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Retaining Residents in a Price Sensitive Market

At a time when we are feeling intense market pressure to offer renewing residents the ‘same deal' as we are offering new residents, decisions not to increase rents and/or offer renewing residents some discount is helping ease the pressure. Even in good economic times, renewing residents often ask or at least wonder "What's in it for me?" at renewal time. Rewarding residents based on their length of tenure is a way your community and company can reassure residents that they are more important than gaining new ones. Additionally, a rewards program can diminish ideas residents have of moving down the street for a better deal. Offering a good product and great service is best, but it doesn't always guarantee a renewal. Life changing events cause residents to move as do tempting discounts down the street especially if someone is trying to save a buck or two.

Today affordability dictates many renewal decisions and renewal programs have to include a pricing strategy. Through my experience it is preferable to stay away from offering upfront rent concessions as a renewal incentive even if a community is offering it to new residents. Renewing residents understand that upfront concessions are absorbed by the cost to move. Furthermore once an upfront concession is given as a renewal incentive it is expected from then on forward. Offering a reduced rate or percentage discount off the market rate helps make their home more affordable. Yes, one could argue that a reduced rate or percentage discount off the market rate promotes the same behavior as an upfront concession; however these incentives are psychologically easier to replace with tangible rewards as the economy improves.

Once the pricing strategy is decided offering additional incentives in the form upgrades, logoed gifts, services and/or perks is a great way to retain residents. One way to do this is to provide renewing residents with credits that they can use toward any number of options to get the things they want. It is good idea to develop a brochure displaying the options available to promote the incentive program. Offering a higher value of credits for each successive term (i.e. 12 months, 36 months and 60 months) of residency will create an appeal residents won't easily give up by moving down the street for a better deal. Incentives do not have to cost a lot to deliver a big value proposition. They can be offered in many forms including free use of community amenities and perks like the return of one's security deposit or flexible lease options that allow residents to terminate their lease without penalty. Here are a few more thoughts of the types of incentives one could consider offering:

Logoed, high quality gifts such as golf shirts, beach towels, hats, canvas bags, or umbrellas that advertise the community and/or brand.

Popular upgrades that reinvest dollars back into the Owner's asset include:

  •  Under cabinet entertainment system;
  •  Lighting or fan options;
  •  Custom paint color for one or two rooms;
  •  Closet organizer system;
  •  Laminate wood flooring.

Services that community's can provide with in-house talent or the community's licensed and bonded contractor include maid service, carpet cleaning, pet walking, car washing and detailing.

Perks that don't cost much include:

  •  Free clubhouse or community center rental;
  •  Reserved parking space convenient to the resident's home;
  •  Free night's stay in the community's corporate/guest suite;
  •  Private use of or exclusive access to an amenity (i.e. business center, media room etc.)

Other perks that can be obtained at discounted rates include cable, Internet or Wi-Fi services and vacation packages.

A credit value of $300, for example could provide a resident with an Under Cabinet Entertainment System (value $200), a Logoed Golf Shirt (value $35) and Maid Service (value $65). The value of each item should include the retail value of item, taxes, delivery and labor cost. Credits should not be refundable or have a cash value and should only be redeemable during a successive fixed term of "X" months or longer.

There are many ways to retain residents. A good pricing strategy, a well kept community and great service have to be at the top of the list. Upgrades, logoed gifts, services and perks are purely a way to thank and appreciate one's clientele.

 

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