In Donald Davidoff's excellent webinar a few weeks ago, he discussed how aggressive a community should be with their renewal rates.  (Seriously, check out that video - that one strategy will pay for the webinar several times over).  What he said had some pretty dramatic ramifications to how we see the renewal process over all, and possibly avoiding having our residents start shopping the competition.  (If you haven’t read my previous blog about avoiding the Buying Cycle, I recommend reading this.)

In general, we are used to prospects coming into our communities in the middle of their Buying Cycle – they are actively shopping communities to find their new home.  But with our existing residents, there is a possibility they never actually start shopping around.  If there is no rent increase, for example, they may just renew their lease without much of a second thought, where the decision is to simply continue as is.  However, once we start increasing rents further and further, then they have a decision to make on whether they want to look elsewhere.  That, right there, is the first decision they make – do they want to actually shop around.  It’s a simple decision, but it has far reaching complications for your sales process!

So the question is:  Can we avoid our renewing residents entering the Buying Cycle, but still raise rents at the same time?  In Donald’s webinar, he mentioned that the data showed that the higher the rent increase, the longer that the residents took to make a decision, indicating that they were now shopping around.  So in this way, it appears it might be possible to assess when residents hit their breaking point and decide to look at their other options.  Hypothetically, if you wanted to avoid having your residents shop around at all, you would price your rent increase the highest you could, but just under that threshold.  But what is that magic number?  Donald was able to see inklings of that on a macro level, averaged across an entire property or portfolio, but we would still want to know the price sensitivity of Person A, Person B, etc on a more individual basis.

For the moment, let’s assume that we weren’t able to stop someone shopping around – is there a way to stop it in its tracks?  Let’s say they get a big rent increase, what is going through their head?  Well first, they are probably angry!  While we are calm and rational, realizing that it is just the market dictating rates, they are likely to assume that their community is trying to take advantage of them, fair or not.  So the first step is to identify their gut feeling on whether they will renew.  Currently, many communities simply put a renewal letter on the door and just pray for the best!  They have little to no idea on whether that resident will renew.  So if we want to stop them from shopping around, the first step is to have a system in place to get a sense of their intentions.  That could be a survey, phone call, or some other means to figure that out.  Once that is ascertained, there will be some reasons why they felt the need to start shopping around, and of those, some will be checking out the competition because of that rent increase.  So what can we do?

Like I said before, a resident who starts shopping around often just wants to make sure that they aren’t getting taken advantage of!  So if we can answer that question for them, then they have less need or inclination to start shopping around.  So let’s say that your leasing consultant is on the phone with a resident who they have found out is unlikely to renew because of their rent increase.  What if that leasing consultant had a market report they could text the resident that shows the rental rates for communities in the area, which also incidentally show that their new rental rate is actually below the competition?   Wouldn’t that answer their big fundamental question?  Would they still need to shop around anymore?  By doing something like this, giving residents more information at their fingertips, you would retain control of the process to a much greater degree, as well as reduce the inclination to enter the Buying Cycle.

What do you think?  If a resident starts to shop around, is there any way to recover control of their buying process?  What sales strategies do you use when you know they are now looking at your competitors?