At many smaller and even medium-sized self-storage companies, the Store Manager (sometimes referred to as the Property Manager) often has de facto responsibility for setting the prices at which units are rented.
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 (i) the importance of the pricing analyst role and (ii) the highly analytical aspect of the job, unlike many of the other responsibilities of the Store Manager.
We recommend that self-storage firms delegate pricing responsibility to a different individual—the pricing analyst. Furthermore, whenever possible, the pricing analyst should have minimal (ideally none) of the operational responsibilities that go with operating a store. Whenever possible, it is best that the pricing analyst be dedicated to pricing, although this is generally only feasible for larger self-storage companies.
Introducing the Pricing Analyst
A primary reason for this division of responsibility can be seen when considering the typical metrics upon which the performance of these positions are typically judged. Among the Store Manager’s major metrics may be customer satisfaction, the level of positive social media feedback, how quickly vacated units are made rent-ready, 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, there is a tendency for prices to be lower than necessary 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. Across multiple industries, we have witnessed situations where, for a wide variety of reasons, the loss of a particularly “visible” sale results in a “knee-jerk” reaction to lower prices to a greater extent than is appropriate, when such a decision is based more on intuition than on detailed quantitative analysis.
Although it may seem counter-intuitive, 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).
The pricing analyst, on the other hand, 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, versus the more customer-centric focus typically exemplified by the Store Manager, more profitable decisions will typically be made. However, one important caveat: Although the pricing analyst should have more of an interest and aptitude in analysis and numbers than the Store Manager, too strong of a shift in that direction is also problematic.
Just as Store Managers need to rely on their analytical strengths to sometimes determine the most appropriate response to a customer, so too does the pricing analyst need 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. For example, by not being closely involved with day-to-day customer interactions, the analyst is less prone to anecdotal customer influences that unconsciously affect pricing decisions. Conversely, a pricing focus allows for sustained concentration on analytical skill development that 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, this is only possible when the centralized staff have 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.