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What Every Seller Dreams AboutUsing differentiation approaches can earn you a corner on the market

January 1, 1999

7 Min Read
What Every Seller Dreams AboutUsing differentiation approaches can earn you a corner on the market

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What Every Seller Dreams About

Using differentiation approaches can earn you a corner on the market

By Harley Rolfe

People writing responsible articles don't normally offer advice on how to perform anillegal act. Monopoly practices are illegal, but we want to be in a position to run them.While we aren't interested in spending time in the clink, we are interested in being acontrolling presence in our area. We look to marketing to provide that. How do we resolvethis issue? Easy: Change the language. Ever run into any of these expressions? "We'renumber one ... The only one to offer ... We have the best ... Acme Storage standsalone..."

Don't these all say the same thing? "We are the only one, so don't lookelsewhere." We think "saying it like it is" is simpler and cheaper. Wesellers want to become a monopoly in at least some aspect that has the significance ofcontrol to the user. We're not picky. If we can't have an overall monopoly, we'll takesome small ones. After all, most will beget the advantages we're after.

In most modern markets, any new market position is, alas, temporary. So, what we reallyget is a string of mini monopolies created when something new is conceived and announced.It is then replaced as the uniqueness fades. People say that the U.S.-style economy isdynamic, always-changing, evolving, etc. They're right, and for the reasons I'mdiscussing. Each supplier is continually pushing for a way to distinguish himself from hisrivals. Most market positions will deteriorate if continual changes aren't made to restoreuniqueness. Then the offering slides into becoming a commodity.

Meeting Competition

When we find that we can't stop the addition of units/facilities in our service areaand become concerned about the competitive impact, we can resort to the few basic ways tomeet that danger. Controlling the supply is not a serious option in most cases. However,some try it. In this business, it amounts to buying up a significant number of facilitiesin an area. This is tricky business.

The next response is to lower price. As a deliberate policy, offering a lower price isactually "cost" competition. You do not compete for long by chopping yourreturn. If you have a cost advantage for some reason, then using a lower price is anexcellent way to go. It works so long as the cost advantage exists. That prompts you intwo directions:

  • If you evenly meet the competition's price, you still must offer something to impel the prospect to choose you over them.

  • To prevail exclusively on price, you must have a comparable offering and beat the rival by a margin significant enough to draw the prospect population. You will watch the competition and, if he decides to challenge you on your basic proposition, you will move down with him, maintaining your price advantage as you go. You will exhaust your rival because of your cost advantage.

In some cases, you will discover that while you are getting the lion's share of thebusiness at a low price, your competition is doing pretty well at a higher price. You feelthat if he can get it, then you should get it. Not so. He is getting it because you arefull. Essentially, you have taken yourself out of the market. So, prospects have only yourcompetition to consider, and your competition can then get away with higher rates. That isa deliberate strategy on both your parts.

The problem with price competition is that it is so readily duplicated. It is quick andeasy. Anyone can do it. Plus, your price is being determined by someone else--your rival.If pursued with abandon and the market is soft, it will maim all the competitors. Loweringprices to meet competition is a symptom of product weakness and indicates that thefacility is seen--and thinks of itself--as a commodity provider.

Prospects know that the prices are easily adjusted and will press both you and yourrivals for more. Also, price claims suggest to prospects to check around to be sure thatyour claims are valid. Price competition fosters shopping--just what we don't want.Besides, with the expense structure of self-storage, prices can fall a long way beforethey hit bottom.

There are a few times when it is healthy to adjust prices. They relate to providingprospects a reward or incentive for behaving in ways that are helpful. Two that come tomind are attracting longer stays and volume buying. Most self-storage pricing is orientedto short-term tenancies (a year or so) and is retail (one to five units per sale) innature.

Term. Lowering price doesn't result in extending the rental period of any onegiven tenant. It is aimed at impelling longer-term prospects to pick you because yourecognize the special nature of this tenancy.

Volume. A tenant entity that wishes to take control of 50 to 100 units is makinga contribution to your business.

Both of these prospects are reducing your business risk and expect to be rewarded fordoing so.

The differences in rate levels between most facilities are often miniscule. But lackinganything else, that difference will serve as the basis for a buying decision. People musthave a reason to act. If we don't give them one, they will choose one to permit them toproceed. Location and/or price will be that basis unless we intercede.

Differentiation as a competitive response is another matter. It is the processof converting your commodity into a product. You offer the prospect something differentthat is relevant to them. Your objective is to either be able to charge a premium orexpect prospects to choose your product rather than your rivals' at comparable prices.Charging a higher price may be an advantage, for it calls attention to the higher qualityyou are offering. It imposes a need to justify that higher rate, which is exactly the kindof attention you want.

The purpose of differentiation is to start giving you some exclusives, some monopolies.Differentiation usually takes two forms: innovation and packaging. Innovation puts you inthe position of offering something unique, which is likely to stand up to comparison. Itusually takes a while for a rival to duplicate something innovative. Many innovations,certainly self-storage, require a capital commitment, so duplication is even moredifficult. An example of this would be climate control, coded gate entry, sophisticatedsecurity systems, etc. It is not important that the feature be specifically valuable toevery user. What is important is that a facility has something exclusive that appears tobe different and better.

The other differentiation approach is packaging. Self-storage is usually a component orsub-set of a larger situation that defines what the prospect is up to. An example is aresidential move. What's the most luminous picture to such a prospect, the vision of oneof our units, or the image of themselves enjoying their first barbecue with new neighborson the patio? In this situation, we're but one item on a checklist of things that theprospect must handle to get to that patio.

So, what the tenant is paying for is often not what they're buying. That's notdouble-talk; that is the essence of marketing. When you deal with the total situation, youare dealing with the customer's frame of reference. But when you start and stop with thedimensions and features of a storage unit, you are well short of where the customer is.You end up talking about what you offer, not what the customer is trying to get done. Goodmarketing deals with the "global" situation into which the product fits.

These remarks are aimed at drawing attention to the whole customer situation, all thethings that impinge upon the prospect as they go about getting their business done. Takinga "global" approach gets you closer to the customer's sphere of interest. Wemeld the self-storage unit into a group of services that each segues into a wholesolution--a package.

Of all the approaches, packaging is the most likely to give you a monopoly on featurestailored to a specific segment. Further, by properly naming it, you can claim it as yourown. In the next issue, we put packaging to work. I'll examine how and why you can usepackaging with prospects that are involved in a residential move. Then we take a carefullook at why it is necessary to know about and use these segments.

Missed some previous issues? Check the Web at www.hardnosed.com.

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 him home in Nampa, Idaho at (208) 463-9039.

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