By Harley Rolfe
Last time, we talked about the risks of competing outside the rules of the federal anti-trust laws. You know I think the impulse to abridge those FTC rules abound within self- storage facilities initially encountering competition. Upon feeling the sting of rivalry many may break those rules, even unknowingly. But how do you get relief this side of the pokey? Many self-storage operations suffer because they weren't "raised" with competition in their life. All they know is that it stings, and they want relief the quickest way possible.
Aside from the examples I cited in last month's column, I have recently had a number of conversations about the initial Microsoft findings. Many of those conversations centered on the disbelief that the government position is proper. "What ever happened to the free enterprise system?", etc. What is ignored is that thousands of businesses compete legitimately and lucratively in the glare of intense competition. This isn't to say that most suppliers wouldn't like to see the competition go away, but they have mastered the techniques of marketing such that they prosper in the face of their business rivals.
For most businesses, no competition would be a charmed life. For them, besting their rivals is a way of life. They must meet and surmount competition daily. How do they do it? Ask them and they probably can't tell you. It may even sound like a dumb question. For them it is instinctive--they never started. They don't remember ever not knowing how. Since I had to learn, I'll try.
Most new idea businesses start out having no competition. Initially, self-storage was such a business. Growth took place in the form of new facilities being built in areas without previous service. Operators charge the utility price for the service--the price the service will bear when the other choice for the prospect is to go without. Time passes and most places receive service, so the next phase adds service where there is already some. Fortunately for the second operator, entry into the industry was easier. Outside of financing, there were no barriers to their entry (technological, patents, etc.) Since the initial operators were entering a new and unproved industry, they built a conservative number of units, leaving room for more operators. The next wave of facilities could enter knowing that there was probably ample unsatisfied demand. Thus, there was little pressure on pricing for number two. We're still in that continuum where the fine reputation of self-storage has legitimized the industry among investors and financing sources, encouraging more facilities to be built. That presages for each current operator the time when there will be price pressure. That's usually the first signal to an existing facility that there is need for marketing.
The Marketing Dilemma
With much at stake, self-storage operators can become stalled. Most have not incurred serious marketing or sales expenses (Yellow Pages notwithstanding). Anything compared to that base seems like a lot. At exactly the time that they should rise up and become more aggressive, they may want to hunker down and (hopefully) wait out the storm. It's a dilemma.
For any supplier, the hope is to establish or maintain a monopoly. That brings with it the greatest opportunity to control prices. Once new facilities arrive, there is temptation to do something in concert with the new rivals to mute the effect of a potential competitive relationship. That's where the FTC trouble can begin. The only other choice the operator has is to engage in the process of product or service differentiation. That is what marketers do.
How Would You Do It?
If a supplier is perceived as the same as his rivals, then the buyer is free to pick the least expensive. That's exactly what you do when you shop. Similar suppliers are set up for naked price competition. That's a game of "Who will cave first?" Marketing wars against that situation. If you cannot control the supply (new facilities) and do not want to be pummeled by price wars, then converting your offering to a product rather than a commodity is the way forward.
Examine how you make any decision. Your prospects are no different. What makes marketing teachable is that the process we all go through in making a buying decision is identical. If we can unscramble that, we're on our way. Here's the secret: You must arrange your offering so that you and you alone offer something that is indispensable to the prospect. If you don't, he will do it for you. He must reduce the choices to one in order to proceed with the decision. Left to themselves, self-storage prospects will make it on location and price in that order. If that's OK with you, then you escape any marketing efforts. If not, then there's more.
Too Simple
I hope you don't dismiss this examination because it seems simplistic. Without getting the most fundamental objective in mind, the more complex stuff will seem just that--complex and undoable. Here's an analogy: I like to ski. As a reasonably proficient athlete, I got the skiing motion pretty well, I thought. On the milder slopes I did fine. Then, for a challenge, I headed for the black-diamond areas. I quickly found out how bad I was. On the bunny slopes, I could fake it, but my fundamentals weren't really there. I needed to master the basics if I ever wanted to be with my skier friends. So bear with me as I outline the marketing for your "slopes" that are no more forgiving than black-diamond territory.
I belabor this because of reactions from self-storage operators who look at serious marketing as too much trouble. The treatment is worse than the ailment--I admit it. What I suggest only makes sense if (and that's a big "if") the facility is beleaguered by competition. There are some other benefits of moving into a marketing mode, which we will treat in another column. The thing that will usually motivate an existing facility to move from offering a commodity to a product--i.e., a marketing approach--is a pretty severe marketplace threat.
The most ideal position for a supplier is to be a single-source supplier of a product in demand. That makes you a monopoly. But a monopoly of what? We have established that, compared with the alternative, using marketing techniques may be the way out. That term has bad overtones because of the anti-trust laws. It suggests that a supplier is out to fleece customers. Bad PR. Get over it so that we can freely discuss the subject.
You are striving to be or become a monopoly. Say it. You must do so without cooperating with your rivals. But you must do it. That's really two things: generating compelling and unique features plus getting the word to prospects. That's it. Next month we examine the "hows."
Harley Rolfe is a semi-retired marketing specialist whose career included executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book Hard-Nosed Marketing for Self-Storage.