ISS BLOG - Don’t Be a Tease! Why Price Transparency Is Key to the Future of Self-Storage

Customer relationships are the lifeblood of every industry, including self-storage. A good relationship can turn a new customer into a long-term brand advocate. It generates word-of-mouth referrals that bring new renters through the door.

To build a relationship with a customer, you need to establish trust right from the start. Today’s consumers don’t expect to be hoodwinked. If they feel they are, they’re going to leave and take your profit margins with them.

Unfortunately, some self-storage operators have forgotten this valuable lesson. The widespread practice of using low teaser rates to get people through the door, only to raise their rent soon after, is sabotaging our ability to build trust. Our customers find themselves initially satisfied, only to have the rug pulled out from under them.

Many of our renters are first-time self-storage users, unfamiliar with what a fair unit price might be. They’re certainly unsuspecting of near-term rent increases. Do we really want to take advantage of them through teaser rates, or build the kind of goodwill that transforms short-term customers into long-term loyalists? Conversely, savvy customers know the game and won’t pledge allegiance to a brand knowing that pricing antics are inherent in their business.

An Unfortunate New Reality

There are many self-storage options from which to choose today. Nonetheless, we see story after story about operators behaving in bad faith when it comes to rent increases. A quick online search reveals numerous reviews, videos, articles and message-board posts by customers who feel duped by teaser pricing.

It’s a practice first developed by the largest companies, and they have failed to self-regulate. This is a dangerous trend, as rate management does more than affect the average tenant’s length of stay; it hurts a company’s overall reputation.

Let’s say a new customer is told they can rent a 10-by-10 self-storage unit for $50 per month. That seems shockingly affordable to someone who’s never rented storage before. But in a short time—as little as three months—they watch their rent double or more.

To add insult to injury, the longer a tenant stays, the more they pay. Their only shot at a lower rate is to move out, then back in again. They may even need to rent a truck and move all their stuff to a different facility. That’s a lot of work to secure an acceptable price, and it doesn’t include the time and money wasted on the task! This is a true disrupter to customer loyalty in an industry that’s already leaning toward commoditization instead of innovation.

The customers who have fallen prey to teaser pricing had no way of knowing that the rate they were given was just an introductory offer, and now they’re starting to speak out. Tenants will talk, and when they do, we want to hear ringing endorsements of our companies, not a long list of complaints. This is especially true in the world of online reviews and forums driving consumer decisions.

Reputation Management Before Revenue Management

Striving for anything less than a stellar reputation seems counterintuitive to growing a profitable, sustainable self-storage business. Put yourself in the customer’s shoes. How do you want to feel when working with a company? You want to feel more than satisfied; you want to feel respected. You want to be fully aware of what the cost of your transaction will be so you can make an educated decision about where to invest your money.

Look at it from the point of view of a residential mortgage. Would you willingly accept a massive, surprise hike in your mortgage payment, or do you expect it to remain predictable? Sure, most customers will probably tolerate that first increase. But subsequent bumps? They’re going to start looking for more reasonable options.

Teaser rates and frequent rent increases put the large self-storage operators at risk of permanently damaging their reputation. They’re sacrificing their integrity in the short term, with too little thought given to the long-term implications. This is an especially dangerous practice for small operators with just one or two locations, as the larger ones against whom they’re competing aren’t going to lose this game.

However, there’s an advantage to being local and nimble, and smaller operators need to play to their own strengths. Focus on how you can remain competitive vs. following the herd mentality of always having a lower price than your competitor.

Guaranteeing Longevity

The largest players in the self-storage industry are responsible for the current teaser-rate tactics. Small and mid-sized operators have a hard time bringing in new customers at a mutually acceptable rate when the biggest names have enough cash reserves and marketing budget to weather customer churn. So, what can you do?

There’s a huge opportunity in the current rate environment. You just need to think bigger. Differentiate your offerings. Develop nicer facilities. Invest in well-trained staff that deliver friendly, local, knowledgeable help to new and legacy customers. A well-managed facility with exceptional service can go a long way, especially when so many customers feel burned by the national and regional operators. This is your opportunity.

This can be especially true in a world driven by social media, where positive reviews can influence people’s spending habits. The modern consumer expects more information before deciding on where to buy, and smaller self-storage operators can provide it through their own voice.

When considering your pricing strategy, don’t underestimate the power of transparency. It can produce remarkable benefits.

First, consider tenant length of stay. Though the data can vary depending on the market and source, we can loosely assume that the average self-storage rental period is seven to 10 months in the United States, with longer stays north of the border. This longer tenancy suggests a high level of customer satisfaction. Price transparency also substantially reduces the costs associated with customer acquisition, including advertising and concessions like offering a free first month of storage.

It’s fiscally dangerous for smaller self-storage operators to implement low standard rates. Not only will you minimize profitability, if your rates are subject to constant fluctuation, lenders and investors will determine that your business doesn’t qualify for refinancing or meet financial goals. Low rates can deeply affect future appraisals, causing significant damage to your property value. Lastly, they make it impossible for developers to get bank financing for new projects.

Sailing in the Wrong Direction

Self-storage is a private-sector business, and self-regulation is all we should need. Yet, many large operators continue to conduct themselves in a less-than-transparent manner. There’s an alarming lack of disclosure. As a result, there’s the potential for a variety of rent-control bills to come into play. This could be quite damaging to the future of an industry that has traditionally been driven by supply and demand. Should any such bill pass, we’ll no longer be in control of our own pricing structures and rates will be outside of supply-and-demand economics, resulting in our first potential cap on income.

Without action, the outcry from angry customers will only grow louder. People are starting to educate themselves on deceptive pricing practices. A relationship-driven approach is the only sensible path forward. Provide transparency into your self-storage pricing and revenue-management policies. Double down on customer service. When the market shifts from teaser rates—and it likely will—forward-thinking organizations will be well-positioned.

It’s Time to Put Customers First

The writing is on the wall for self-storage teaser rates. At best, their use is a shady marketing tactic that does nothing to benefit the industry in the long run. Companies that honor their standard rates for a longer period are able to maintain and grow a loyal customer base while charging a profitable price per square foot. Price transparency enables them to still achieve their budgets over long-term investment horizons of three to five years.

So, resist the temptation to join the teaser-rate parade. Rise above those willing to sacrifice customer satisfaction for short-term gains. Win on customer service and retention. Or sit back and watch as your customers find a better self-storage solution.

Jason Koonin is CEO of Bluebird Self Storage, which operates 25 sites across six Canadian provinces. He’s also the CEO of Sunbird Storage, a U.S. self-storage property-management company that recently launched in North Carolina. The companies offer a premium, honest and hassle-free self-storage experience. They also provide significant amounts of storage free of charge to nonprofits and community groups. To learn more, contact [email protected].