Post on 06-May-2015
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Retention Marketing and Profit Optimization
Moderator:Jim Kjolhede, Satteron Enterprises
Panelists:Doug Miller, SatisFactsRichard Hughes, AMLI
Greg Lozinak, Waterton
Opening Comments
Doug Miller, SatisFacts
•Impact of revenue management on turnover?
•Net gain if renewals/retention a lesser goal vs. leasing?
•Rev management include turnover’s NOI impact? What cost used? Reward (perceived value = opportunity) factored in?
•Improved service, satisfaction impact on increase resistance?
•What drives satisfaction and retention?
•Why is national turnover down? Performance? Recession? What happens as renewal increases ratchet up?
•What have clients experienced during recession? How has satisfaction, perceived value and renewal likelihood changed?
Questions to Address
Impact of Satisfaction onPrice Resistance
•“From the perspective of the firm, the findings imply that increasing customer satisfaction is likely to decrease price elasticity of demand.”
•Author states firms considering investing time and resources to improve customer satisfaction reaps financial benefits - including customers’ increased willingness to tolerate price increases.
•Source: Customer Satisfaction and Price Tolerance. Eugene W. Anderson, National Quality Research Center, School of Business Administration, The University of Michigan. As published in Marketing Letters 7:3 (1996): 265-274 by Kluwer Academic Publishers, http://deepblue.lib.umich.edu/bitstream/2027.42/47216/1/11002_2004_Article_BF00435742.pdf.
Two for One Special: Impact of Boosting Satisfaction and Retention
•$4,166 positive NOI impact for each move-out saved due to improved service delivery•Improved satisfaction reduces resistance to rent increases•Increasing satisfaction lets you avoid NOI hits as well as achieve renewal increases
Shareholder ValueCorrelates Satisfaction
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Satisfaction Ranking
Improved
Satisfaction Ranking
Unchanged
Satisfaction Ranking
Declined
52%
21%
-28%
Relationship Between Customer Satisfaction and Sharehold Value (Auto Industry)
Change in Shareholder Value (1994-2004)
Source: "Satisfaction - How Every Great Company Listens to the Voice of the Customer" by Chris Denove and James D Power IV of J.D. Power and Associates. Published by The Penquin Group, 2006.
The Impact of Increased Resident Retention on NOI and Asset Value
Assumptions: AverageAverage rent* $1,009Average vacancy loss days 45Average concessions $634Calculations:Vacancy loss $1,513Concessions* $634Leasing staff time/cost $170Marketing / advertising / rental, referral / locator fees, leasing commissions $849Hard turnover costs (carpet cleaning, painting, repairs, miscellaneous costs) $765Maintenance staff time/cost $165Apartment Clean $71TOTAL $4,166Source: SatisFacts Research (www.SatisFacts.com)
Move-Out Cost: Challenging Market Conditions
* Source: Axiometrics (www.axiometrics.com); average asking rent and concessions as of Dec 2010
The Real Cost of Turnover / The Real Gain from Reducing Turnover
Run the Numbers…They Speak for Themselves
Calculate How Much Each Move Out Costs:http://www.multifamilyinsiders.com/home/apartment-turnover-cost-calculator
Calculate the Impact of Reducing Turnover on NOI and Asset Values:
http://www.satisfacts.com/tic.html
•Leveraging satisfaction and retention drivers delivers huge returns•Client turnover rate 9+ points below NAA IES•Impact on a 5,000 unit portfolio:
•$1.978 million higher NOI ($4,166/move-out)•$32,980,000 higher asset value (6 cap)•Does not include factor for reduced resistance to rent increases
•So, what’s more desirable?•Seeking to bump rents $50 when a resident moves out, or•Boosting satisfaction, saving thousands in move-out costs…plus achieving a rent increase
•Our view is the goal is not to lease apartments…•It’s to have apartments leased at maximum rent levels achievable via superior satisfaction
What Matters Most?
Lease Renewal
Service Request Process
Communication and Culture of
Responsiveness
Retention DriversThe realities of what drives retention relate to the office staff, communication,
and a culture of responsiveness
Problem Areas with the Greatest Impact on Renewal Likelihood
Rank Satisfaction Topic1 Office staff: Promptness of response to calls and e-mails
2 Office staff : Follow-up on completed service requests
3 Office staff: Responsiveness and dependability
4 Office staff: Courteous and professional
5 Apartment: Appearance and condition
Source: SatisFacts Research
Impact of Outstanding In-Unit Maintenance Problems on Overall SatisFaction (n = 50,000)
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
0% 20% 40% 60% 80% 100%
Residents w/Outstanding Maintenance Problems
Ov
era
ll S
ati
sF
ac
tio
n (
1-5
sc
ale
)
15
Source: ©SatisFacts Research
Fewer Outstanding Maintenance Issues =Higher Satisfaction
Impact of Overall SatisFaction on Likelihood to Renew
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
0%20%40%60%80%100%"Very Likely" to Renew
Ov
era
ll S
ati
sF
ac
tio
n (
1-5
sc
ale
)
16
Higher Satisfaction = More Likely to Renew
Source: ©SatisFacts Research
Service Request Process PerformanceDrives Satisfaction
2008
2009
2010
0%10%20%30%40%50%60%70%80%90%
100%
Maintenance cleaned up when
doneService request
completed properly the first
time
Maintenance problems still
existOffice follow up
after request completed
90%
76%
29% 34%
92%
80%
26%41%
93%
82%
23%
46%
2008 - 2010 SatisFacts Index: Service Request Process
Percent "Yes" to Yes/No Questions. ©SatisFacts Research (www.SatisFacts..com).
Continual three year
Improvements in all best practice metrics
Clients Prove Best Practice Focus Drives Increased Satisfaction and Reduced Turnover
2008
2009
20103.80
3.90
4.00
4.10
4.20
4.30
4.40
4.50
ApartmentOffice
courteous, professional
Office responsive, dependable
Office prompt
response to calls/emails
Maintenance staff
courteous, professional
Speed service requests handled
Quality of maintenance
work done
Overall average score
3.92
4.21
4.034.00
4.31
3.93
4.04
3.98
4.01
4.30
4.154.13
4.41
4.104.16
4.07
4.06
4.35
4.214.19
4.46
4.184.24
4.12
2008 - 2010 SatisFacts Index: Best Practice Trends
Satisfaction Five Point Rating Scale: Exceptional (score of 4.50+), Superior (4.00-4.49), Average (3.50-3.99), Warning (3.00-3.49), Red Flag (below 3.00). ©SatisFacts Research (www.SatisFacts..com).
Continual three year
Improvements in all best practice metrics
Client Focus on Best Practices Reduced Controllable Factors Impacting Renewals
2009
2010
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FinancialValue
Buying HomeStaff Related
or Controllable
ApartmentRelocation,
Status Change
35.7%
27.2%
13.9%
53.9%
79.2%
13.2%
40.8%
21.0%
11.0%
46.1%
73.0%
18.8%
2009 - 2010 SatisFacts Index: Response Categories -Why Not "Very Likely" to Renew
Aggregated Percent Selecting Response Option. ©SatisFacts Research (www.SatisFacts..com).
Significant decreases in controllable non-renewal
reasons – notably value
and staff-related – driven by
improvements in best
practices
Clients Prove Turnover is Controllable!
2007
2008
2009
2010
10.0%
20.0%
30.0%
40.0%
50.0%
"Very likely" to renew"Not likely" to renew
43.6%
20.3%
43.6%
16.4%
44.5%
14.7%
48.3%
13.1%
2007 - 2010 SatisFacts Index: Renewal Likelihood
Percent Selecting Response Option. ©SatisFacts Research (www.SatisFacts..com).
Consistent four year positive
renewal likelihood score trends
correlates with continual
improvement in all best practice
metrics and perceived value
Doug Miller, SatisFacts ResearchMain: (866) 655-1490 x100Direct/Cell: (410) 598-1400Email: dmiller@satisfacts.comWeb: www.satisfacts.com
Contacting the Panelist
THANK YOU!!!
Richard Hughes, AMLI
2 Questions:
“Is there an economic advantage to renewals?”
“What are the primary drivers of renewal intent?”
Renewal Leases
•Consolidate Renewal and Profile Data•Cohort Analysis•Correlation Analysis•Regression Model•Logit Predictive Model
Proposed Steps
•“Yes or No” questions need to become 1 or 0
•Add additional data about that lease:
– Demographic– Community Information– Transaction History– Social Media (Gasp! a real life use!)
•Fire up your spreadsheet
Consolidate Renewal and Profile Data
•Group supplemental data into ‘Buckets’ (Cohorts)
•Examine the propensity to renew (average of those 1’s and 0’s)•Create charts to impress senior management
Cohort Analysis
Asset ageProperty Age
0
2000
4000
6000
8000
10000
12000
14000
0 - 2 3 - 4 5 - 6 7 - 9 10 - 14 15+
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Count
Renewal Variance
Lease Term
Lease Term
0
2000
4000
6000
8000
10000
12000
14000
16000
0 - 2 3 - 5 6 - 8 9 - 11 12 - 14 15 - 17 18 - 20 24 +
-60%
-40%
-20%
0%
20%
40%
60%
Count
Renewal Variance
Percentage Rent Increase Rent Increase
0
2000
4000
6000
8000
10000
12000
-15% to -10%
-10% to -5%
-5% to 0%
0% to 5%
5% to 10%
10% to 15%
15% to 20%
20% to 25%
25% +
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Count
Renewal Variance
Completed Service Requests
Service Requests
0
1000
2000
3000
4000
5000
6000
0 1 - 2
3 - 4
5 - 6
7 - 9
10 - 14
15 - 19
20 +
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Count
Renewal Variance
•Allows us to understand the relationship (association) between variables•Association in not causation
– Install “Data Analysis tool pack” in Excel– Tools > Data Analysis > Correlation
Correlations
Correlations
1. Race 2. Color 3. National Origin4. Religion5. Sex6. Disability7. Familial Status (families with children)8. Age9. Marital Status
Never, Ever Offer Based On:
•Allows you to combine variables into a descriptive model
– Shows how much the whole model describes the data
– Shows the impact and relevance of each variable
•Can be used to create a predictive model
Regression Model
Regression Model
•Branch of economics that addresses discrete choice problems •An extension of the existing regression
– For any customer for any price point will give their probability to sign a renewal based on data previously analyzed
•True micro-marketing, leveraging consumer level data into actionable results.•Better, more robust revenue management
Logit Model
•There are many drivers of satisfaction and retention•Which might make the chart on the right meaninglessThe plural of ‘anecdote’ is not (good) ‘data’
TakeawaysReasons for not renewing
Employment22%
Corporate Lease Expiration
6%
Change in Household
Composition12%
Transfer On-Site7%
House Purchase / Rental19%
Other12%
Downsizing6%
Price9%
Unit Satisfaction4%
Skip / Evict3%
THANK YOU!!!
Greg Lozinak, Waterton Residential
• RevMan – People vs. Machine
• Why Choose RevMan Software• Roll Out Methodology
• Affect On Rental Rates & Occupancy
• RevMan vs. CRM – Impact On Retention
• Lessons learned
AGENDA
REVMAN – PEOPLE VS. MACHINES
• Delivering the right product at the right price to the right person in a way that maximizes revenue under a give set of constraints
• Variables:• Demand• Unit type availability• Net rental price• Lease term• Days vacant• Seasonal trends
• Revenue management software makes this process more efficient
WHY MACHINE OVER PEOPLE
• Establish structure & discipline around pricing process
• Establish consistent process across portfolio
• Transparency
• Eliminate variability of people
• Establish efficiency
ROLLOUT METHODOLOGY
• January 2009 – “Test” new leases
• August 2009 – New lease rollout complete
• October 2009 – Begin rollout of renewal pricing
• March 2010 – Rollout of renewal pricing complete
AFFECT ON RENTAL RATES
REVMAN VERSUS CRM• RevMan doesn’t always equate to low retention rates
• Great customer service doesn’t always equate to high retention rates
• Goal - provide a level of customer service that creates value for resident
• Pre-RevMan retention rates – 50 – 65%
• Post-RevMan retention rates – 42 - 46%• Rolled out renewal pricing as market was recovering
• Better economy – more options• Philosophical change in renewal pricing
• 2009/Early 2010 – ceiling on renewal pricing with no floor• Late 2010/2011 – floor on renewal pricing with no ceiling
LESSONS LEARNED• Using a revenue management tool doesn’t mean you can turn your brain off
• Let the tool do what it’s supposed to do
• Senior executive sponsorship & peer level sponsorship
• Pricing team
• Establish parameters • Who can change rents
Contact Info:Greg Lozinak, Waterton ResidentialDirect: (312) 948-4550Email: glozinak@wallc.comWeb: www.watertonresidential.com
Contacting the Panelist
THANK YOU!!!
Moderator Questions to the
Panelists
Audience Questions to the
Panelists