Multifamily Blogs
Pricing and Sales: An Interesting Interplay in Multi-family
Pricing and Sales: An Interesting Interplay in Multi-family
Selling more is always a good thing, right? Salespeople love it when product is flying off the shelf. They make more money, their confidence leads to even more sales and their companies’ owners see profits rise. Everybody is happy, so what could be wrong with that?
In most industries, that’s totally true. However in capacity constrained industries like multi-family housing, there’s actually such thing as too many sales. If we’re at low exposure and still leasing easily, then the cold, hard fact is that we’re not charging high enough rents. With somewhere in the range of 3.5 million units now on automated pricing and revenue management systems, it’s very common to see good sales volume lead to higher rents which ends up making it more difficult for the leasing agents to rent.
That’s an “elephant in the room” that we need to talk about. Most salespeople only benefit from sales going up; but our leasing associates can sometimes feel like they’re being penalized for their own success. They lease well, so the pricing system raises rents which makes it harder to lease. This is not “normal” in most of the sales world, so we should be purposeful and address this very real situation with our leasing associates. Here are a few things to think about:
- Be authentic and honest with your leasing associates. They’re smart, so don’t try to hide this fact. Be open and honest about it and discuss what it means. Nobody wants something more than when it’s in short supply, so we can authentically point out that the lack of supply can be used to excite prospects about their chance to lease with us.
- Appeal to their sense of competition. Everyone likes playing for the winning team. Instead of feeling down about having to sell a higher rent, appeal to your leasing associates sense of competition by playing up the fact that these increased rents are the result of prospects and customers valuing us. We’re worth it; they’re worth it; our product is worth it
- Rely on your sales system. A good sales system connects with prospects and establishes credibility and trust. Price becomes an easier (not necessarily easy, but easier) conversation when that trust is established. Most sales approaches in this industry say they’re “customer centered” but they’re really not—they’re really about our processes and our products. Make your sales approach truly customer-centered and the value proposition will be received much better by the prospect.
As a supply-constrained product, we should be raising prices when inventory is low. While that doesn’t make the leasing associate’s job any easier, it doesn’t have to be a barrier to their success.
Comments 4
The leasing professionals are probably the reason revenue management software was developed. Someone (maybe it was you a few years ago) told his/her Owner/Boss, "I can get more money for these apartments than you are charging!" And that Owner said, "Do it!" And the leasing professional did. :-) I think those who are exceptional at leasing (making the sale) would look at revenue management as a chance to make a better commission because what I would do is up the commission with fewer inventory. In turn I would expect my professionals to live, eat, breathe the market and know everything - everything - about the competition and then be instrumental in guiding the pricing. I know that means I have to trust those onsite - and I would. The software is designed to take the guesswork out of the pricing module, but out there is someone, like me, who will say, "You know, I bet I can still get a higher rent for that unit!" And then prove it.
The problem I see is for the lower performing property whose upper management will not start at a reasonable pricing strategy in order to stabilize rents and in turn stabilize the community. Then as occupancy increases and the supply becomes limited, then implement the new pricing strategy. Leasing professionals who are stuck with ever increasing rents then feel like they are always renting and re-renting the same units and become discouraged. I understand pricing fluctuates downward as well, but usually not. We all know Leasing professionals are instructed to sell the apartment NOW because in three days (when the Quote expires) the price will go UP. Stabilize the property first, then implement. In my opinion, the emphasis on processes and product comes from upper management who may actually only be interested in providing "good customer service" if it benefits the bottom line and not necessarily the customer. When it comes to money, the customer will choose based on many factors, and it is not always because of the happy, polite, nice, leasing consultant. Sometimes, it is price.
When it comes to pricing an apartment, two of the biggest aspects are going to be the components of the apartment (i.e., what upgrades it has) and the supply/demand in the market. I think a lot of leasing consultants, however, are very focused on the first one - they can't wrap their arms around the idea that they are charging more for a product that has not changed at all. It can seem disingenuous to someone who is legitimately trying to help their prospect, knowing that the prospect realistically isn't getting anything more for their money.
So I think a big element of successful sales is to educate the leasing consultants more about the supply/demand aspect to the price changes so they can feel confident in their own sale. I agree completely that if we focus on the fact that a given community has limited supply, it is easier for a leasing consultant to understand that each remaining unit is precious and more valuable.
All in all, I think we need to do much more training with leasing consultants so they can feel confident in these prices, because if they are not confident, there is no way they are going to justify those prices to the prospect.
I'll add something else. The leasing associate knows what the price was a week ago, a month ago, even a year ago. The prospect only knows what the price is today. I often find leasing associates who believe a unit "will never rent at $_______" only to be surprised when it does. Kind of like stock purchases, the price it was a month ago is not particularly relevant to what you pay for it today. So we would do well to acknowledge this with our teams--it's only human to anchor to past pricing. But that's not how prospects consume those offers.
You are so right - preconceived notions can really hold a leasing consultant back. If a new leasing consultant were to come in, they would have no problem with the rates because they have no historical background to compare it to.