Retention Marketing and Profit Optimization

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Tetention Marketing and Profit Optimization

Quantitative experts will frame and hopefully synthesize an understanding of how to properly integrate the costs of turnover with pricing optimization. Industry leaders will share information on variable and fixed turn costs, advertising strategies and when it might make sense to bite the bullet and let a resident go in favor of a projected rental increase. Readers of the AIM LinkedIn discussion group will recognize the discussion that started online and more fully considered in person.

- Richard Hughes, Vice President of Revenue Management, AMLI
- Doug Miller, President, Satisfacts
- Greg Lozinak, Chief Operating Officer, Waterton Residential

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  • Why is industry turnover down? Can people assume its “us”? What happens during recessions?Financial issues, greater focus on budgets as well as value, hunkering downRenting down (A to B, and B to C)Matching up (1BR to roommates and larger sizes)SF home inventory up…the shadow market (group homes)Fewer buying homesWhat have our clients experienced?Greater focus on what matters most to residentsBest practice performance improvement2008-2010 SatisFacts Index (SI)Growth in SI over last 3 yearsEnhancements in perceived valueEnhancing perceived value, driven by best practice focusDespite focus on expenses, rent/value diminishing as a reason for movingAll driving changes in Very Likely to Renew % and Not Likely to Renew %
  • Retention Marketing and Profit Optimization

    1. 1. Retention Marketing and Profit Optimization<br />Moderator:<br />Jim Kjolhede, Satteron Enterprises<br />Panelists:<br />Doug Miller, SatisFacts<br />Richard Hughes, AMLI<br />Greg Lozinak, Waterton<br />
    2. 2. Opening Comments<br />
    3. 3. Doug Miller, SatisFacts<br />
    4. 4. Questions to Address<br /><ul><li>Impact of revenue management on turnover?
    5. 5. Net gain if renewals/retention a lesser goal vs. leasing?
    6. 6. Rev management include turnover’s NOI impact? What cost used? Reward (perceived value = opportunity) factored in?
    7. 7. Improved service, satisfaction impact on increase resistance?
    8. 8. What drives satisfaction and retention?
    9. 9. Why is national turnover down? Performance? Recession? What happens as renewal increases ratchet up?
    10. 10. What have clients experienced during recession? How has satisfaction, perceived value and renewal likelihood changed?</li></li></ul><li>Impact of Satisfaction onPrice Resistance<br /><ul><li>“From the perspective of the firm, the findings imply that increasing customer satisfaction is likely to decrease price elasticity of demand.”
    11. 11. Author states firms considering investing time and resources to improve customer satisfaction reaps financial benefits - including customers’ increased willingness to tolerate price increases.
    12. 12. 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.</li></li></ul><li>Two for One Special: Impact of Boosting Satisfaction and Retention<br /><ul><li>$4,166 positive NOI impact for each move-out saved due to improved service delivery
    13. 13. Improved satisfaction reduces resistance to rent increases
    14. 14. Increasing satisfaction lets you avoid NOI hits as well as achieve renewal increases</li></li></ul><li>Shareholder ValueCorrelates Satisfaction<br />
    15. 15. The Impact of Increased Resident Retention on NOI and Asset Value<br />
    16. 16. The Real Cost of Turnover / The Real Gain from Reducing Turnover<br />
    17. 17. Run the Numbers…<br />They Speak for Themselves<br />Calculate How Much Each Move Out Costs:<br />http://www.multifamilyinsiders.com/home/apartment-turnover-cost-calculator<br />Calculate the Impact of Reducing Turnover on NOI and Asset Values:<br />http://www.satisfacts.com/tic.html<br />
    18. 18. <ul><li>Leveraging satisfaction and retention drivers delivers huge returns
    19. 19. Client turnover rate 9+ points below NAA IES
    20. 20. Impact on a 5,000 unit portfolio:
    21. 21. $1.978 million higher NOI ($4,166/move-out)
    22. 22. $32,980,000 higher asset value (6 cap)
    23. 23. Does not include factor for reduced resistance to rent increases</li></li></ul><li><ul><li>So, what’s more desirable?
    24. 24. Seeking to bump rents $50 when a resident moves out, or
    25. 25. Boosting satisfaction, saving thousands in move-out costs…plus achieving a rent increase
    26. 26. Our view is the goal is not to lease apartments…
    27. 27. It’s to have apartments leased at maximum rent levels achievable via superior satisfaction</li></li></ul><li>What Matters Most?<br />
    28. 28. Retention Drivers<br />The realities of what drives retention relate to the office staff, communication, and a culture of responsiveness<br />
    29. 29. Fewer Outstanding Maintenance Issues =<br />Higher Satisfaction<br />Source: ©SatisFacts Research<br />15<br />
    30. 30. Impact of Overall SatisFaction on Likelihood to Renew<br />5.00<br />4.50<br />4.00<br />3.50<br />Overall SatisFaction (1-5 scale)<br />3.00<br />2.50<br />2.00<br />1.50<br />1.00<br />0%<br />20%<br />40%<br />60%<br />80%<br />100%<br />"Very Likely" to Renew<br />Higher Satisfaction = More Likely to Renew<br />Source: ©SatisFacts Research<br />16<br />
    31. 31. Service Request Process PerformanceDrives Satisfaction<br />Continual three year Improvements in all best practice metrics<br />
    32. 32. Clients Prove Best Practice Focus Drives Increased Satisfaction and Reduced Turnover<br />Continual three year Improvements in all best practice metrics<br />
    33. 33. Client Focus on Best Practices Reduced Controllable Factors Impacting Renewals<br />Significant decreases in controllable non-renewal reasons – notably value and staff-related – driven by improvements in best practices<br />
    34. 34. Clients Prove Turnover is Controllable!<br />Consistent four year positive renewal likelihood score trends correlates with continual improvement in all best practice metrics and perceived value<br />
    35. 35. Doug Miller, SatisFacts ResearchMain: (866) 655-1490 x100<br />Direct/Cell: (410) 598-1400<br />Email: dmiller@satisfacts.comWeb: www.satisfacts.com<br />Contactingthe Panelist<br />
    36. 36. THANK YOU!!!<br />
    37. 37. Richard Hughes, AMLI<br />
    38. 38. Renewal Leases<br />2 Questions:<br />“Is there an economic advantage to renewals?”<br />“What are the primary drivers of renewal intent?”<br />
    39. 39. Proposed Steps<br />Consolidate Renewal and Profile Data<br />Cohort Analysis<br />Correlation Analysis<br />Regression Model<br />Logit Predictive Model<br />
    40. 40. Consolidate Renewal and Profile Data<br />“Yes or No” questions need to become 1 or 0<br />Add additional data about that lease:<br />Demographic<br />Community Information<br />Transaction History<br />Social Media (Gasp! a real life use!)<br />Fire up your spreadsheet<br />
    41. 41. Cohort Analysis<br />Group supplemental data into ‘Buckets’ (Cohorts)<br />Examine the propensity to renew (average of those 1’s and 0’s)<br />Create charts to impress senior management<br />
    42. 42. Asset age<br />
    43. 43. Lease Term<br />
    44. 44. Percentage Rent Increase <br />
    45. 45. Completed Service Requests<br />
    46. 46. Correlations<br />Allows us to understand the relationship (association) between variables<br />Association in not causation<br />Install “Data Analysis tool pack” in Excel<br />Tools > Data Analysis > Correlation<br />
    47. 47. Correlations<br />
    48. 48. Never, Ever Offer Based On:<br />1. Race <br />2. Color <br />3. National Origin<br />4. Religion<br />5. Sex<br />6. Disability<br />7. Familial Status (families with children)<br />8. Age<br />9. Marital Status<br />
    49. 49. Regression Model<br />Allows you to combine variables into a descriptive model<br />Shows how much the whole model describes the data<br />Shows the impact and relevance of each variable<br />Can be used to create a predictive model<br />
    50. 50. Regression Model<br />
    51. 51. Logit Model<br />Branch of economics that addresses discrete choice problems <br />An extension of the existing regression<br />For any customer for any price point will give their probability to sign a renewal based on data previously analyzed<br />True micro-marketing, leveraging consumer level data into actionable results.<br />Better, more robust revenue management<br />
    52. 52. Takeaways<br />There are many drivers of satisfaction and retention<br />Which might make the chart on the right meaningless<br />The plural of ‘anecdote’ is not (good) ‘data’<br />
    53. 53. THANK YOU!!!<br />
    54. 54. Greg Lozinak, Waterton Residential<br />
    55. 55. Agenda<br /><ul><li>RevMan – People vs. Machine
    56. 56. Why Choose RevMan Software
    57. 57. Roll Out Methodology
    58. 58. Affect On Rental Rates & Occupancy
    59. 59. RevMan vs. CRM – Impact On Retention
    60. 60. Lessons learned</li></li></ul><li>RevMan – People VS. machines<br /><ul><li> Delivering the right product at the right price to the right person in a way that maximizes revenue under a give set of constraints
    61. 61. Variables:
    62. 62. Demand
    63. 63. Unit type availability
    64. 64. Net rental price
    65. 65. Lease term
    66. 66. Days vacant
    67. 67. Seasonal trends
    68. 68. Revenue management software makes this process more efficient</li></li></ul><li>Why Machine over people<br /><ul><li> Establish structure & discipline around pricing process
    69. 69. Establish consistent process across portfolio
    70. 70. Transparency
    71. 71. Eliminate variability of people
    72. 72. Establish efficiency</li></li></ul><li>Rollout Methodology<br /><ul><li>January 2009 – “Test” new leases
    73. 73. August 2009 – New lease rollout complete
    74. 74. October 2009 – Begin rollout of renewal pricing
    75. 75. March 2010 – Rollout of renewal pricing complete</li></li></ul><li>Affect on Rental Rates<br />
    76. 76. RevmanVersuscrm<br /><ul><li>RevMan doesn’t always equate to low retention rates
    77. 77. Great customer service doesn’t always equate to high retention rates
    78. 78. Goal - provide a level of customer service that creates value for resident
    79. 79. Pre-RevMan retention rates – 50 – 65%
    80. 80. Post-RevMan retention rates – 42 - 46%
    81. 81. Rolled out renewal pricing as market was recovering
    82. 82. Better economy – more options
    83. 83. Philosophical change in renewal pricing
    84. 84. 2009/Early 2010 – ceiling on renewal pricing with no floor
    85. 85. Late 2010/2011 – floor on renewal pricing with no ceiling</li></li></ul><li>Lessons Learned<br /><ul><li>Using a revenue management tool doesn’t mean you can turn your brain off
    86. 86. Let the tool do what it’s supposed to do
    87. 87. Senior executive sponsorship & peer level sponsorship
    88. 88. Pricing team
    89. 89. Establish parameters
    90. 90. Who can change rents</li></li></ul><li>Contact Info:<br />Greg Lozinak, Waterton ResidentialDirect: (312) 948-4550<br />Email: glozinak@wallc.comWeb: www.watertonresidential.com<br />Contactingthe Panelist<br />
    91. 91. THANK YOU!!!<br />
    92. 92. Moderator Questions to the Panelists <br />
    93. 93. Audience Questions to the Panelists <br />

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