By Fred Gleeck
No matter how much you invest in marketing your storage business, you need to spend intelligently. But before you expend a dime, its important to understand the value of your customers. In other words, you should know what youre getting for your marketing dollars.
Here is a way to compute how much each customer is worth to you. Take your average length of stay in months (the national average is approximately seven months for residential customers). Multiply that number by the rental rate for the average unit rented (the national average is $80). In this example, you get a total of $560 (your gross revenue). If you are in an area with higher rental rates, substitute your own numbers. Dont be overly concerned with the precision of your figuresits more important to understand the principle.
Next, subtract your hard costs of doing business. To make things easy, lets say they comprise 50 percent of your gross revenue, or $280. If youre fairly regular about generating referrals, every fifth customer will win you another rental, so you can re-add $56 (20 percent, or one-fifth, of $280) to your total, leaving you $336. This is the number you will work with for the sake of the exercise. In reality, it may be slightly higher or lower.
Choosing Your Marketing Method
Now its easy to determine whether a certain method of marketing makes sense. If the cost of acquiring a customer is more than $336, look to another approach. If the cost is lower, consider it. In an optimal environment, you want to put all of your marketing dollars in the area that provides the greatest return for your effort.
There is only one wrench in the works. Some groups can only be attracted through specific marketing methods. For example, some will only look through the Yellow Pages; others will only respond to direct mail. Still others only do business with you if they are referred by someone they know. For this reason, you must employ a variety of marketing techniques. Different target markets require various approaches, which come with varying costs. Use those methods that are the most cost-effective, but realize some customers cannot be captured using inexpensive marketing. You may need to spend more to attract select groups.
Understanding this, you cannot fall back on lazy marketing as practiced by the vast majority of self-storage operators. Many owners simply place a Yellow Pages ad and wait for the phone to ring. Anyone who does this and complains about how tough the business has become is deluding himself. I dont know of any other businesses in which owners feel they dont have to work to be successful.nIf you got into the self-storage business thinking you would not have to work at marketing, think again. Lack of attention to promotions will make your long-term survival very questionable.
Every marketing-related activity you do should be based on this key premise: Spend the least amount possible to get the greatest in return. You should always be looking for a return on investment. The trick with marketing is to spend very little and have the net payback in terms of rentals be substantial. This is your ROMD (return on marketing dollars). I coined this phrase because few people in the industry had thought about it before. The old-guard, elite operators had been operating on a dumb and happy philosophy.
What do I mean by this? For years, the storage industry was bursting at the seams. Owners threw up a building, tossed a so-so ad in the Yellow Pages and watched their bank accounts grow with little or no marketing effort. Dont get me wrongI applaud the pioneers in this industry for their foresight. They built early and deserve credit for seeing an excellent opportunity. However, the rules of the game have changed. They are now competing in a completely different marketplace. So are you!
It is getting considerably more difficult to make a bundle of cash in this business. Competition is increasing daily. The big REITS are building in towns we thought they would never touch. I recently visited a facility in the San Diego area where there were 13 storage facilities within 1 mile of each other. You think you have it bad! And it will get worse. Investors now know what a great business self-storage is. This can only mean one thing: decreased profits and more competition.
There are lots of different ways to market your storage facility; but the top seven ways in terms of ROMD are:
- Generating repeat customers
- Encouraging referrals
- Using a storage hotline
- Cultivating centers of influence
- Implementing direct mail
- Maximizing free publicity
- Running Yellow Page ads
I have touched on each of these methods in past columns. Advertising in the Yellow pages is not even in the top five in terms of ROMD. Does this mean you should not use them? Absolutely not. All it means is there are other methods with much higher leverage ratios. Your marketing efforts should be a balanced mix of different techniques. Concentrate on those which give you the best bang for your buck!
Look at every method of marketing you use and assess its cost vs. its benefits. Understand that certain techniques will have much higher return rates than others. Use them allas long as they are profitableto maximize your chances for success in this ever more competitive storage marketplace.
Fred Gleeck is a profit-maximization consultant who helps self-storage owners/operators during all phases of the business, from the feasibility study to the creation of an ongoing marketing plan. He is the author of Secrets of Self Storage Marketing SuccessRevealed!, available for purchase at www.selfstoragesuccess.com, as well as the producer of professional training videos on self-storage marketing. To receive a copy of his Seven-Day Self- Storage Marketing Course and storage marketing tips, send an e-mail to [email protected]. For more information, call 800.FGLEECK; e-mail [email protected].