by John Stevens
September 7, 2011 10:53 AM
Everyone loves a bargain. In 2010, 49% of business transactions included free shipping. Many people canceled their orders when they discovered they couldn't get free shipping. In 2009, the Denny's restaurant chain offered a free breakfast to its customers. They saw increased revenue because of their giveaway. This year to celebrate its 84th anniversary, 7-Eleven convenience stores across the country offer free 7.11 ounce Slurpees to customers on the seventh day of each month. Nancy Smith, 7-Eleven's vice president of marketing, said that last year on the days when customers received a free slurpee sales increased 38%.
Businesses offer free products in an effort to get customers in the door. The idea is that customers will then purchase other items or bigger ticket items which will then increase the business's revenue. Business owners also believe that these offers will turn one-time customers into regular, repeat customers.
Self storage facilities also participate in offering free products, services, and rent. Some offer free boxes and packing supplies. Some provide free use of a moving truck or give one month's free rent. Some businesses give fifty percent off of two month's rent when customers sign a lease for a storage unit.
But what is the actual cost of this practice to storage owners?
The idea behind the discount strategy is that when customers receive free or discounted prices they will rent longer than they originally had planned. Then, business owners gradually increase the rent so by the time the renter has moved out the owner has recouped the money lost from the discount.
There are several drawbacks to this marketing tactic. Deep discounts attract a lower quality of customers. They storage hop - get one month free rent from one facility and at the end of the month move to another one for a free month's rent. They hop from one storage facility to the next never becoming long-term renters.
When owners slash prices, it is difficult for owners to rent units at normal the prices. The discounted price gets deep-rooted in customers' minds and they are not willing to pay a higher price. "I don't see any easing," said Jeffrey Supnick, president of Supnick Real Estate in Mt. Laurel, N.J. "I think it's becoming more entrenched."
Also, customers may not rent from a nearby storage facility that doesn't offer free rent. Instead, they drive further in favor of looking for one that offers one month free rent.
Sources Used:
Free Shipping and Online Shopping Statistics.
"Discounting Ruts: Are the Costs Too Deep?" Mini-Storage Messenger; September 2011.
"7-11 honors 7/11 with free slurpees." CBS News; 11 july 2011.
"2 million enjoy free breakfast at Denny's." USA Today; 3 February 2009.