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PRICINGTrick or treat?

November 1, 1999

6 Min Read
PRICINGTrick or treat?

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Trick or treat?

By Harley Rolfe

Pricing is oneof our most useful yet dangerous of business acts, and Halloween provides the perfectanalogy. If you are only going to do one thing to change your marketing "mask,"pricing is your choice. The plan is to be sure that there are "treats." Theassumption here is that you want to maintain and improve your market stance withoutchanging your actual offering.

You face a conspiracy aimed at making your life difficult. When the only differenceamong products is price, you are playing their game--that of the government and customers.The customer wants the lowest price and he also wants the buying decision to be simple, sohe needs to regard all the choices as the same. Then he can play one rival off the othersand just compare prices. As to the "Feds," U.S. businesses agree to abide by theanti-trust laws. These are mostly aimed at maintaining competition. Most of these lawswere written as a result of excesses by suppliers and are aimed at what many aggressivemarketers want. We must figure a way to prosper without running afoul of the Feds andstill attract sufficient prospects to keep the joint full. It's what we marketers do for aliving. Are we up to the task?

Time out for a moment here: You have a "sleeper." Self-storage units don'tcost much. A 10 percent advantage on a $40/month unit is $4--no big deal. The real problemis that the prospect needs some basis on which to make his decision. Self-storageprices are not, by themselves, significant; they become so only if there is no other basison which to make that decision.

Engineers use the laws of physics to make things work; we marketers use the laws ofhuman nature/behavior. All animal life (that's us) seeks to conserve the expenditure ofeffort/resources to achieve its ends. "Price" extracts resources from the buyer.His normal reaction is to resist or minimize them. He can't help himself: It's asfundamental as dealing with hunger, maintaining body warmth, reproducing, etc. Concernabout price is visceral.

But what is price? There are at least three elements: the price in dollars, the pricein shopping time and the price in analysis effort of various choices. The prospect wantsthe lowest and/or simplest. This is further complicated for us because, in many cases, hedoesn't want a self-storage unit in the first place. The buying process is a hassle whenthe prospect associates it with little pleasure, so attempts by us to deliver our pitchcan create enmity. When the prospect calls asking for the rate on a 10-by-20, he's alreadydecided that the location is OK--he just wants the cheapest price. We must create ourofferings so that there is legitimate need (as seen by the buyer) not to provide thisinformation.

Price plays many roles. It is a powerful attention-getter. It is used exhaustively bymany retailers, such as grocery stores, auto dealers and furniture dealers. Mass marketerssuch as Kmart and Wal-Mart make their living by suggesting that all their prices arelower. Check the Wal-Mart's motto--"Always low prices." The secret is the wholeprice. An important part of the prospect's resource allocation is his personal time. IfWal-Mart can get the prospect to make a trip to its store, the store has won. So, implylow price, but deliver convenience. How about self-storage? Same thing.

But how do you do that with a one-dimensional product? Create a choice that depends onthe tenant's attitude. Here are some approaches:

  • Offer differing rates based on the value differences of units in the facility. Distinctions might be style of access (man-door, overhead, roll-up), width of driveway, position in the building (hallway, direct-driveway access, grade-level or upstairs, etc.) Proper presentation of these choices sets up your request that the prospect come take a look for himself. In this case, the fact that most purchasers of self-storage are not familiar with our facilities helps to generate curiosity--and a visit.

  • Offer the prospect varying rate levels depending on the length of time he will stay. Ideally, every prospect will qualify. You can't quote a price until the prospect tells you what the length of his tenancy will be. That requires consideration by him. It interrupts his inclination to just ask for the price of a 10-by-20 and hang up.

  • Use rebates to activate your approach. Conceived in the late '70s and early '80s, rebates have become the choice for discounting. The appeal rests on the idea that the customer has earned the rebate by purchasing and following up on certain conditions. There is a measurable "rush" when the check shows up. Capitalize on this good feeling by pressing the ex-tenant for referrals.

  • Good marketing practices discourage open-ended discounting. Bad marketing practices are an invitation for the prospect to try to bargain you into a still lower price. Case in point is the "half-off-first-month" discount. A better practice is to place conditions on your offer that "firewall" or contain it, such as offers that end on the 30th of the month, implying that the offer will come to an end. This adds both urgency to the appeal and marks it as being temporary or unusual. It is never good practice to discount your main product outright as it implies that there is something wrong with your regular price. Also, it isn't good for existing tenants to see that newcomers are paying less.

  • Watch out for employees flirting with fraud, for instance, using a low price to induce a visit to the facility and then announcing that they are out of the units being promoted, but have a similar one for an enhanced price is an absolute invitation for trouble. This tactic is likely to work pretty well because the prospect is usually in a hurry and cannot make use of a restitution offer calling for the facility to call when the correct one frees up. Plus, the prospect has already invested in a trip to the facility. This fraudulent practice may yield results, but the penalty can be cataclysmic. This why I suggest that aggressive owners closely monitor marketing. You should get a primer conversation on the dos and don'ts from your lawyer.

Price does many things well. It gets attention, it permits the offering of choice, itsets the terms of your tenant contract. But it can also get a facility into a peck oftrouble if not used carefully. Use pricing creatively, but watch out for spooks!

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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