The Importance of the Pricing Analyst
Recognizing the importance of the pricing analyst is a key to revenue management success. At many smaller and even medium-sized self-storage companies, the Store Manager often has de facto responsibility for setting unit rental prices. (The Store Manager is sometimes referred to as the Property Manager.)
This Store Manager is a multi-talented individual whose responsibilities include sales, customer service, and property management, all rolled into one. Pricing is another obligation that the Store Manager bears because they are “closer to the customer.” However, such a strategy overlooks two important aspects. The first is missing the importance of the pricing analyst role. The second is failing to realize the highly analytical aspect of pricing. Pricing is a job that is unlike many of the other responsibilities of the Store Manager.
Introducing the Pricing Analyst
We recommend that self-storage firms delegate pricing responsibility to a different individual—the pricing analyst. Ideally, the pricing analyst should have minimal to none of the operational responsibilities that go with running a store. Whenever possible, the pricing analyst should only be dedicated to pricing. However, this is generally only feasible for larger self-storage companies.
A primary reason for this division of responsibility is the difference of performance metrics. A difference of performance metrics will incentivize a difference of focus and behavior. The Store Manager’s major metrics may include customer satisfaction, positive social media feedback levels, quickness of rent-ready vacated units, store cleanliness, and possibly some aspects of facility cost control.
Conversely, the price analyst’s primary performance metric is top-line revenue and growth. The skill set and experiences required to excel along these performance metrics are quite different.
The Pricing Analyst and Store Manager: Different Responsibilities and Skills
When Store Managers are tasked with responsibility for setting prices, prices tend to be lower than necessary. This is because of the their interactions with customers in combination with their focus on customer satisfaction. Revenues and profits will likely be lower as a result. We have witnessed, across multiple industries, the loss of a particularly “visible” sale that results in a lowered price. However, this price is lowered to a greater extent than is appropriate. Such a decision is often a “knee-jerk” reaction that is based more on intuition than on detailed quantitative analysis.
When it comes to pricing, being too close to the customer can be a disadvantage. (This is also true for rent increases, although for other reasons that we will discuss in a future blog). This may seem initially counter-intuitive.
On the other hand, the pricing analyst will focus on pricing data, competitor’s advertised pricing data, occupancy rates, and other “hard” data that is specifically relevant to price-setting. By being more analytical, more profitable decisions will typically be made. Contrast this with the more customer-centric focus typically exemplified by the Store Manager. However, there is one important caveat. Although the pricing analyst should have more interest and aptitude in analysis and numbers than the Store Manager, too strong of a shift in that direction is also problematic.
Store Managers need to rely on their analytical strengths to sometimes determine the most appropriate customer response. Conversely, the pricing analyst needs to remember that setting the correct prices is more than just a numbers game. Woe to the companies and pricing analysts that forget the importance of understanding customer behavior beyond whether or not customers make a purchase!
Advantages of a Dedicated Pricing Analyst
A pricing analyst who is removed from day-to-day operational responsibilities offers many critical advantages. By being more distant from day-to-day customer interactions, the analyst is less prone to anecdotal customer influences. These influences can unconsciously affect pricing decisions. Moreover, the analyst’s sustained pricing focus allows for analytical skills development. The same development would be very difficult for a Store Manager to achieve.
From our experience, the pricing function is best carried out via a centralized position rather than by multiple field staff. That said, success depends on centralized staff having access to the necessary data, pricing analytics, and price setting capabilities. A centralized focus allows the analyst to have a broader perspective, analyze pricing performance across stores, and link company business strategy more clearly to pricing actions.
Especially in large organizations, a small price adjustment can mean big differences in profitability. A dedicated pricing focus or having a pricing focus that is not diminished by operational responsibilities, where possible, provides the requisite attention to these detailed adjustments. The importance of the pricing analyst role cannot be overstated.
Finding the Pricing Analyst in Your Organization
While the traditional DNA of self-storage firms is more customer-centric and operational, we have discovered that there are nearly always individuals that can fit the pricing analyst role, even in smaller organizations. This role provides the added benefit for those who are analytically minded with more career growth and fulfillment.
Furthermore, with the advent of remote work, he or she is no longer required to physically reside at headquarters. This allows for a larger internal pool of pricing analyst candidates. This individual can then be mentored and trained by one of the many revenue management resources available in the self-storage industry.