On today’s show we are talking about how to design a product for the market when the spreadsheet is telling you otherwise.

We’re developing a storage facility in a tertiary market up in the Rocky Mountains. Most of the existing storage facilities in town are older and date back to the 1980’s and 1990’s. The newest facility was built in 2019. The market has very high occupancy and we see demand in excess of the existing supply.

The interesting thing is that none of the facilities are climate controlled. When we rely on a spreadsheet analysis alone we would come to the same conclusion that climate controlled storage would not make financial sense. There is considerable additional cost associated with insulating the space and then outfitting the HVAC infrastructure. The electrical requirements for the entire site would increase considerably and the additional revenue when balanced with the additional costs would not return additional profit to the bottom line.

We would be reaching the same conclusion that all the other storage facilities have. Climate controlled makes no sense.

But this is where market positioning becomes important. If you don’t want to be differentiated in the market, then it’s easy to treat your product as a commodity and play the same game as everyone else.

In a commodity market, all of the products are the same. They all offer the same value and the only differentiator is price.

One facility might be more conveniently located and will win the business. But apart from location, these facilities are completely interchangeable. Will someone drive an extra mile to save $20 a month? Some will, and maybe some will not. It’s the race to the bottom.

But if someone has prized possessions that they want stored in a climate controlled environment, they will pick you and only you if you are the only one offering that in the market. There is a real benefit of being in a category of one, rather than just one of many.

They will call you first. They may ultimately not choose the climate controlled storage unit. But they still will call you first. That is a tangible marketing advantage that is otherwise intangible in a spreadsheet.

Customers may choose a small climate controlled storage locker for those few prized possessions and keep the remainder of their items in a non-climate controlled locker. There are opportunities to bundle two lockers in a packaged offering that other facilities don’t have.

When you build a building, you are not just undertaking a bricks and mortar exercise. You are designing a product for a specific customer. Product design involves thinking through the product usage from the customer’s perspective.