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March 1, 2000

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Addressing Competition

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Addressing Competition

By Harley Rolfe

For many ofyou, marketing is not much of an influence. Competition is an annoyance, not a threat. Aslong as you are staying full, why bother? I agree. Marketing is not kid stuff. But if youneed to address competition, marketing is good news.

Last time, we talked about the risks of competing outside the rules of the federalanti-trust laws. You know I think the impulse to abridge those FTC rules abound withinself- storage facilities initially encountering competition. Upon feeling the sting ofrivalry many may break those rules, even unknowingly. But how do you get relief this sideof the pokey? Many self-storage operations suffer because they weren't "raised"with competition in their life. All they know is that it stings, and they want relief thequickest way possible.

Aside from the examples I cited in last month's column, I have recently had a number ofconversations about the initial Microsoft findings. Many of those conversations centeredon the disbelief that the government position is proper. "What ever happened to thefree enterprise system?", etc. What is ignored is that thousands of businessescompete legitimately and lucratively in the glare of intense competition. This isn't tosay that most suppliers wouldn't like to see the competition go away, but they havemastered the techniques of marketing such that they prosper in the face of their businessrivals.

For most businesses, no competition would be a charmed life. For them, besting theirrivals is a way of life. They must meet and surmount competition daily. How do they do it?Ask them and they probably can't tell you. It may even sound like a dumb question. Forthem it is instinctive--they never started. They don't remember ever not knowing how.Since I had to learn, I'll try.

Most new idea businesses start out having no competition. Initially, self-storage wassuch a business. Growth took place in the form of new facilities being built in areaswithout previous service. Operators charge the utility price for the service--the pricethe service will bear when the other choice for the prospect is to go without. Time passesand most places receive service, so the next phase adds service where there is alreadysome. Fortunately for the second operator, entry into the industry was easier. Outside offinancing, there were no barriers to their entry (technological, patents, etc.) Since theinitial operators were entering a new and unproved industry, they built a conservativenumber of units, leaving room for more operators. The next wave of facilities could enterknowing that there was probably ample unsatisfied demand. Thus, there was little pressureon pricing for number two. We're still in that continuum where the fine reputation ofself-storage has legitimized the industry among investors and financing sources,encouraging more facilities to be built. That presages for each current operator the timewhen there will be price pressure. That's usually the first signal to an existing facilitythat there is need for marketing.

The Marketing Dilemma

With much at stake, self-storage operators can become stalled. Most have not incurredserious marketing or sales expenses (Yellow Pages notwithstanding). Anything compared tothat base seems like a lot. At exactly the time that they should rise up and become moreaggressive, they may want to hunker down and (hopefully) wait out the storm. It's adilemma.

For any supplier, the hope is to establish or maintain a monopoly. That brings with itthe greatest opportunity to control prices. Once new facilities arrive, there istemptation to do something in concert with the new rivals to mute the effect of apotential competitive relationship. That's where the FTC trouble can begin. The only otherchoice the operator has is to engage in the process of product or service differentiation.That is what marketers do.

How Would You Do It?

If a supplier is perceived as the same as his rivals, then the buyer is free to pickthe least expensive. That's exactly what you do when you shop. Similar suppliers are setup for naked price competition. That's a game of "Who will cave first?"Marketing wars against that situation. If you cannot control the supply (new facilities)and do not want to be pummeled by price wars, then converting your offering to a productrather than a commodity is the way forward.

Examine how you make any decision. Your prospects are no different. What makesmarketing teachable is that the process we all go through in making a buying decision isidentical. If we can unscramble that, we're on our way. Here's the secret: You mustarrange your offering so that you and you alone offer something that is indispensable tothe prospect. If you don't, he will do it for you. He must reduce the choices to one inorder to proceed with the decision. Left to themselves, self-storage prospects will makeit on location and price in that order. If that's OK with you, then you escape anymarketing efforts. If not, then there's more.

Too Simple

I hope you don't dismiss this examination because it seems simplistic. Without gettingthe most fundamental objective in mind, the more complex stuff will seem justthat--complex and undoable. Here's an analogy: I like to ski. As a reasonably proficientathlete, I got the skiing motion pretty well, I thought. On the milder slopes I did fine.Then, for a challenge, I headed for the black-diamond areas. I quickly found out how bad Iwas. On the bunny slopes, I could fake it, but my fundamentals weren't really there. Ineeded to master the basics if I ever wanted to be with my skier friends. So bear with meas I outline the marketing for your "slopes" that are no more forgiving thanblack-diamond territory.

I belabor this because of reactions from self-storage operators who look at seriousmarketing as too much trouble. The treatment is worse than the ailment--I admit it. What Isuggest only makes sense if (and that's a big "if") the facility is beleagueredby competition. There are some other benefits of moving into a marketing mode, which wewill treat in another column. The thing that will usually motivate an existing facility tomove from offering a commodity to a product--i.e., a marketing approach--is a prettysevere marketplace threat.

The most ideal position for a supplier is to be a single-source supplier of a productin demand. That makes you a monopoly. But a monopoly of what? We have established that,compared with the alternative, using marketing techniques may be the way out. That termhas bad overtones because of the anti-trust laws. It suggests that a supplier is out tofleece customers. Bad PR. Get over it so that we can freely discuss the subject.

You are striving to be or become a monopoly. Say it. You must do so without cooperatingwith your rivals. But you must do it. That's really two things: generating compelling andunique features plus getting the word to prospects. That's it. Next month we examine the"hows."

Harley Rolfe is a semi-retired marketing specialist whose career includedexecutive-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.

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