Revenue management is not just sending out rate increase letters when your bank account gets low.
Revenue management is the process of getting every dollar out of your storage facility that the market will allow. It’s an overall strategy of effectively managing potential and actual revenue to maximize return, encompassing competition review, market analysis, pricing, facility assessment, and staff participation.
The first step in proper revenue management is renting your storage units for what they are worth when the tenant first moves in. The price of each unit depends on availability of that size, demand for your units, urgency of the rental, and method of rental. Regarding method of rental, there are three touch points where customers will experience your facility before they become a tenant.
Most people will go online to check out your facility before they stop by or call. If you don’t have a website, get one. If you have a website, you have to decide whether or not to post your rates online.
To publish rates or not publish rates
I have conducted interviews with people who are looking for storage in a certain part of our town. 100% of the interviewees said that they went online first and looked at rates. Some of the businesses had published rates, but other did not. It was mixed results on whether that affected a potential tenant taking the next step towards a rental, depending on how the potential tenant perceived the facility.
If all of your competitors have rates published and you are in a highly competitive market, then you probably should publish your rates. Keep in mind that NOT publishing rates leads people to assume that you are more expensive. Your website, including rates or not, should reflect how you want your facility to be perceived in the marketplace, and not publishing rates leads to the belief that you are hiding your rates because they are higher than competitors’ rates.
What rate to use?
Not all rates are created equal. If someone is searching online, you assume they are in the early stages of looking for storage and weighing factors such as convenience, security, cleanliness, and price.
Make sure that your website showcases the best side of your facility in all the factors above.
You have to decide what price to use on your website to convert this person into a tenant, and a cut-rate price may not be the best idea. Knowing what your competitors list on their websites is crucial because you don’t want to be too far from the market price in either direction.
Remember that cheap units increase occupancy but don’t increase cash. Cash is king. A commonpractice in storage is to put the lowest priced unit, in that size, on your website and then upsell the prospect when they come to your facility. This practice is a form of prospect management, which is Step 2 in revenue management.
- Phone Call
Having a conversation is priceless in selling your facility. If your staff simply quotes the price and hangs up, you are losing a ton of money and need to provide some sales training immediately. The big names in storage have a script to take the prospect through a variety of questions and gather information before they ever name a price.
The goal of every call is to end it with a closed sale. Does your staff know that? Make sure that you are tracking phone calls vs closed sales to see what close rate (closed sales / total calls) you are working with. Knowing your close rate will help you determine what price to quote and how to use the phone as an effective sales tool.
You should also know how your customers got your phone number. Did they go to your website, drive by, or find you on Google Places? Knowing how they got your number will help you decide where to spend those marketing dollars.
The mighty walk in! If someone took the time to drive over to your facility, there is little reason that they should leave without a signed lease. Just as it is common in hotels and storage to quote a lower price on the phone, the price is usually higher when someone walks in off the street, and with good reason. If someone is going to come to your facility to get a price, they are primed to rent, and you will be saving them a great deal of trouble from driving all around town. If your staff has a good understanding of the competition and can close the sale while assuring the tenant that they are getting great deal, everyone will leave feeling satisfied.
Want to develop a rock solid revenue management program that you can feel confident about? Check out my course “Price With Confidence: Self Storage Revenue Management”
Summary of Step 1
Revenue Management starts with the price that you originally rent that unit for. You will have a hard time earning a high return per square foot if you start the unit rental price too low. On the flip side, you will have to hard time gaining occupancy if you start the unit rental price too high. Pricing is an art and a science, and having a good staff equipped with valuable training is the best way to earn top dollar in your facility. Consider giving your staff a range of prices, instead of a set price, and paying your staff on commission for each unit that they rent. Hire natural salespeople who can turn your facility into the facility you’ve dreamed of and earn you more money and more freedom.
Check out Step 2 in the Revenue management series – Prospect management.