September 2008 Newsletter
Resident Retention: The Myths, Realities and Best Practices
By Doug Miller and Jen Piccotti, SatisFacts Research
Having conducted research with residents from over one million apartments nationwide, SatisFacts has a database from annual, move-in, work-order follow-up and pre-renewal surveys which provides an empirical test tube from which to review retention. This permits SatisFacts to evaluate the important retention and turnover topics - what beliefs and practices need to be questioned and what should the industry be focusing on.
Given that most turnover is controllable and the significant impact service delivery by the office/leasing staff has on renewal decisions, adjusting the industry's focus on what most matters to residents will reap financial rewards. Since move-outs cost $3,000-$6,000, controllable turnover cannot be overlooked. There is a return for focusing on satisfaction: our clients’ annual turnover rate is 9.5 point lower than the NAA Income/Expense Survey; thus NOI for a client with 5,000 units is at least $1,500,000 higher!
Myth No. 1: The resident is #1.
Reality No. 1: The owner of the asset is #1.
Take care of No. 1 - the owner - by treating residents like they are #1. Everyone wins by understanding that the goal is to retain residents.
Myth No. 2: Most turnover cannot be controlled.
Reality No. 2: 60+% of turnover is controllable.
Over 60% of turnover is controllable; less than 40% is due to home buying and relocation. Dissatisfaction, driven by poor communication between residents and office/leasing staff regarding service, and between office/leasing staff and maintenance drives turnover. Outstanding maintenance issues drive satisfaction - and satisfaction drives renewals.
Myth No. 3: Typical retention programs have a positive impact on turnover.
Reality No. 3: These are not effective, according to the 2003-2007 NAA Income & Expense Surveys.
Per NAA’s annual survey, turnover has remained high and flat for five years (61%-62%). Service delivery education, improved communication with residents, a greater focus on work-order management by the office/leasing staff and ongoing resident feedback programs lead to below-industry turnover rates. Reducing $3,000-$6,000 controllable move-outs increases NOI.
Myth No. 4: Social activities, newsletters and move-in gifts are important retention program components.
Reality No. 4: Work-order performance and communication drive retention.
Nothing impacts retention more than service delivery, work-order management and related communications. Soft marketing programs have a minimal impact at best and they should only be icing on the cake; it is a mistake letting these become distractions from service delivery. Funds are better invested in anything related to work-order management and communications, such as resident portals with online work orders, rent payments and “email the manager” functionality, as well as beefed up maintenance staffing.
Heavy make-ready efforts and work orders compete for staff attention during the rental/expiration season. Therefore work-order delays occur at the worst time - when increase letters are sent. To limit dissatisfaction at renewal time, focus on work orders prior to and during the expiration season. Reallocating $4,800 from low ROI soft-marketing programs permits for hiring a part-time tech for 320 hours prior to and during the expiration season.
Myth No. 5: The goal of retention programs is to increase satisfaction.
Reality No. 5: Minimizing dissatisfaction is the key to increasing retention.
Retention programs must focus on minimizing dissatisfaction in the areas that impact renewal likelihood the greatest; work order management by the office and the communication between the staff and residents has the strongest impact on retention. The top four areas impacting renewal likelihood all relate to the office staff’s performance regarding service. Residents remember negative experiences, so staff must focus on minimizing dissatisfaction and, when bad experiences occur, they need to deliver remarkable recoveries.
Myth No. 6: Residents move because of rent increases.
Reality No. 6: Residents move because perceived value diminishes.
Residents do not move because of rent increases; the issue typically is no longer seeing the value due to perceived staff disinterest, poor service, unresolved issues and apartment wear/tear. Why accept an increase if you do not feel it’s a good value?
Myth No. 7: A leasing consultant’s job is to follow up with prospects and rent; work orders are secondary.
Reality No. 7: More than 50% of a consultant’s time is spent serving residents, so more focus is needed.
The industry has traditionally focused more attention on prospective residents who have made no financial commitment than on rent-paying residents. Since service begins and ends with the leasing staff because they submit most work orders, and given move-out costs, retaining residents should be the priority. A SatisFacts analysis showed “follow-up on completed work orders” has the second highest impact on renewals; work orders entered as “completed” does not mean the resident was satisfied so follow up is critical. But work order follow-up has earned the lowest score on the SatisFacts Index (fortunately the score has increased yearly for clients). Work-order follow-up by leasing consultants must be more important than prospect follow-up.
Myth No. 8: Communities communicate with residents.
Reality No. 8: The typical community cannot communicate with residents.
Good service requires being able to communicate - which requires current contact info. However, the typical community only has home phone numbers and e-mails for 50% and 15% of its residents, respectively - and at least 20% is out of date (happens because leasing consultants load move-in contact info from the application - but as many people relocate the info is often old). Given the correlation between contact info coverage in the system and satisfaction, staffs must verify contact info during every interaction.
ABOUT THE AUTHORS:
Doug Miller, president and founder of SatisFacts Research, has over 20 years experience in multifamily marketing, research and training, and holds a MBA/Marketing. Jen Piccotti, SatisFacts’ VP/Consulting Services, has over a decade of experience in customer loyalty and process efficiency, and holds a Master of Science/Quality Assurance. They can be reached at 866.655.1490 x123 or www.satisfacts.com.
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