MEET THE OPPOSING TEAM:
A Smarter Approach to Competition

By Elizabeth Ferrin

Two self storage managers recently came face to face with a hungry lion. One manager quietly started lacing up his running shoes while the other manager panicked and yelled, “You know you can’t outrun a lion, even with those running shoes!” The first manager calmly responded, “I know that, but I can outrun you.”

This illustrates the way many self storage managers feel about their competition. In this highly competitive industry, there are always competing stores working to attract the same group of potential customers. With this in mind, many self storage managers have mixed feelings about the concept of competition. In some cases, thinking about competing stores may conjure bleak images of lower rental rates and declining occupancy. For others in the industry, the idea of more competition may go hand-in-hand with the goal of finding a facility’s niche and working toward constant improvement. Still others may believe that as long as they are doing better than the competition, they’ll be as profitable and successful as possible.

Whatever the reaction, competition is a very real part of the self storage industry. As the industry grows and matures, an increasing number of competitors will hit the scene. This thought naturally leaves self storage managers to wonder about the best way to deal with the growing legions of stores opening their doors in the immediate area. While all managers have their own methods of handling the competition, the end goal will always be the same—to successfully and profitably manage a self storage store. Marketing To Competitors Almost every self storage manager agrees that it is a good idea to be aware of the competition. However, the extent of the monitoring and awareness will vary from manager to manager. One theory is that it pays to be exceptionally vigilant of other self storage stores. And some operators want competitors to be familiar with their facilities also.

“We market to the competition,” says Anne Ballard, president of Smyrna, Ga.-based Universal Management Company. “They are the very best source of referrals for any product or size they might not have, so you want them to know you and your store firsthand and to send you the referrals when possible, instead of turning them out on the street, so to speak.” In this spirit, Ballard’s managers host monthly dinner meetings with all of an area’s competitors to share industry information and discuss any new developments at the stores. The goal is to forge a mutually beneficial relationship with neighboring self storage managers in the hopes of promoting her stores and earning future referrals. “We want people to think of us first before they send their referrals anyplace else,” explains Ballard.

These types of referrals are surprisingly common within the industry. “With our telephone techniques, even if we’re full, we want the customer to come in and see us,” says Ballard. “If our store can’t accommodate them and one of our sister stores can’t accommodate them, then we’ll call the competition. It makes us a hero to the customer. Plus, when the competition gets a referral from us, it makes them more motivated to send us their referrals.”

Focus On Your Facility
Other managers are more hands-off when it comes to tracking competing stores. “I don’t focus a lot on the competition,” says Shirley Wilson, manager of Castaic Self Storage in Castaic, Calif. “I talk to them and I’m upfront with them, but I think our success has more to do with the corporate office behind us and how they support us.”

Although she prefers to focus on her own business rather than the competition, Wilson advocates sharing some information with stores and creating a positive climate for referrals. “There is one facility that I call and ask for their rates,” Wilson says.

Wilson is quick to add that she will not directly compare her facility to the competition’s, and she avoids saying anything negative about other self storage properties. Instead, she focuses on providing a superior product and has found customer service often trumps price when customers are searching for a new self storage facility. “We’ve had people come back and say, ‘I like your staff better,’ or ‘I like your property better,’ and they end up renting with us.”

At the midpoint between the active and passive approaches is Diane Gibson, owner of Phoenix, Ariz.-based Armored Mini Storage Management. “We know who the competition is. We go there and meet them and network off each other,” she says. The hope of gaining referrals is usually the driving force in the relationship.

It is important to remember that every meeting with a self storage manager will not blossom into a friendly relationship bearing the fruit of mutual referrals. “Sometimes sending referrals does work to your advantage, but other times, competing managers won’t talk to you at all,” Gibson says, adding that giving your competition the cold shoulder is never a smart idea. She points out that rental rates and unit size information is readily available to the general public through the Internet or mystery shopping, so managers will know what each store has to offer whether the competing managers divulge this information or not.

Gibson frowns on actively recruiting tenants from the competition and trying to sell them on your store. “I don’t think that’s really ethical,” she says. “More typically what you see is that you gain tenants from the competition when the renter has moved and our location is better now, or if the competition has changed gate hours and ours are better for the tenant.” Gibson also gains excellent customers from competing stores with weak or confrontational managers. “A lot of your edge on the competition is the managers. I hear it all the time, ‘I came to you because of the way you treated me.’”

Rather than focusing on the competition and even working for referrals, Gibson believes the smartest approach is to identify your competitive advantage in the market place and then actively market your store’s benefits to the customers. “You always need to be aware of the competition and what they’re doing, but I think it’s half and half between focusing on other stores and putting your effort into building your own business. It really all goes back to your unique selling point and what you have to offer.”

Know The Market
Of course, your focus should always be on your own customer service, but having a solid grasp on the competition can give a facility a competitive advantage. For example, Ballard’s managers create annual comparable survey books, which are used as a marketing tool throughout the year. These books are the compilation of anything and everything managers can learn about competing facilities.

“We ask them about everything,” says Ballard, including the store’s accessibility, curb appeal, cleanliness, accessibility of the units, general upkeep, office appeal, signage, gate security, ancillary services, concessions offered, the availability of free moving trucks and the number of climate-controlled units. She also tracks the unit sizes and the prices at each facility. In addition, her staff must note the type of manager working at each competitor’s site.

A tracking of upcoming self storage developments is also included in the comparable survey books. In the same way that industry professionals look at permits when preparing feasibility studies for new self storage businesses, Ballard’s managers pull permits to get a glimpse of any future competition. “I think this aids the managers in preparing for new competition by making sure they have everything up to standards, so they are not giving the competition an opportunity to take their business.”

The permit information as well as photos and data on every competing store are compiled in the comparable survey book. If a customer comes in to check prices, instead of sending them out to drive around, the manager will offer them a beverage and go through the book. Not only are competitor’s prices available, it is a chance to explain the benefits of the facility.

“We want the photographs and facts we found in the marketplace to speak for themselves,” says Ballard. “We never want to speak negatively about our competition; we just state the facts. At worst, the customer now has seen our operation and met our great managers, and with all the repeat business that exists in our industry, someday we will likely get them back as a customer.”

Gibson, too, keeps a close eye on any new developments in her markets. “We always keep up on who’s building,” she says. She occasionally runs specials just before a new store opens to secure those last few customers who may otherwise rent a space at the new facility.

In the reverse situation, Ballard likes to send referrals to other local stores just before opening a new self storage site. “When we’re opening a new property, we send our competition the customers who need something right away,” she says. This helps to fill up competing stores before her new store opens for business.

Competition And The Bottom Line
An attitude that is especially anti competition may end up hurting a store’s bottom line. Researchers J. Scott Armstrong and Fred Collopy wanted to see whether managers who focused primarily on the competition were more successful than managers who focused solely on their own business. The two led a study involving mostly MBA students but also included some executives and undergraduates.

The subjects were told the current value of the profits from one particular project, and then were split into two groups. The first group was told that if they pursued a low price strategy, their profits would be $40 million, but if they were to pursue a high price strategy, their profits would reach $80 million. Simple choice.

The second group, on the other hand, was told that if they were to pursue a low price strategy, they would make $40 million, but their competition would lose $100 million. If they were to choose the high price strategy, they would make $80 million, but their competitor would make $40 million. Surprisingly, more than twice as many subjects in this group chose the lower price strategy over the higher price strategy. Given the choice between making more money and hurting the competition, more subjects chose to forgo profits in order to inflict some pain on a competing business!

The authors of the study were so surprised by its outcome that they went on to analyze pricing data from several top U.S. companies. Examining more than 45 years of information, they found that these companies’ bottom lines were negatively related to the competition’s pricing strategy. Hence, the authors concluded that the more that businesses allow their prices to be determined by the competition, the less money they make.

Self storage managers can find a moral to this story. While it may be wise to keep an eye on the competition, managers should not fall into the trap of letting the competition affect their decisions. Instead, they should focus on their own businesses and determine their own unique selling points within the market. Practical managers know how to set their facilities apart from the competition while maintaining a friendly referral relationship with other self storage operators in the market. These wise managers have perfected the art of maintaining a proper balance between having a keen awareness of the competition and staying focused on their own bottom-line profits.