Veritec Powers Dynamic Value Pricing In The Self Storage Industry
Veritec 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 controlled, ground floor units. Because of all the units share the same attributes, people usually think of them as being the same. Furthermore, self-storage operators offer these units, being “the same”, at the same price.
However, self storage customers may perceive many of these same-priced storage units very differently. Taking this one step further, customers value these units differently and are therefore willing to pay different amounts for them.
Value Pricing, also known as “Good”, “Better”, “Best” Pricing
The question then becomes: Does the self storage operator have the ability to easily price these units differently? The answer is a resounding “yes”. This is where Value Pricing comes in.
Veritec Solutions is a pioneer in Value Pricing in the self-storage industry. The company even has a patent for its innovative approach. Value Pricing is both a concept and method. It prices storage units of the same unit type differently based on their convenience.
Often, customers determine convenience by distance to access points. They can further determine convenience by attributes such as door size or even location. A location’s desirability can be defined whether it is on the shady or sunny side of the driveway. Moreover, some geographical areas desire sunny locations, while others desire shady. Customers may value more highly a unit that is better for unloading and unloading. Customers may also value more highly units closer to the front of a facility.
Why pay more?
There are a number of reasons why a customer is willing to pay more for a unit. A customers may deem a unit that that is only one turn away from the elevator much more convenient than a unit that is two or three turns away. Think of trying to move a heavy 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, when we offer customers upgrade options at the store, we have found slightly over one-third of customers will upgrade. When we offer upgrade options on the website, upgrade rates can approach, and may even exceed, 50 percent. We have seen similar results with upgrade options offered through the call center,
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, Dynamic Value Pricing automatically reassigns units 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. Some self storage companies are earning up to 10 percent incremental revenues from dynamic Value Pricing. Moreover, customers who move in to more convenient units are generally willing to pay higher rents over time. Therefore, the revenue increases are sustainable, even through multiple rent increase cycles!
Interested in learning more on how Veritec powers dynamic value pricing in the self storage industry? You may want to read the Self Storage Association’s December 2020 issue of the SSA Magazine. 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.