage units don't cost much. A 10 percent advantage on a $40/month unit is $4--no big deal. The real problem is that the prospect needs some basis on which to make his decision. Self-storage prices are not, by themselves, significant; they become so only if there is no other basis on which to make that decision.
Engineers use the laws of physics to make things work; we marketers use the laws of human nature/behavior. All animal life (that's us) seeks to conserve the expenditure of effort/resources to achieve its ends. "Price" extracts resources from the buyer. His normal reaction is to resist or minimize them. He can't help himself: It's as fundamental as dealing with hunger, maintaining body warmth, reproducing, etc. Concern about price is visceral.
But what is price? There are at least three elements: the price in dollars, the price in shopping time and the price in analysis effort of various choices. The prospect wants the lowest and/or simplest. This is further complicated for us because, in many cases, he doesn't want a self-storage unit in the first place. The buying process is a hassle when the prospect associates it with little pleasure, so attempts by us to deliver our pitch can create enmity. When the prospect calls asking for the rate on a 10-by-20, he's already decided that the location is OK--he just wants the cheapest price. We must create our offerings so that there is legitimate need (as seen by the buyer) not to provide this information.
Price plays many roles. It is a powerful attention-getter. It is used exhaustively by many retailers, such as grocery stores, auto dealers and furniture dealers. Mass marketers such as Kmart and Wal-Mart make their living by suggesting that all their prices are lower. Check the Wal-Mart's motto--"Always low prices." The secret is the whole price. An important part of the prospect's resource allocation is his personal time. If Wal-Mart can get the prospect to make a trip to its store, the store has won. So, imply low price, but deliver convenience. How about self-storage? Same thing.
But how do you do that with a one-dimensional product? Create a choice that depends on the tenant's attitude. Here are some approaches:
Price does many things well. It gets attention, it permits the offering of choice, it sets the terms of your tenant contract. But it can also get a facility into a peck of trouble if not used carefully. Use pricing creatively, but watch out for spooks!
Harley Rolfe is a semi-retired marketing specialist whose career included executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book Hard-Nosed Marketing for Self-Storage.