By Scott Simon
When looking at a pre-owned car that doesn’t have a displayed price, do you ask yourself, “How much money do they make?” Pre-owned car dealers and sales staff do very well for themselves because they work in a negotiated-price industry just as we do in self-storage rentals. They make profit selling high and negotiating to a price above the “suggested price.” This is the figure they set knowing how much profit they’ll make but which the customer never sees.
When engaging prospective self-storage customers, do you give them a printed rate card? If so, that’s your “suggested price.” The problem is it’s killing your chances of making more money unless you have a facility that has non-stop customers. Throw your rate card in the trash.
Too many people have been trained to sell from a fixed price. Instead, condition yourself to sell from an “invented high price.” It works. My annualized revenue is 20 percent higher even though my rented square footage is just 3 percent more than it was on Aug. 9, 2014, the first day of rioting in Ferguson, Mo.
Between May 1, 2015 and April 30, 2016, 33 percent of my sales to new customers were above the “suggested price.” I had to offer below this threshold to some of the remaining 66 percent to prevent them from walking out the door to the competition.
My gross discount for the year was just 2.9 percent, but had I stuck to a set printed rate, the annualized discount would have ballooned to 7.4 percent. Adopting this flexible, negotiating strategy increased annual revenue about $15,000.
I also increased rates 5 percent. The combination of fewer discounts and higher rates generated more revenue for a facility in an economically challenged area of the St. Louis metro area.
Here’s how to make real money using this tactic. Let’s say your printed 10-by-10 rate is $95. Tear up your card and follow this example:
Customer: “I think a 10-by-10 unit will be what I need. How much will that be per month?”
Manager: “$115 per month.”
Customer: “I’m not sure I can handle that price.”
Manager: “How about $105? Would that be a special price you can accept?”
If the customer says, “yes,” you will have made $10 per month over your printed rate card, and she’ll think she’s getting a $10 per month discount. If the customer balks and you discount again to $100, you’ll still make $5 more a month than the suggested price, and she’ll think she saved $5 more!
Anyone can do this. Some of you may be saying, “We have printed rates on our Web page. How do you make money but still make customers think they’re getting a bargain?”
Easy. Tell customers the Internet price is the bargain rate and that the actual rate is $15 (or whatever price you choose) higher than what’s published online.
When customers come to the facility after seeing your price, they’re closing the sale themselves because they liked what they saw. Who comes in for prices they don’t like?
Throw away that rate card. Wheel and deal. Don’t automate your sales presentation. The ability to negotiate makes you different from a kiosk. Convince yourself, “I can make the customer buy thinking they’re getting a bargain.” Your job is to make a presentation that makes the customer feel good about the deal they’re getting and quickly sign a lease.
Nothing accomplishes this better than when customers think they’re getting a steal even though you know the end price is higher than the lowest figure you’d be willing to accept to secure the rental.
Scott Simon has been resident manager at A1 U Store It in St. Louis since 2013. A member of the Self-Storage Talk online community under the handle SimonSez, Scott has published several online articles under the same moniker since 1996. He has written on a variety of topics ranging from marketing to assessing human behavior, based on experience gained from years as a newspaper and broadcast journalist. Scott can be reached at 314.793.5863 or via e-mail at [email protected].