Who Wants to Just Persevere?

By Harley Rolfe

Note: The views expressed in this column are not intended to represent theopinions of Inside Self-Storage or members of its staff. We invite any comments and willpresent them in a subsequent issue, if appropriate.

Are there new facilities arriving in your area? If so, that's great for all the folkswho benefit from development: architects, builders, suppliers, certain land owners, etc.And it's great for those who want to sell. It may not be the greatest for existingoperators. So it's a good news/bad news story depending on who you are. More importantly,it's a typical story.

All industries go through this sequence as they mature. A new service is introduced andis well received. For a while the problem is creating enough supply to handle all comers.Initially, individual suppliers can offer a commodity; but that period passes and on comesthe difficulties of price competition. It's the opening gun for interest in marketing.This story should be comforting. We are not dealing with rocket science. Many have gonebefore us. It's how marketers make a living.

Usual Competitive Response

If the management orientation has been one of offering a commodity, then it's a matterof getting prepared to give a rate-level response to new suppliers. To endure as asuccessful approach, we know that price competition should really be cost competition. Sowe need to look for areas of cost advantage. I have mentioned in previous columns that thelevel of marginal unit-operating cost for self-storage operations is quite low, soit's not possible to cut much there.

That leaves financing. While not literally an operating cost, debt service is regardedlike one in this kind of situation. Here an existing facility is likely to have anadvantage: They may have little or even no debt. That would ease cash-flow pressure andprovide room for the rate-level contest. The new facility may not be so fortunate. Its newdebt-level obligations could discourage aggressive pricing. So, they may not be toowilling to move down as you push to maintain your market position. Without some kind ofcost advantage, it is difficult to persevere for long using a rate-level response.

Time to Bail?

There's another reaction. A friend who was in the self-storage business in the PacificNorthwest took a look at the developing situation in his area and decided it was time tosell. He wanted no part of what he thought was going to be a dogfight. I tried to tell himthat there were a number of things he could do to insulate himself, but his "dayjob" prevented him from devoting very much attention to his facility. With a residentmanager, the facility had pretty much run on its own.

What's Normal?

I've been asked about a norm for promotion expense as a percent of total sales.Operators are looking for guidelines as they pick their way along an unfamiliar route.Many have never spent serious money on marketing. Spending on Yellow Pages is about it.Anything more can seem like a lot.

Other industries do have such norms. They are used to a competitive market and havebeen responding for years. Both they and their industry have a track record. But mostcurrent self-storage operations function as a commodity; so the first move is to segueinto a product-type operation. That is a transitional step. Next is the ongoing operationof the facility on the product basis. The norm we're after relates to the latter ongoingphase. Few have gone there, so the guideposts aren't established, yet. It will seem likeyou're flying blind for a while.

Time to Rock 'n Roll

It's no fun to face a competitive threat for the first time. The normal reaction is toretrench, get conservative to preserve resources. But that isn't the usual way to engagein a competitive contest. Normally, the more aggressive the opponent, the more active thehome team gets. But just when it's time to rock 'n roll, the opposite may seem to be thebest course. Also, direct price responses usually can only go on so long. More creativedifferentiation approaches need to be introduced. Still, persons not familiar withmarketing options hesitate to expend resources under pressure circumstances. It's no timeto try out unfamiliar fixes.

You Woulda Thought...

The additional puzzle: Where can existing owners turn for help? In other kinds ofbusiness, the industry association would be there to help members thrive. It's one oftheir most valued services. But in this industry, the Self-Storage Association (SSA)offers little marketing help for present owners being pressed by new competition. They mayoffer some assistance with Yellow Pages ad layout advice and point-of-purchase displays,but such responses are anemic in the face of serious market combat.

Yet, the SSA offers extensive assistance to developers, both in written material andtrade shows aimed at newcomers attracted to those fine returns. They provide them withexcellent knowledge--coaching, guidance and pitfalls to avoid--that many existing ownersnever got. Moreover, those lessons were born of the hard knocks present owners had tosuffer on their own. The SSA must know that added capacity in the association has thepotential to threaten those souls located in any area of expanding operations. It wouldseem that before offering aid and comfort to newcomers, they would move hard to make moreroom in the industry first.

A while back, I had a personal experience in that regard: I offered the SSA use of mybook. They did not answer--I received no comment at all. Maybe the book is no good, butthe association doesn't offer anyone's marketing material. It seems to have littleinterest in helping existing owners respond to the competition it fosters. The localstate/regional associations focus on the welfare of existing operators. The nationalorganization seems less inclined--at least on the marketing front. It is a source of prideto herald the "growth" of the self-storage industry. By growth they mean addedcapacity and more units. Continuous added capacity inevitably leads to destructivecompetition. As I've said before, competition is great for society, but hell on suppliers.I mention this only to lament the dearth of marketing resources available to operators whofind themselves on the wrong end of the self-storage industry "growth" story.

Where to Turn

There are two facets of cost related to getting marketing help: 1) the personal timeand raw cost of gaining information, and 2) the risk in lost effectiveness if the answersturn out not to work. A problem caused a need for information; the problem continues, andthere is a penalty for not solving it. So choosing a poor solution not only wastes thedirect cost of the action taken, but also exposes the operator to the continuing costs ofnot solving the problem.

Another part of the dilemma for the marketing novice is how to tell the straight stufffrom the pretenders. If you don't know a whole lot about a new subject, how do youdetermine how good the information that you're getting? Under those circumstances and in asituation where you often need to know--quickly--how can you judge enough to bet yourbusiness?

Earlier I mentioned that price is the first weapon of choice in the face of newcompetition. Operators can persevere for a while using it. But who wants to justpersevere? Owners want to prosper. Next month, I'll offer some suggestions on sources formarketing help.

Missed some previous issues? Check the web at www.hardnosed.com.

Harley Rolfe is a semi-retired marketing specialist whose career includesexecutive-level marketing positions with General Electric and AT&T. He also ownedlodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degreein economics from Wabash College and a master's degree in business administration from theUniversity 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 forSelf-Storage.