Social Powered Price Premiums: Revenue Management Likes Friends

By webmaster | December 1, 2011

Been wondering lately if social media platforms are ever going to factor into the effectiveness of your revenue management system? Quit wringing your brain cells, as the answer is a definitive yes, pundits on the casino gaming side of revenue management offer any clairvoyance into system advancements in the apartment sector (they do). We were intrigued by a recent podcast featuring an interview with The Rainmaker Group’s principal and co -founder Tammy Farley, not so much because of the possibility that social media might be used to create incremental demand (still a longshot in multifamily), but because of the promise of social media in determining overall resident satisfaction and gaining a better understanding as to the propensity of residents to renew, both of which can ostensibly be used to support pushing price premiums relative to market.

In short, it’s easier to ask for more rent when you know your residents like where they live and when the alternatives in the market don’t match your demonstrated customer service levels. “I already have an algorithm that uses social media as one of the inputs to generate renewal price,” said Chicago-based AMLI Residential’s revenue manager Rich Hughes.

Richard Hughes

“It’s a logistic regression and looks at transactional behavior and psychographic and behavioral demographics, and social certainly falls within that. You find that on the front side the pricing is somewhat homogenized because you are exposing pricing to the market and saying OK, who wants the product at this price? On the renewal side you have a one-on-one relationship with these people that allows for bespoke pricing, and there are a lot of strategic levers based on who they are and what they like that affect how much of a price increase you can push.”

Stacy Westbay

Even if you’re not quite up to programming logistic regression algorithms, gauging resident sentiment via social media (including compiling and aggregating ratings on the sites that have them) offers any operator the ability to better determine renewal rates. “I certainly think that resident sentiment can be measured via social to help determine propensity to renew,” says Stacy Westbay, president of Dallas, Tex.-based multifamily revenue management consultancy Revenue Edge. “Obviously a key area to gain uptick in revenue via revenue management is on the renewal side. If you’ve got really strong apartment ratings or scores or if your company participates in regular resident satisfaction type surveys I think you can certainly gauge what your perception is from your residents and know that you can push rents a little bit here or there.”

Still iffy for the apartment set is whether or not social media can be used effectively as a direct marketing channel, or for targeted marketing to create incremental and variable demand to improve revenue management pricing outputs. “On the gaming side with both Facebook and Twitter you can target very specific demographics for push marketing messages as compared to blast marketing to the general population,” Westbay says. “That is a little bit harder to do with multifamily, where fans of apartment companies on Facebook and Twitter are typically going to be existing residents, not prospects.”

Hughes says that even if social media is going to pull prospects in the door, it can still be tied to guest cards as a way to better to gain inferential data for qualifying and selling applicants. Is Jane Doe checking in at the local BBQ joint? Make sure to point out the fire-pits and poolside grills during the community tour. “That and the final element of social of course is the extent that you can get highly relevant long tail tie-ins for SEO lift. You’re not going to rocket up the rankings and knock off Rent.com because you’ve got Facebook at Happy Acres, but in the domain of long tail marketing, which is probably where the smart operators are looking right now, I think there is a lot of value there in social media.”

Have a killer idea about integrating social media with revenue management? Email me at steve@jtimedia.com

 

 

Posted in Featured | Leave a comment

Apartment Revenue Management Conference: Brainstorming Pricing Tactics & Offers Recap

By webmaster | October 3, 2011

Non-cash and cash-based incentives versus pricing concessionsat the time of renewal was the hot topic for the roundtable comprised of Scott Morrison, senior vice president, operations, Legacy Partners; Patty Garver, pricing manager, Laramar; Stacy Westbay, president, Revenue Edge, LLC; and Mike Clow, senior managing director, Greystar. Here is where it netted out:

  • Avoid getting sucked into the concessions game. Train leasing staff to explain the difference between 2-months free rent at a competing property and your monthly rate. The statement “it is like 2-months free rent” can go a long way with a resident or prospect
  • At the time of renewal, non-cash incentives are very effective. It not only helps justify the rate increase by offering a greater perceived value but encourages the resident to sign the renewal sooner. For example, “if you renew the lease within the next two weeks, we can provide you the renovation package for free”
  • One advantage of a revenue management system is to get away from concessions – a common and costly crutch often used in the leasing office. Ensure your staff knows how to sell the rate increase by understanding the pricing system, sell the value of the property as well as educate the resident why your property delivers greater value than the one offering two months free rent
  • Adjusting pricing should be a last resort at an under-performing property. Look closely at all 7 (not just 4) P’s of revenue management before changing your pricing strategies - product (units, community), people (well-trained leasing staff), promotion, policy (a ‘no-pet’ policy in a city full of pet lovers), post-selling (strong resident relations and customer service) and then pricing

Posted in Featured | Leave a comment

Bob Cross AptRevenue Conference Keynote Recap

By Steve Lefkovits | September 20, 2011

The first annual Apartment Revenue Management Conference is a wrap and we are proud to say it was an overwhelming success. A special thanks to our sponsors and the industry leaders who shared their knowledge and insights into successful revenue management practices.

Over the course of the next few days, we will be utilizing this blog to post recaps from the various sessions presented at the conference. So be sure to check back often and we would love to hear your feedback on the sessions and what you take away from them.

Bob Cross Keynote Presentation

Bob Cross, author of the best-selling book Revenue Management: Hard Core Tactics for Market Domination and CEO of Revenue Analytics delivered the keynote presentation at the first annual Apartment Revenue Management Conference, and he did not disappoint. The audience was engaged, laughing, nodding their heads in agreement with his insights and feverishly taking notes as to not miss anything from the “guru of revenue management.” It was truly an honor to have him attend the conference as well as share his expertise in yield optimization. And let’s not forget Bob’s willingness to spend more than an hour signing copies of his book for conference attendees.

For those who were not able to attend the conference and missed out on hearing Bob speak – here are some of the key concepts he discussed:

  • The guru of revenue management never took a business or marketing class. Revenue management started as a common sense discussion with key business personnel including executives and members from the operations, marketing and sales departments.
  • Don’t view a revenue management system as the solution. It is a life-long learning process.
  • The biggest competitors to successful revenue management are not the communities down the road but ignorance and inertia in the process.
  • Don’t shut off your brain when engaging in revenue management, combine people and technology to generate the most success.
  • Effective revenue management is resident-centric, however, a prospect should never know more about the market than your leasing staff. Make sure your onsite leasing staff is educated about pricing, the competition, supply and demand and the value of your product.
  • One of the most common misconceptions about revenue management is the idea “you are the one sticking it to the customers.” Revenue management is really about ensuring “everyone wins.” The customer gets the product they want at a price they are willing to pay with built in perceived value while the company receives the targeted revenue goal.
  • Even companies like Southwest Airlines, who many think doesn’t practice revenue management because they are not charging extra for checking bags or change fees, really do practice revenue management. The company has simply adjusted the model so it works best for them.
  • Finally, Pop-tarts will sustain life during a hurricane along with some beer and ice too. Bob referenced a survey conducted before the major hurricane season 2005. The survey was conducted to determine what people would purchase to prepare for the storm. Though the results showed consumers said they would purchase the essentials, water, batteries, canned food, the actual purchases were completely different.  Strawberry pop-tarts were the most purchased item. This survey is a prime example that customers say one thing but often do or buy another. They don’t know what they want or what they will do. You can’t rely on a customer’s word to drive your revenue.  Utilize supply and demand as the foundation for your revenue management practices.

Bob Cross greeting AptRevenue conference attendees during book signing


Posted in Featured | Leave a comment

Session Wrap-Ups from Apartment Revenue Management Conference

By Steve Lefkovits | September 16, 2011

The first annual Apartment Revenue Management Conference is a wrap and we are proud to say it was an overwhelming success. A special thanks to our sponsors and the industry leaders who shared their knowledge and insights into successful revenue management practices.

Over the course of the next few days, we will be utilizing this blog to post recaps from the various sessions presented at the conference. So be sure to check back often and we would love to hear your feedback on the sessions and what you take away from them.

Amenity Pricing Roundtable

Three of the industry’s leading pricing experts, Donald Davidoff, senior vice president strategic systems, Archstone; Dave Romano, vice president, pricing and revenue management, Equity Residential; and Kevin Huss, director of revenue, Resource Residential, sat down to discuss amenity pricing, the mechanics of determining price and how to get a handle on multiple amenities that can create value among prospects and residents. Here’s a run-down from the round-table discussion:

  • Walk the property, understand its amenities – views, balconies, even square footage have different value to residents and prospects. Understand where the value is, establish a dollar amount for each amenity and blend this pricing with marketing to generate a perception of increased value
  • Listen to your managers. They know what units always rent and which ones never rent. This information helps identify the amenities that generate greater value for residents, revenue for the community and can even pin-point undervalued and overpriced units
  • Try to maintain consistent amenity values within a specific market but be aware it may not always work. Adjust pricing based on the unit’s exposure and amenity mix
  • Amenity pricing as part of the effective rent strategy can range from 5-8% on the low side and 13-17% on the high side for a garden-style apartment. High rise communities can price amenities at 30-40% in the upper floors for views and highly sought after units with balconies
  • Be careful. Bundling too many amenities together can quickly price your community out of the market

Posted in Featured | Leave a comment