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PRICED TO GO
Mobile Self Storage Pricing Strategies
By Jennifer LeClaire
Mobile self storage operations are springing up in all shapes and sizes. There’s mobile storage that rests on traditional self storage sites, mobile storage that operates as a complement to moving services, mobile storage franchises, and even mom and pop mobile storage operators. With so many different business models, it is no wonder that one pricing scheme doesn’t fit all—and those are just a few of the factors in the pricing equation.
As interest in mobile storage rises, questions about how to price the service-oriented product are rising with it. Do you charge for pickup, delivery, or both? Do you offer discounts or not? Do you price it to compete with traditional self storage or treat it as a premium product? All good questions. The answer depends on whom you ask.
“The mobile storage industry is still young and many people are still trying to get a feel for it,” says Josh Wilson, president of Mobile Attic Franchising Company, Inc. in Elba, Ala. “There is a preconceived notion that there will be a premium for mobile storage, but it can be difficult to judge how much of a premium over traditional self storage.”
Using Competitive Benchmarks
When it launched in 2001, Mobile Attic’s initial strategy was to keep its prices as competitive with traditional self storage as possible, pound for pound—or square foot per square foot, as it were. As the concept took off in the Southeast and competition started creeping in, however, Wilson says he used the mobile storage competition as a benchmark for his pricing scheme. Although Mobile Attic franchisees set their own rental rates, corporate headquarters does share what they know from experience works. “We’ve been competitive with our pricing per unit because our operating costs are much lower than a traditional franchise. At the majority of our locations where PODS is present, our units will cost anywhere from $10 to $20 less,” Wilson reveals. “Overall, there is no secret formula. We price our units based on what the market will bear.”
Keeping tabs on competitive pricing is a key in any business, but perhaps more so in a nascent industry with which consumers are less familiar. Wilson offers a fast food example that drives the point home. Hungry diners in a small town that only offers a McDonald’s® restaurant might think a Big MacTM is expensive, he explains, but when Burger King® moves into town with its WhopperTM, diners can decide which is the better deal. What they’ll find with mobile storage, he adds, is that the prices are within a particular range that varies based on geographic considerations.
Pricing To Market
That leads us to the next pricing strategy: pricing to the market. Dusty Rhodes, director of business development for SmartBox Portable Self Storage, LLC in Richmond, Va., takes this approach. SmartBox franchises operate in 12 markets. The pricing in Denver, Colo., is different from the pricing in Jacksonville, Fla. “It’s not just the lowest price that wins deals. Yes, we have tried to focus our business on giving customers great prices, but at the same time we also provide a high level of customer service,” Rhodes says. “You can actually charge a premium for that.”
Customer service aside, part of the pricing challenge rests on market demographics. Phil Duval, co-owner of Space-to-Go, LP, a mobile storage franchisor based in Monongahela, Pa., says the challenge with mobile storage is that you can’t break up your pricing structure by neighborhood like traditional self storage operators can. Self-storage, he says, can charge higher prices in affluent neighborhoods or lower prices in moderate neighborhoods. Mobile storage, by contrast, has to offer one price for a potentially larger radius that includes all types of neighborhoods.
“What’s expensive to one person may be a drop in the bucket to another,” Duval says. “So you have to balance the delivery cost and the monthly rental to make it attractive to anybody who wants to rent. Since you don’t know how long someone is going to rent the unit, you don’t know how long it will take you to recover the cost of the delivery.”
Using Financial Benchmarks
Duval’s points lead us to another factor: using financial benchmarks as a basis for pricing. Used together with market and competitive considerations, this pricing strategy considers the cost per mobile storage unit together with financing costs. You do this by calculating the debt service and principle reductions along with overhead operating costs of the storage facility, personnel, equipment, gas, and insurance, and you divide the total by the number of mobile storage units in your inventory. That leaves you with a figure that represents the cost to finance and operate an individual unit.
But that’s not the only thing to consider. Before you tally up the bottom line, you need to keep in mind the potential cost of future maintenance and repairs on the units. Depending on the type of unit you’ve invested in, you may have more or fewer repair costs. “Some operators are going to run into significant repair costs that could impact their operations in years to come,” Wilson says. “The quality of the product is going to be important over the long haul, not just the unit, but also the facility.” The mobile storage customer who does research to determine the best price may find similar prices across the board, Wilson offers, but when they view the units and the storage facilities, the differences will begin to emerge. In the context of pricing, inferior facilities may need to ultimately charge less, but may have to pay more for maintenance and repairs.
Charging For Pickup And Delivery?
As you go through the financial benchmark exercise, you’ll have to make some decisions. Will you charge for delivery, pickup, or both? There are different schools of thought on this topic. Duval believes customers understand that there is a price to pay for delivery and pickup. “I don’t think having a delivery and a pickup fee is offensive to customers,” he argues. “The bigger question is how much you will charge. That depends on how much you need to cover your costs.” If it cost $100 to deliver a unit, he explains, you could charge $100 plus a profit margin or you could charge less than $100 and hope to recover the loss through the monthly rental.
SmartBox chooses not to charge a pickup fee. The company offers free pickup as a customer service feature it hopes will differentiate it in the market. “Pricing is a sensitive issue and it comes to the core of marketing strategies,” Rhodes explains. “It gets more confusing when you consider that some people are using mobile storage to move, others are using it during remodeling, others are using it for different reasons. Different pricing models may provide benefits for different markets. There’s still a lot of variability.”
Going The Discount Route
Offering discounts is a popular strategy in the traditional self storage industry, though some disdain the tactic. But does it work in the mobile storage industry? Jason Curi, president of Outta Site Mobile self storage in Pontiac, Mich., believes it can under certain circumstances. He offers discount pricing for customers who rent large quantities of units in order to compete locally with PODS and a relative newcomer, SAM (Store And Move). With 5-by-8 containers, Outta Site has much smaller units than either competitor.
What Outta Site doesn’t try to do is compete with traditional self storage pricing. In fact, Outta Site is significantly more expensive than self storage in its local market. “It’s hard to stay competitive with self storage because some folks here are renting 5-by-5s for $20 a month,” Curi explains. “That’s a ridiculous price for mobile storage, so we don’t try to compete with it. We just try to stay in line with the mobile storage competitors, and hopefully the industry will come up with some standards around pricing.”
Wilson believes Curi’s hope will become a reality at some point with a price range that is competitive and easier to define than it is today. “Customers are more sensitive to pricing today than they will be in the future. Today, a portable storage unit is a portable storage unit is a portable storage unit,” he says. “Mobile storage operators will differentiate themselves with unique products and services in the future, and customers will perceive value propositions accordingly.”
Jennifer LeClaire is a freelance writer based in Hallandale Beach, Florida, and a regular contributor to the Mini Storage Messenger and Self Storage Now! Her clients include The Associated Press, The New York Times, and CBS Television/Winstar Communications.
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