Retention Marketing and Profit Optimization

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

Questions to Address ,[object Object]

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?,[object Object]

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.,[object Object]

Improved satisfaction reduces resistance to rent increases

Increasing satisfaction lets you avoid NOI hits as well as achieve renewal increases,[object Object]

The Impact of Increased Resident Retention on NOI and Asset Value

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

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,[object Object]

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,[object Object]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retention Marketing and Profit Optimization

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