06 Jun 2023
As a business owner, pricing is one of the most critical elements of success - where you set your price points for a product or service sends clear signals to your customers. Pricing your products too low says to customers that you could be desperate for their business or are not terribly concerned with the quality of the service. Pricing your product or service too high excludes some potential customers.
The cost of a storage unit in your facility should never be a set-it-and-forget-it task. Just as Amazon, Ebay and Etsy adjust prices based on demand and availability, your self storage facility could be leaving a significant amount of money on the table if you are not taking advantage of one of the biggest benefits of the self storage industry - Dynamic Pricing.
Forbes article "How much do storage units cost in 2023?" calculations have determined that the average cost for a small storage unit is around $75 per month, climbing to $150 for a medium-sized unit and $300 for a large unit. If these prices don’t reflect your particular facility - that’s ok! You should be setting your prices based on your specific market conditions - and this means you are looking for Dynamic Pricing!
Dynamic Pricing, sometimes known as “surge pricing” is a strategy to adjust the pricing of a product or service based on demand. There have been many articles written about the scourge of dynamic pricing in the self storage industry, but did you know that the self storage industry is just the next in a long line of markets to make millions off dynamic pricing? When customers ask why prices are shifting, you could give one of any number of examples of how they use dynamic pricing daily;
Ultimately, dynamic pricing is everywhere - and customers are accustomed to it - so why do self storage owners and operators struggle with the issue of dynamic pricing in their facilities? Let’s go through a few of the elements that affect the cost of a storage unit in 2023, and how you can explain them to your customers.
The size of the unit will greatly affect how much you can store in the unit, how easy or difficult it is to access your stored material. In addition, remind customers that they are renting by the square foot. As facilities often offer discounts for the rental of more square footage, customers might be better served financially by renting a slightly larger unit.
Rental of a unit in a major urban area almost always costs more than the rental of a unit of the same size in a more rural area - but not always. Self storage facilities are no longer restricted to major roadways and highways with high visibility like they once were. This means that more facilities are using dynamic pricing in your local market. If your location allows for more space, a cleaner facility and more safety equipment, don’t forget to use dynamic pricing to charge for it!
Climate control will always bring more revenue than non climate control storage units. Estimates state that climate control units typically bring in $25-$30 more for the same sized unit without climate control. This will be a major selling point in areas suffering from extreme heat, cold or severe weather of any kind. Remember, demand for climate control is high all year-long, but will get especially high before hot, cold or rainy seasons - use dynamic pricing to plan accordingly!
If your local market is running low on 10X10 units, you can safely bump up your price for units of this size. Being aware of the occupancy statistics in your local market will help you determine how to set prices and promotions based on availability.
A quick look at the self storage move-in/move-out rate for the past few years shows us that household moves spike in the temperate months of April, May, and June, and typically bottom out in colder months. This should force your prices lower in colder winter months, and should push them higher in more move-friendly seasons.
The longer a customer plans to store their possessions, the more of a discount they should be entitled to. As long-term paying customers, they can be relied on to contribute to your ROI in a meaningful way. Customers with short-term storage plans are great, but won’t be there for long enough to affect your business success.
What insurance you carry (or don’t carry) on your facility will greatly impact your cost for a storage unit. Increased insurance premiums for severe weather, security or crime prevention or any other potential hazard should result in higher cost for your storage units.
Regularly adjusting for wild (or predictable) fluctuations in the self storage market, owing to seasonality, weather, inflation, location and availability, seems like a daunting task. Once you feel confident you are able to understand and explain why you are using dynamic pricing at your facility, it’s time to set a dynamic pricing strategy.
When creating a dynamic pricing strategy, there are several important steps to take and elements to consider.
For more information on how to use technology to keep an eye on your market and pricing, we suggest reading about Radius+, our answer to the call for self storage market data near you, and across the globe.
As a self storage owner or operator, you will have regular discussions with customers about dynamic pricing and how it works. Taking advantage of dynamic pricing at your facility will certainly help your business achieve success, but it’s just as critical that you be able to explain your policies to customers in a clear, reasonable and informed way. Having immediate access to market data will allow you to inform your customers, and create a bond of trust in your ability to run and manage your business well, and therefore can be fully trusted with their valuable possessions.
