The self-storage drumbeat over the last five years has been all about new supply. For existing operations and new facilities in lease-up, the fight to gain occupancy has meant spending marketing dollars to reach prospects and get ahead of the competition. Many new sites have been working hard just to get to a breakeven point.
Now, the world has suddenly changed due to the coronavirus pandemic. Nationwide, unemployment has soared and continues to grow. Our industry will likely see an increase in tenant delinquency as a result. Though we may not get hit as hard as the retail and housing markets, we’ll no doubt feel the ripple effects of this global crisis.
Monitoring return on investment (ROI) for every dollar spent will make the difference between storage facilities that survive and those that don’t. Marketing efforts are more crucial during times like these because what you promote today will translate into revenue tomorrow. Self-storage operators need to be aware of all budgets and expenses, particularly those related to advertising.
Start With the ‘Low-Hanging Fruit’
Marketing represents the effort to generate new business. Before setting your budget, review how well your managing the basics to ensure the best ROI.
Drive-by traffic. This consistently ranks as the No. 1 lead generator for self-storage. Having excellent curb appeal and eye-catching signage and banners will help your property stand out and catch prospects’ attention.
Online presence. This is just as critical as your property’s physical appearance. Claiming your Google My Business listing, using great pictures and keeping store information current will strengthen your Web visibility. Your marketing will be more successful if your online content is up-to-date and attractive. Further, a website that allows customers to rent units online is an essential part of your plan, particularly now, as people self-isolate and practice social distancing.
Grassroots. Self-storage is a business of community. Your customers are also your neightbors, so it makes sense to strengthen those relationships as much as possible. A strong grassroots campaign can help marketing efforts when there isn’t room in your budget for a lot of pay-per-click (PPC) campaigns. Get out, shake hands and kiss babies (not literally). Connecting with local moving services, real estate agents, banks, small-business owners, restaurants and others can help make a name for your facility at a reasonably low cost.
Referrals. A strong program encourages your current customers to refer others to your property. May campaign is, “It pays to have friends, literally.” We generously reward our tenants for referring their friends to us.
Once all this “low-hanging fruit” is handled to make your marketing as effective as possible, it’s time to build your budget!
Begin With the End
To calculate your marketing budget, you must understand the following metrics and formulas:
- Marketing Spend x Marketing Conversion = Demand Events
- Demand Events x Closing Rate = New Rentals
- New Rentals - Vacates = Net Occupancy Gain
To be data-driven, you must begin with the end in mind. What’s your target occupancy, and how many rentals do you need to get there? If 90 percent is the goal and your property is at 45 percent, how many new rentals are required each month? When determining this number, you must factor in move-outs as well as move-ins. The net of the two will be the occupancy gain.
To forecast your monthly move-outs, you must know your average length of stay per customer. Some of my properties have a six-month average, while for others it’s three years. Understanding how many new rentals are needed to overcome the vacates and still hit your target occupancy will help you prepare the marketing budget. Obviously, it’s easier to gain occupancy and reach breakeven when your average length of stay is longer.
Know Your Closing Rate
New rentals are a factor of demand events and closing rates. Both metrics must be tracked. We trace every demand by source, size, type and other factors. The same detail should be monitored for closing rates.
For example, if your self-storage facility generates 20 website demand events for 10-by-10 units each month, and you need three units to reach your occupancy goal, the conversion rate you need to hit your number is very low. This knowledge can help you eliminate unnecessary move-in specials or discounts because your decisions are data-driven rather than reactionary. Reacting to the market rather than using strategic planning often causes random drops or spikes in rates, blanket specials, and needless credits to customers. It’s like using a sledgehammer in surgery instead of a scalpel.
Create Demand Events
Once you’ve calculated your existing demand and closing rate, you can make smart budget decisions. Spending money to increase drive-by traffic, online presence, grassroots or referrals should be predictable if you track metrics and understand conversion rates. Let’s put this into practice using our formulas.
Let’s say our self-storage property has to replace 10 vacates each month and gain four additional move-ins to reach its goal occupancy. If we have a 30 percent closing rate, we need 47 demand events monthly to get those 14 units per month. We develop a marketing budget to align with our needs. Here’s our current monthly plan:
Our new marketing plan might look something like this:
The key to developing and maintaining a well-performing marketing budget is to regularly review demand by source and note whether outcomes match expectations. Tracking every demand event and closing rate is vital to understanding if your marketing dollars are working for you.
Too many self storage operators simply throw money at the problem without tracing the ROI, watching the conversion rate and coaching facility managers through closings. Gather the proper metrics so you can make smart, data-driven decisions. With everything likely to impact your business during these times of uncertainty, you simply can’t afford not to.
Magen Smith is a co-founder of Atomic Storage Group, a boutique self-storage management company, and owner of Magen Smith CPA, an outsourced accounting firm specializing in self-storage. She’s also a partner in Safe Space Development, which builds self-storage properties. Magen started in the industry as a facility manager and has held nearly every operational role. She has a passion for the industry, helping owners improve their businesses, teaching asset management and conducting self-storage audits. To reach her, e-mail firstname.lastname@example.org.