Pricing your self storage units is both an art and a science. I like to use a 10 step approach when teaching people how to price with confidence. Once you master the steps, you will easily make more money with your storage units and increase the value of the property. If you are still calling the competition and matching rates, you may be leaving money on the table. Going through all the steps will position you to dominate your market and give you the confidence you need when you set street rates and raise rates on current customers. Sleep easy at night knowing you are doing everything possible to make your self storage business a Perfect 10.
Step 1: Prepare yourself
If you are not mentally ready to raise rates, you will not have success. Attitudes show up in numbers and owners who believe that raising rates will cause them to lose business will see lower numbers. Taking the time to listen to the stories that you are telling yourself will help you increase your confidence. I have yet to drive by a facility after 5 pm and see customers comparing their storage invoice. Most people move out of their storage unit when they no longer have a need, not when you raise their rates a few dollars.
Step 2: Accept there are no rules
Setting and raising self storage rates is both an art and a science. There are guidelines that you can follow, which I walk you through in my online revenue management course, but there aren’t any rules. The best way to gain confidence that you are correctly pricing is to monitor supply and demand and watch your conversion rate. Making sure the right numbers move in the right direction will give you confidence in your revenue management approach.
Step 3: Finding Your Zone
Storage is highly dependent on location. You can offer free units and you still won’t attract a customer 50 miles away. Most “zones” are 3-5 miles around your facility. Finding your zone is a process of defining how many potential customers you have and how many other people are trying to get those customers. If you do not know where to market, how can you spend your advertising money correctly?
Step 4: Understand your Market
Most owners do not understand their market as deeply as they should. It is not enough to mystery call your competition once a year. You have to dive deeper into your area and see your market as if you are your customer. I have built an entire mystery shopping process into my online revenue management course that is designed to give you fresh insight into your market. I also have a guide to walk you or your management through the process of properly mystery shopping your competition.
Step 5: Verifying Your Data
It is impossible to make smart decisions on pricing if your reports are not correct. You need to know:
- Your current street rate for each unit size
- How many empty units do you have available of each size
- Average length of stay
- Current tenant price
- Last time a price increase was issued
- Current economic occupancy & goal economic occupancy
One of the biggest mistakes I see when reviewing reports is not handling unit/standard rate and tenant rate correctly. The unit rate or standard rate is the price for the unit today. If someone walked into your office, what price would you give them on that size unit? The tenant rate is what each tenant is paying. Tenants may pay more or less than unit rates. If you moved tenants in at a lower rate and have yet to raise their rates, you will see a variance. If you cut them a special deal because they are a friend or family, you will see a variance. Making sure you have unit and tenant rates listed correctly is vital to setting and increasing rates. Run an occupancy statistics report and look at your units. If you see 5x10s listed at $45, $55, $65, etc. you have a problem. Each unit size should have one price. Keep your reports even cleaner by separating by unit type. Labeling inside, outside, upstairs, downstairs will help make your reports easier to use for making decisions.
Step 6: Assess demand
Assessing demand sounds more complicated than it is. Demand, quite simply, is how many people want to rent a unit at your facility. There are three ways that customers contact you: Phone call, walk in, website. To assess demand you need to keep track of everyone who contacts your facility, then mark when they become a tenant. If 50 people call, walk in and send you a contact form online per week and 10 of the 50 move in, you have a 20% conversion rate (10/50). Of the 50 people who contacted you, 20% became a customer.
Tracking your conversion rate will give you invaluable insight into your company. In my online revenue management course, I explain conversion rates in detail and show you how you can use them to perfect other parts of your business.
Step 7: Increasing Street Rates
Steps 1-6 are essential to collecting the data required to raise rates. We have to go through all those steps to get the science part of our process organized. The remaining steps are the art part of the process. In Step 7, we begin reviewing the data and making decisions. Remember, there are no rules. Here is where we get the play the game of increasing street rates then testing our conversion to see if we picked the right number. I like to test and analyze to let my numbers tell me if my plan is working. If you raise street rates and your conversion drops too low, you may have raised them too high. If you raise your street rates and your conversion stays the same, you may be able to go higher. This is going to take some judgment calls and tracking. It is a game so have fun with it.
Step 8: Increasing current customer rates
Increasing rates on current customers gives most owners a bit of anxiety. In my experience, owners either neglect to raise rates because they are too fearful or they raise rates based on made up information because they do not know what they should be doing. Some owners just raise rates at a certain period (6 months, nine months, one year) and pick a standard percent (5%, 8%, 10%) then call it a day. Do you think that will make you the most money? We can be more creative on raising rates by using our test and monitor strategy. Pick a section of your customer and raise their prices to see what they can handle. Watch the point at which they begin to move out. Use your average length of stay to calculate an acceptable strategy on the timing of rate increases. If your customers stay an average of 15 months, why would you wait 12 months to raise rates? I walk through this process in my online revenue management course and give you all the guides and checklists that you need to master the steps of the process.
Step 9: Raise rates with confidence
Before you send out a single rate increase letter to your customer, you need to make sure your staff is ready and prepared to have rates increased. They are the front lines of your business so be a smart business owner and take some time to prepare them to respond appropriately to customers. I have a conversational guide in my online revenue management course designed to walk you through this conversation with your staff. Make sure they understand your expectations when it comes to responding to customers complaints. The more comfortable they feel with the process, the smoother it will go.
Step 10: Track your results
Don’t do all this work and neglect to track the outcome. Part of the No Rules approach is to track your results and refine your process until it works for you. A storage facility in Los Angeles cannot use the same process as a storage facility in New Iberia, LA where the population is 31,000. I believe in customizing the approach to make it work for the business, owner, and staff. Each owner has different goals and beliefs and every manager has a different set of strengths and weaknesses. Markets are different when it comes to storage so a one size fits all approach to pricing often doesn’t work. I created my online revenue management course to guide owners through the process of gathering their data and walk them through the steps to make decisions, but I kept it loose enough to allow some room to customize the plan to make it work for you. Tracking your results is the only way to know if you are winning the game.
Step 11: Premium pricing options
Once you master the 10 step approach to revenue management, you may wonder how to make even more money with your business. Much like you pay extra for a room facing the beach, premium pricing offers tenants the option of having a unit next to the office, gate, etc. Identify your premium unit based on their location and charge a different rate. Giving customers a choice when it comes to choosing a unit will make you more money and provide them with an option that wouldn’t exist otherwise.
Get creative when it comes to pricing to make more money in your self storage business. The self storage industry is booming right now so if you are not staying competitive, you are going get left behind. If you find this process overwhelming, I am here for you. I created Price with Confidence: Self Storage Revenue Management Course just for you. I will hold your hand and walk you through all the steps to raising rates. Get started today.