Veritec Technology Powers Dynamic Value Pricing In The Self Storage Industry
A typical self-storage facility has many storage units within a unit type—for example, 10×10 climate control, ground floor—that are usually thought of as being the same. In fact, however, many of the storage units that are frequently offered at the same price may be perceived very differently by self-storage customers. And, perhaps even more importantly, self storage customers value these units differently and are willing to pay different amounts for them. The question then becomes: Does the self storage facility have the ability to easily price these units differently?
The answer is a resounding “yes”. This is where Dynamic Value Pricing comes in.
Value Pricing
Veritec Solutions is a pioneer in Value Pricing in the self-storage industry and even has a patent pending for its innovative approach. Value Pricing is both a concept and method: Storage units of the same unit type are priced differently based on their convenience.
Often, convenience is determined by distance to access points, but it can also be affected by certain attributes such as door size or even whether it is on the shady/sunny side of the driveway in different geographical areas. A unit that is better positioned for unloading/unloading or closer to the front of a facility might even be more highly valued by a customer. There are a number of reasons why a customer is willing to pay more for a unit. A unit that is only one turn away from the elevator might be deemed much more convenient than a unit that is two or three turns from the elevator, especially if they need to move a desk or sofa!
The gradations of convenience can in theory be the same number as the same-type units themselves. In practice, however, we recommend segmenting same unit types into three tiers: “Good”, “Better”, and “Best”. Leveraging consumer psychology concepts, it is much easier for customers to choose between three tiers than four, five, or more. Paralysis by analysis is definitely something to avoid!
Value Pricing provides the self-storage customer a conscious choice of what is important to them, and what they are willing to pay. It also gives the self-storage operator the opportunity to price units closer to their actual value to the customer. In fact, we have found that up to slightly over one-third of customers will choose an upgraded option when first offered that option at the store. When upgrade options are presented on the website and/or through the call center, the upgrade rate can approach, and may even exceed, 50 percent.
Dynamic Value Pricing
Many self storage operators have found that the Veritec Solutions methods are leading the industry in Dynamic Value Pricing. Rather than have a static set of “Good”, “Better”, and “Best” units, units are automatically re-assigned to these three categories based on the relative convenience of the available units. Each day, after move-ins and move-outs are recorded, the vacant units are reassigned “Good”, “Better”, and “Best” prices based on their comparative convenience. This is all done by automated processes, so there is no additional operational burden put on staff.
Revenues from move-ins typically increase by 4 to 8 percent, although some self storage companies are earning up to 10 percent incremental revenues from dynamic Value Pricing. And, customers who move in to more convenient units are generally willing to pay higher rents over time, so the revenue increases are sustainable, even through multiple rent increase cycles!
Interested in learning more? You may want to read the Self Storage Association’s December 2020 issue of the SSA Magazine, in which the article “The Price Is Right” provides excellent insights into how operators are implementing dynamic Value Pricing. You can also download specifically “The Price Is Right” article here.