Resident retention is generally the forgotten factor in property management, while the art of apartment marketing and leasing to new prospects continues to be studied, sliced, diced and pureed by the apartment industry to find optimal strategies of getting people in the door. In fact, the better a community is at apartment marketing and leasing, the more it can mask its shortcomings on the resident retention side. So much effort is made on the leasing side of the business that our front line troops are called “Leasing Professionals.” Focusing on Leasing is not a bad idea; however, neglecting the other half of your business can alienate your residents, cause high turnover, and severely impact your bottom line.
Which is more important: Resident Retention or Apartment Marketing?
When we discuss the value of Resident Retention, it is not to say that apartment marketing isn’t also vitally important. In other words, to improve retention, we should not sacrifice leasing. That said, an increase in retention is vastly more beneficial than an increase in leasing. This should not be a surprising concept. When you compare a new resident to an existing resident, the existing resident is much more profitable, with hardly any make-ready costs and no loss due to vacancy. Additionally, a long-term renter is much more likely to refer friends and coworkers than a new renter would.
When you see the difference in profitability between the two groups, it is shocking how much more we spend on prospects. While prospects and new residents get the benefit of cheaper rent and extensive marketing, existing residents, those who pay the bills, often get the short end of the stick. This difference can result in alienation of your current residents, a situation you should strongly avoid.
Why is resident retention not on the radar?
Even though we all understand the concept of resident retention, surprisingly little is known about how to accomplish it. Therefore, most communities choose to either ignore it all together or choose methods that do not achieve the expected goals. Let’s first look into a few of the most common mistakes made in current retention “techniques.”
Customer Service and Maintenance
Let me be clear about this: Customer service and maintenance are NOT resident retention programs. We constantly hear how important these two items are, which is completely correct. However, instead of going above and beyond, these items are an expectation, not a perk. Especially for Class A and Class B properties, residents do not see strong maintenance and customer service as a luxury item that they should be impressed with. They instead see these items as a required part of living at your community. Consider a restaurant advertising that its food is served warm. Isn’t that expected at a restaurant? And if that is the best trait the restaurant can provide, would you really expect the food to be that great? For a community to advertise a feature that should be standard, they are actually implying that the rest of their service is not too impressive!
The infamous summer party…
Summer parties can be a fun perk, but are rarely a great investment. First of all, summer parties can be quite expensive if food is offered, generally ranging from $1,500 to $3,000 for a 300-unit community. Ironically, you save money when you get a low resident turnout at these events. Imagine the cost if 100 percent of your residents attended! However, more than likely, you will only have around 25 percent of your residents show up. Of those, it’s likely that only about 25 percent has a lease coming up to make an impression on the renewal decision. Therefore, you are impacting only 6 percent of your “target audience.” This means for an average community of 300 units, you are spending roughly $2,000 to reach 18 residents – that’s $111 per resident! Even if the party influences a few others that renew later in the year, investments in these parties do not justify the reward.
So what are some programs we can implement?
First of all, know your community. Fair Housing laws limit how much demographic information we can keep about our residents, but you should at least have an idea of the different faces of your community. Additionally, instead of having one giant one-size-fits-all party, you can coordinate several smaller, targeted parties throughout the year. Having more frequent parties allows you to target different demographic groups in your community at different times instead of “putting all your eggs in one basket” approach of large summer events. Spacing these events throughout the year will also guarantee that your events coincide with all your residents’ renewal periods, thus giving you the largest impact possible. Here a few ideas that can you can explore that are less expensive: