To Discount or Not to Discount

Gina Six Kudo is the general manager for Cochrane Self Storage in Morgan Hill, Calif. She is one of four recipients of the Inside Self-Storage 2009 Humanitarian Service Award.

In the Self-Storage Talk forum, there are several threads discussing discounting methods to bring in customers. One of the most difficult guesses associated with keeping a facility full is determining where your comfort zone is financially. Some argue that cut-rate move-in specials are prohibitive to continued success and the bottom line. Others believe discounts bring in people that would otherwise wait or not utilize storage at all during these tough economic times. A few believe some rent is better than no rent.

With more than 53,000 facilities nationwide, I’d venture there are at least 5,300 different discount flavors to choose from. So what to do? A $1 move in, $20 move in, half price, prepay for three, get one free? The ideas are endless, and the discussion is sure to become even more interesting as more people offer up their own ideas. 

We’ve tried many different versions since doubling our facility. One of the main components to any discount is to ensure you do it properly. Do you always enter the normal rate of the unit on your contract? Do you clarify the rate is only valid as long as the tenant is not delinquent? Or do you discount even for people who are very delinquent? Is your discount understandable to your tenants?
 
Have you taken the time to analyze the cost of your discount versus the return income based upon your facility averages? Do you know how to determine the return on investment of your discount programs?
 
If your average tenant rents from you for 11 months, multiply your average rent by 11 and see what your average tenant is worth. Let’s say your average rent is $100 per month times 11 months equals a customer value of $1,100. 

Once you know the cost/value of a customer, you can begin considering discount rates and what cost you believe you can bear to obtain that customer. Is a new customer worth $100, $200, $300 to you? At what point are your discounts hurting you? Are you planning out discounts so they expire when normal seasonable rent ups return so that you may maximize your returns?

This topic and many more are being discussed right now on Self-Storage Talk. Join in, learn from each other and contribute ideas. Who knows, you may find just the solution you need to make a difference to your bottom-line profit.