As most national reports continue to show, soft markets, heavy concessions and flat-at-best rents persist across most of the nation – and are expected to continue for the foreseeable future. We have all heard the horror stories of sub-markets where prospects are being offered up to four months free rent.
Given the difficulties on the rental side, resident retention is getting more and more attention as companies seek to find ways to “shut the back door.” The key to improving performance is to reduce turnover – and the key to reducing turnover is to improve resident satisfaction. The satisfaction research we conducted last year with tens of thousands of residents from across the majority of the country once again show the answers to improving satisfaction and the likelihood to renew comes from a focus on the “basics” of prompt and professional attention to service requests, ensuring residents have positive feelings about their home, and that residents feel reasonably safe. The investments that permit property staffs to improve their performance in these critical areas, our research shows, deliver powerful returns.
Since the cost for each move-out is at least $3,000 (and much more if up to three or four free months concessions are given), our research would suggest that the way to increase NOI is to ensure that the best possible level of service is delivered – which can lead to a 1%, 5%, 10% or more reduction in turnover. What a dividend! Every move-out that is saved means much lower turnover costs! Controllable turnover will decrease the more residents perceive value for the rent they pay. If expenses must be cut, don’t cut back in areas that impact servicing resident requests - focus on reducing the money being spent on “soft” marketing programs (i.e. social activities, gifts, etc.).
Given the immense pressures of concessions, vacancy loss and reduced rents, some firms have attempted to boost NOI by cutting back on staffing, most notably maintenance staff. Our findings suggest that such decisions have a significant negative impact on satisfaction and the likelihood to renew. Our 2003 national SatisFacts Index reported that percent of turnover that was controllable increased to 74%!
There are several possible causes for this increase. Residents submitting work orders increased to 79% from the 72% mark in 2002. This jump in the number of work orders submitted increases a property’s exposure to how well the requests are handled…so handle them with care. You do not want to turn an important customer touch point into a negative experience. Make how you handle service requests an opportunity to show residents the value they are receiving for their rent. Another important finding was that the percent of residents with outstanding service requests increased from 20% in 2002 to 27% in 2003. With the strong correlation between the percentage of residents with outstanding requests and the percentage who respond they are “Very Likely” to renew their lease, it was not surprising our findings showed a reduction in the renewal likelihood…which dropped from 56% “Very Likely” in 2002 down to 51% in 2003!
This article will delve deeper into our findings, including an in-depth review of the factors for the reduction in the likelihood to renew, as well as some ideas on how to incorporate addressing these “basic” issues into a successful Resident Relationship Management™ (RRM) program.
· The majority of turnover is controllable
· Success begins with the staff, attitude, education, and operational systems
· Residents want and reward a focus on the basics
· The percent of outstanding work orders, staff responsiveness, work quality, a sense of security, and perceived value drives renewals
The Impact of Service Requests on Renewals
Year after year we see that how well service requests are handled continues to be the key driver in the renewal decision.
This powerful correlation remained the case again in 2003: the higher the percentage of residents with outstanding maintenance problems, the lower the percent of residents who respond that they are “Very Likely” to renew their lease. The renewal potential drops significantly as the percent with outstanding issues increases.
How do outstanding service issues impact satisfaction? The same type of correlation as the previous graph: satisfaction drops from the “
The same relationship we reported last year… office staff responsiveness, maintenance response time and work quality continues to have a clear and strong impact on satisfaction!
The important message here is that these issues are controllable. The returns on investments in these areas are clear: there are many potential RRM program components, but the focal point should be in ways that permit for improved staff efficiency. With limited budget dollars and staffing, it’s clear funds should be directed to areas that will specifically address real service issues. Some of the key areas to focus on involve staff education (regarding taking and servicing work orders), staff size (having the proper size staff to effectively handle annual or seasonal work order needs) and utilizing the full capabilities of your property operating system (using the maintenance modules to help make the tracking, handling and completion of work orders more efficient).
Overall Findings
Our resident surveys cover a broad range of satisfaction areas, with residents answering questions using a 5-point rating scale (1 being “Extremely Dissatisfied” up to a 5 being “Extremely Satisfied”). Scores above 4.50 are considered “Exceptional,” from 4.00 – 4.49 “
Scores dropped from 2002 to 2003, we feel, because of the impact of reductions in staffing. These results add weight to our position on the need to prioritize funds towards areas that improve the staff’s ability to deliver service to residents.
