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

1. Retention Marketing and Profit Optimization Moderator: Jim Kjolhede, Satteron Enterprises Panelists: Doug Miller, SatisFacts Richard Hughes, AMLI Greg Lozinak, Waterton

2. Opening Comments

3. Doug Miller, SatisFacts

5. Net gain if renewals/retention a lesser goal vs. leasing?

6. Rev management include turnover’s NOI impact? What cost used? Reward (perceived value = opportunity) factored in?

7. Improved service, satisfaction impact on increase resistance?

8. What drives satisfaction and retention?

9. Why is national turnover down? Performance? Recession? What happens as renewal increases ratchet up?

11. Author states firms considering investing time and resources to improve customer satisfaction reaps financial benefits - including customers’ increased willingness to tolerate price increases.

13. Improved satisfaction reduces resistance to rent increases

15. The Impact of Increased Resident Retention on NOI and Asset Value

16. The Real Cost of Turnover / The Real Gain from Reducing Turnover

17. 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

19. Client turnover rate 9+ points below NAA IES

20. Impact on a 5,000 unit portfolio:

21. $1.978 million higher NOI ($4,166/move-out)

22. $32,980,000 higher asset value (6 cap)

24. Seeking to bump rents $50 when a resident moves out, or

25. Boosting satisfaction, saving thousands in move-out costs…plus achieving a rent increase

26. Our view is the goal is not to lease apartments…

28. Retention Drivers The realities of what drives retention relate to the office staff, communication, and a culture of responsiveness

29. Fewer Outstanding Maintenance Issues = Higher Satisfaction Source: ©SatisFacts Research 15

30. Impact of Overall SatisFaction on Likelihood to Renew 5.00 4.50 4.00 3.50 Overall SatisFaction (1-5 scale) 3.00 2.50 2.00 1.50 1.00 0% 20% 40% 60% 80% 100% "Very Likely" to Renew Higher Satisfaction = More Likely to Renew Source: ©SatisFacts Research 16

31. Service Request Process PerformanceDrives Satisfaction Continual three year Improvements in all best practice metrics

32. Clients Prove Best Practice Focus Drives Increased Satisfaction and Reduced Turnover Continual three year Improvements in all best practice metrics

33. Client Focus on Best Practices Reduced Controllable Factors Impacting Renewals Significant decreases in controllable non-renewal reasons – notably value and staff-related – driven by improvements in best practices

34. Clients Prove Turnover is Controllable! Consistent four year positive renewal likelihood score trends correlates with continual improvement in all best practice metrics and perceived value

35. Doug Miller, SatisFacts ResearchMain: (866) 655-1490 x100 Direct/Cell: (410) 598-1400 Email: dmiller@satisfacts.comWeb: www.satisfacts.com Contactingthe Panelist

36. THANK YOU!!!

37. Richard Hughes, AMLI

38. Renewal Leases 2 Questions: “Is there an economic advantage to renewals?” “What are the primary drivers of renewal intent?”

39. Proposed Steps Consolidate Renewal and Profile Data Cohort Analysis Correlation Analysis Regression Model Logit Predictive Model

40. Consolidate Renewal and Profile Data “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

41. Cohort Analysis 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

42. Asset age

43. Lease Term

44. Percentage Rent Increase

45. Completed Service Requests

46. Correlations Allows us to understand the relationship (association) between variables Association in not causation Install “Data Analysis tool pack” in Excel Tools > Data Analysis > Correlation

47. Correlations

48. Never, Ever Offer Based On: 1. Race 2. Color 3. National Origin 4. Religion 5. Sex 6. Disability 7. Familial Status (families with children) 8. Age 9. Marital Status

49. Regression Model 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

50. Regression Model

51. Logit 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

52. Takeaways There are many drivers of satisfaction and retention Which might make the chart on the right meaningless The plural of ‘anecdote’ is not (good) ‘data’

53. THANK YOU!!!

54. Greg Lozinak, Waterton Residential

56. Why Choose RevMan Software

57. Roll Out Methodology

58. Affect On Rental Rates & Occupancy

59. RevMan vs. CRM – Impact On Retention

61. Variables:

62. Demand

63. Unit type availability

64. Net rental price

65. Lease term

66. Days vacant

67. Seasonal trends

69. Establish consistent process across portfolio

70. Transparency

71. Eliminate variability of people

73. August 2009 – New lease rollout complete

74. October 2009 – Begin rollout of renewal pricing

77. Great customer service doesn’t always equate to high retention rates

78. Goal - provide a level of customer service that creates value for resident

79. Pre-RevMan retention rates – 50 – 65%

80. Post-RevMan retention rates – 42 - 46%

81. Rolled out renewal pricing as market was recovering

82. Better economy – more options

83. Philosophical change in renewal pricing

84. 2009/Early 2010 – ceiling on renewal pricing with no floor

86. Let the tool do what it’s supposed to do

87. Senior executive sponsorship & peer level sponsorship

88. Pricing team

89. Establish parameters

91. THANK YOU!!!

92. Moderator Questions to the Panelists

93. Audience Questions to the Panelists