One day, while discussing the self-storage facilities they co-own, Bill and Joe wound up debating why some assets outperform others. They’re interested in developing more properties, but they begin to realize that traditional metrics don’t seem to explain what causes extraordinary performance in some properties over others.
Figuring out if a plot of land will work well for self-storage is an inexact science, but there are data tools that can help determine if a property is financially viable based on local customer attitudes, aspirations and other psychological criteria. Welcome to the world of psychographics.
What the Heck Are Psychographics?
Historically, self-storage developers and operators have relied on feasibility studies to determine where to build and forecast future success. While such a study is helpful in deciding whether a site will be viable, it doesn’t get into the heads of the potential customers within a local market or reveal anything about their buying habits.
A feasibility study typically includes a breakdown of demographics, traffic counts and patterns, competition in the area, market demand for space, and market rents and occupancy. It also provides a recommendation for unit mix, an analysis of amenities and climate-controlled space in the market, a pro forma income analysis, and a go or no-go recommendation. That’s a lot of valuable information, but it lacks a psychographic analysis.
Demographics are comprised of statistical data related to a market’s population, providing insight to the number of people in the area and their ages, family status, level of education and income, as well as housing types, the average age and value of property, and more. In contrast, psychographic data classifies the people within a market according to their attitudes, aspirations and other psychological criteria. While demographics are invaluable in determining the financial feasibility of a site, psychographic data helps differentiate between a good location and a great one.
The key difference is understanding who’s residing within your market besides factual population data at an aggregate level. For one, psychographic data describes the personalities, values, opinions, attitudes, interests and lifestyles of potential customers. Second, the information is available at the household level. It’s possible for demographic information from two areas to be similar, while the psychographics and purchasing patterns within them can be vastly different. A great starting point is to compare the tenants at existing self-storage properties with the population in the area.
Depending on the data provider, there are 60 to 80 psychographic profiles. In addition to location type (rural vs. urban), these vary based on income, education, socio-economic group, age, children at home, and other factors. Different groups have distinct purchasing and spending preferences, as well as varying political preferences.
A good starting point for existing self-storage operators is to compare tenant information against the psychographic profile types of the area population. You’ll find that certain groups are far more likely to use self-storage than the average household.
To understand how this works, let’s consider five hypothetical psychographic groups and their propensity to rent self-storage:
- Type A: 500%
- Type B : 200%
- Type C : 100%
- Type D: 50%
- Type E: 20%
These are just for illustrative purposes. In real-world scenario, there would likely be about 70 profiles. However, the range of 500 percent above average to 20 percent below average is typical of household propensity to use a product or service within a geographic area.