Understanding your competitive set when pricing is obviously important. If you’re constantly at low exposure, you can push pricing and ignore whatever comps are doing. But if your exposure ever goes up, you’ll want to make sure that you’re not priced out of the market such that you can’t reduce exposure.

In my experience, I’ve seen two “camps” on how to approach this problem. The first tries to build the comparison from the ground up. We audit our community against the comp on a variety of things—age, community amenities, unit size, unit type amenities (balconies, fireplaces, kitchen and bath finishes, etc.), and record these in (usually a large) spread sheet. $15 for a balcony, $3 for crown molding, $10 for a fireplace, ….  A lot of work, and a lot of alleged precision.

Can you tell I don’t belong to that camp? The reason is pretty fundamental—although there’s a (I believe false) sense of security and precision in such a complete and seemingly analytical approach, the reality is simply our customers don’t shop for apartments that way. You rarely see a prospect come with a matrix of things they’re evaluating, or even see them taking notes. Do we really think a prospect is saying to themselves, “Ooh, crown molding. I’ll pay $3 a month more for that.” Of course not.

Searching for a place to call home is a much more holistic process.  So I’m an advocate of conducting this thought (or real) experiment. Walk your community/unit type as if you were on tour. Then do the same for the comp. What price difference would make the decision between the two really tough? Ask all your front office staff the same question—the average (or maybe even better the median) is usually a really good answer.

You can also do a sanity check on your answer—look at the current rent difference between your comp and you. If your occupancy/exposures are comparable, that’s another good data point. I’m a big fan of the notion to “let the market tell you what the difference is.” What’s the comp’s rent per square foot vs yours? Is that explainable by size, age and other differences? If the actual differences are in the ball park of your estimate, you’re good to go. If they’re different, which is more believable (hint: I tend to favor what the market is telling you, but there are times where you know why a comp is just mis-pricing so you do need to use your own judgment).

Competitive price comparison is never an exact science. So let’s not pretend it is. Let’s shop the way our prospect’s shop, do a sanity check and then use our best judgment. That may not get you an answer to defend if you were trying to get a PhD, but it’s good enough to make business decisions from.