By Harley Rolfe
People writing responsible articles don't normally offer advice on how to perform an illegal act. Monopoly practices are illegal, but we want to be in a position to run them. While we aren't interested in spending time in the clink, we are interested in being a controlling presence in our area. We look to marketing to provide that. How do we resolve this issue? Easy: Change the language. Ever run into any of these expressions? "We're number one ... The only one to offer ... We have the best ... Acme Storage stands alone..."
Don't these all say the same thing? "We are the only one, so don't look elsewhere." We think "saying it like it is" is simpler and cheaper. We sellers want to become a monopoly in at least some aspect that has the significance of control to the user. We're not picky. If we can't have an overall monopoly, we'll take some small ones. After all, most will beget the advantages we're after.
In most modern markets, any new market position is, alas, temporary. So, what we really get is a string of mini monopolies created when something new is conceived and announced. It is then replaced as the uniqueness fades. People say that the U.S.-style economy is dynamic, always-changing, evolving, etc. They're right, and for the reasons I'm discussing. Each supplier is continually pushing for a way to distinguish himself from his rivals. Most market positions will deteriorate if continual changes aren't made to restore uniqueness. Then the offering slides into becoming a commodity.
When we find that we can't stop the addition of units/facilities in our service area and become concerned about the competitive impact, we can resort to the few basic ways to meet that danger. Controlling the supply is not a serious option in most cases. However, some try it. In this business, it amounts to buying up a significant number of facilities in an area. This is tricky business.
The next response is to lower price. As a deliberate policy, offering a lower price is actually "cost" competition. You do not compete for long by chopping your return. If you have a cost advantage for some reason, then using a lower price is an excellent way to go. It works so long as the cost advantage exists. That prompts you in two directions:
- If you evenly meet the competition's price, you still must offer something to impel the prospect to choose you over them.
- To prevail exclusively on price, you must have a comparable offering and beat the rival by a margin significant enough to draw the prospect population. You will watch the competition and, if he decides to challenge you on your basic proposition, you will move down with him, maintaining your price advantage as you go. You will exhaust your rival because of your cost advantage.
In some cases, you will discover that while you are getting the lion's share of the business at a low price, your competition is doing pretty well at a higher price. You feel that if he can get it, then you should get it. Not so. He is getting it because you are full. Essentially, you have taken yourself out of the market. So, prospects have only your competition to consider, and your competition can then get away with higher rates. That is a deliberate strategy on both your parts.
The problem with price competition is that it is so readily duplicated. It is quick and easy. Anyone can do it. Plus, your price is being determined by someone else--your rival. If pursued with abandon and the market is soft, it will maim all the competitors. Lowering prices to meet competition is a symptom of product weakness and indicates that the facility is seen--and thinks of itself--as a commodity provider.
Prospects know that the prices are easily adjusted and will press both you and your rivals for more. Also, price claims suggest to prospects to check around to be sure that your claims are valid. Price competition fosters shopping--just what we don't want. Besides, with the expense structure of self-storage, prices can fall a long way before they hit bottom.
There are a few times when it is healthy to adjust prices. They relate to providing prospects a reward or incentive for behaving in ways that are helpful. Two that come to mind are attracting longer stays and volume buying. Most self-storage pricing is oriented to short-term tenancies (a year or so) and is retail (one to five units per sale) in nature.
Term. Lowering price doesn't result in extending the rental period of any one given tenant. It is aimed at impelling longer-term prospects to pick you because you recognize the special nature of this tenancy.
Volume. A tenant entity that wishes to take control of 50 to 100 units is making a contribution to your business.
Both of these prospects are reducing your business risk and expect to be rewarded for doing so.
The differences in rate levels between most facilities are often miniscule. But lacking anything else, that difference will serve as the basis for a buying decision. People must have a reason to act. If we don't give them one, they will choose one to permit them to proceed. Location and/or price will be that basis unless we intercede.
Differentiation as a competitive response is another matter. It is the process of converting your commodity into a product. You offer the prospect something different that is relevant to them. Your objective is to either be able to charge a premium or expect prospects to choose your product rather than your rivals' at comparable prices. Charging a higher price may be an advantage, for it calls attention to the higher quality you are offering. It imposes a need to justify that higher rate, which is exactly the kind of attention you want.
The purpose of differentiation is to start giving you some exclusives, some monopolies. Differentiation usually takes two forms: innovation and packaging. Innovation puts you in the position of offering something unique, which is likely to stand up to comparison. It usually takes a while for a rival to duplicate something innovative. Many innovations, certainly self-storage, require a capital commitment, so duplication is even more difficult. An example of this would be climate control, coded gate entry, sophisticated security systems, etc. It is not important that the feature be specifically valuable to every user. What is important is that a facility has something exclusive that appears to be different and better.
The other differentiation approach is packaging. Self-storage is usually a component or sub-set of a larger situation that defines what the prospect is up to. An example is a residential move. What's the most luminous picture to such a prospect, the vision of one of our units, or the image of themselves enjoying their first barbecue with new neighbors on the patio? In this situation, we're but one item on a checklist of things that the prospect must handle to get to that patio.
So, what the tenant is paying for is often not what they're buying. That's not double-talk; that is the essence of marketing. When you deal with the total situation, you are dealing with the customer's frame of reference. But when you start and stop with the dimensions and features of a storage unit, you are well short of where the customer is. You end up talking about what you offer, not what the customer is trying to get done. Good marketing deals with the "global" situation into which the product fits.
These remarks are aimed at drawing attention to the whole customer situation, all the things that impinge upon the prospect as they go about getting their business done. Taking a "global" approach gets you closer to the customer's sphere of interest. We meld the self-storage unit into a group of services that each segues into a whole solution--a package.
Of all the approaches, packaging is the most likely to give you a monopoly on features tailored to a specific segment. Further, by properly naming it, you can claim it as your own. In the next issue, we put packaging to work. I'll examine how and why you can use packaging with prospects that are involved in a residential move. Then we take a careful look at why it is necessary to know about and use these segments.
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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 him home in Nampa, Idaho at (208) 463-9039.