Maximizing renewals begins with a 'back to basics' focus.

Tens of thousands of apartment community residents participated in the latest resident satisfaction telesurvey by customer satisfaction research company SatisFacts. The findings once again confirm that a significant percent of turnover is controllable. Miller and Pulket document and explain that the best way to boost retention rates is by providing outstanding customer service, particularly in the area of maintenance

The pressure to lease intensifies daily as soft markets prevail across the nation. As a result, the attention directed to improving resident satisfaction, and thus retention, has intensified. The rewards for increased focus on retention are clear, as SatisFacts Research shows that 65 percent of potential turnover is controllable.

Of course, every move-out that can be avoided means one less apartment to lease. And the bottom line impact of reduced turnover is clear since vacancy loss, concessions, turnover costs, staff costs, and advertising and other marketing costs add up quickly and significantly influence the bottom line.

Given the industry standard that each move-out costs at least $2,500, more attention is being paid to identifying the issues affecting move-outs. A 1 percent, 5 percent or 10 percent reduction in turnover pays a clear dividend.

This article summarizes findings from the most recent resident satisfaction telesurveys conducted with tens of thousands of residents from across the majority of the United States. Ks SatisFacts reported last year, these findings once again confirm that a significant percentage of turnover is controllable--and that the key to a successful Resident Relationship Management Services[TM] (RRM) program is a focus on the basics.

While there are many potential components to the RRM program, SatisFacts finds the most important issue is to satisfy residents' basic needs--tens of thousands of residents confirm this to be the case. The basics literally mean making sure a courteous staff promptly and professionally handles work orders and keeps the apartments and community clean and as well-maintained as reasonably possible. This adds up to making sure there is perceived value for the rent paid. Take care of this, and you are on the way to reducing controllable turnover.

The 'People Factor'

Our research clearly shows that the "people" are the key to a successful RRM program. The starting point is not only to hire the right staff members, but to provide them with adequate education. Effective customer service improves resident satisfaction, which affects renewals.

Nordstrom department stores claim that the key to the incredible customer experience that it offers is its people, and that they "hire the attitude and teach the technique." Lastly, remember this old adage, "Don't open a shop if you cannot smile."

Harry Beckwith, in Selling the Invisible, talks about what scientists call "The Butterfly Effect." He describes a scientific study done years ago to see what affect, if any, a butterfly flapping its wings in the United States had on the typhoons in the Far East. To most people's surprise, the study said that while small, the butterfly did, in fact, have an affect (related to the slight movement of air).

Beckwith's next chapter, "A Butterfly Named Roger," describes how one salesperson's actions transformed a bad experience into one that made him a loyal customer for life. And Tom Peters, in his Excellence books, writes that the only things better than great service are remarkable recoveries.

All of this is only possible with the right people.

Service Requests and Renewals

The survey findings confirm common knowledge--there is a very strong, clear correlation between how work orders are handled and the likelihood of a resident to renew. The likelihood of residents at a single property to renew drops by 70 percent as the percent of residents with outstanding maintenance problems increases.

What is the good news? The tables in this article show residents gave a "Superior" satisfaction rating for "Office Staff Responsiveness" and a high "Average" satisfaction rating for "Maintenance Response Time," and that only 20 percent of residents cited that maintenance problems still existed in their apartment (after they submitted service requests). Given the powerful correlation between service requests and renewals, focusing on improving how work orders are handled should improve renewals.

Residents Reward Superior Service

The impact of outstanding work orders on the likelihood to renew is certainly clear--as the percentage of residents with outstanding maintenance problems increases, the percent of residents who responded that they were "Very Likely" to renew their lease drops significantly!

And, as the percent of work orders outstanding increases, satisfaction scores drop from the "Superior" to the "Red Flag" range. Looking at the impact office staff responsiveness, maintenance response time and work quality has on renewal rates, the correlation is also strong. Residents do reward superior service.

The implications these correlations have on budgeting are clear. While there are many potential RRM program components, the focus should be on ways that permit for improved staff efficiency. Rather than "bells and whistles" (social events, etc.), research shows that the way to boost resident retention is to focus on service, such as work orders, and ensuring the basics are taken care of, for example community cleanliness, operable laundry room equipment and the like.

And the Survey Says ...

The survey used a five-point satisfaction rating scale. Scores above 4.50 are considered "Exceptional"; 4.00-4.49 "Superior"; 3.50-3.99 "Average"; 3.00-3.49 "Red Flag"; and scores below 3.00 represent a "Warning" signal that there is a serious problem onsite. Overall, how did residents rate their satisfaction?

Remembering the phrase "Don't open a shop if you cannot smile," it's great to see that residents give "Superior" satisfaction ratings for courtesy and professionalism. (See Residents Rate Services table.) "Superior" ratings for maintenance work quality, office staff responsiveness and curb appeal are important, too. These points are significant due to the strong correlation shown between how work orders are handled and renewals.

The rest of the scores fell into the high "Average" range. Two are worth noting. First, regarding the apartment rating, if satisfaction is only "Average," how will residents react when they receive a rent increase? If they don't like their home, will they be long-term residents? This is the heart of value perception problems covered later in this article. Second, given the correlations covered earlier, "Average" scores for maintenance speed are an issue requiring attention.

The table on the previous page includes other interesting findings. What is the significance that 73 percent of residents submitted maintenance requests last year? Given the critical connection between how work orders are handled and renewals, properties have a great opportunity to either negatively or positively affect retention.

The importance of the percent of residents with maintenance problems that still exist has been made quite clear--as the percent of residents with outstanding work orders increases, the percent citing that they are "Very Likely" to renew drops. The data also shows that 56 percent of the residents surveyed said they were "Very Likely" to renew--but what is there to learn from the 44 percent that did not answer "Very Likely"? Continue reading.

The number of "Superior" scores probably results from properties being highly focused on RRM. Growth in certain properties' scores and in the likelihood their residents will renew is due to these companies researching how residents evaluate their performance. The resulting specific information reveals voids in service, enabling the property's management to work on improving satisfaction and bottom line results.

Controllalde Turnover

Every resident surveyed is asked, "How likely will you be to renew your lease when it expires?" The 44 percent who did not respond that they were "Very Likely" were then asked why they did not answer that way. Of these residents, 65 percent cited controllable reasons!

A notable percentage of these residents cited reasons directly related to the delivery of service by the property staff. In other words, the majority of turnover can be reduced. The key is to specifically address a property's real issues, as opposed to simply implementing generic, traditional "resident retention" programs, such as social activities and newsletters. The more thought that is given to the topic as "Resident Relationship Management," the more focus can go toward what retention is really all about. And, it begins with the staff and taking care of the basics of customer service.

When reviewing the top reasons for not answering "Very Likely," keep in mind that an issue cited by just 3 percent of residents has a large financial impact--3 percent of 150 move-outs equals five residents. Assuming each move-out costs at least $2,500, the bottom-line effect of just one of these controllable issues is a minimum of $12,500.

As shown in the table, Top 20 Reasons Why Not "Very Likely" to Renew, the good news is clear: many of the top reasons residents move-out are within management's immediate control.

As it relates to office and maintenance staff responsiveness, consider that an enormous amount of money is invested in training leasing consultants on how to lease, but no more than 50 percent of their time is spent leasing. The balance of their time is spent providing customer service, including taking work orders. One property surveyed found that maintenance "wastes" one-and-a-half to two hours per day deciphering work orders. For example, simply noting "the A/C isn't working," the tech must spend valuable time determining the problem.

Given this, it is time to start educating leasing staff on how to take service requests. For example, what are the key questions to ask for the most common service calls the property receives? This is especially critical given the direct correlation covered between service requests and renewals.

Grouping the reasons for not being very likely to renew into general categories, the points become even clearer: 16.1 percent of residents cited staff-related reasons. How significant is that? Using the same 150 move-out example, 16.1 percent equates to 24 move-outs specifically due to staff. At $2,500 per move-out, these issues are, at a minimum, negatively affecting the bottom line by $60,000. Looking at the category of "Staff Controllable," the affect is, of course, even stronger. But, again, the good news is that these issues are controllable.

Additionally, note the issue regarding apartment features/ appearance. When more than 7 percent of residents specifically cite their apartment as a reason for not renewing, keeping in mind that each move-out costs at least $2,500, would it not be worthwhile to spend part of that $2,500 on in-unit enhancements (as simple as painting and carpet cleaning) if it meant convincing a resident to renew?

Lastly, while some reasons do not appear controllable, they may be more controllable than expected. For example, SatisFacts finds that when residents cite the rent increase as the issue, often the real issue is not the $30 increase, but in fact much more basic--they do not see the value. Longer-term residents perceive that they are not receiving as good a value as new residents and they perceive that they are not being rewarded for their longevity. How would you respond if the price went up for a product you did not think was special? You'd find another supplier. Residents, of course, are no different. This issue presents a strong case for considering lease-renewal incentive menus.

Back to Basics Suggestions

As with the responses to the issues behind why residents said they were not "Very Likely" to renew, the responses to the question, "What can be done to improve the community?" were equally enlightening. Residents, again, said first and foremost to stick to the basics. The keys to improving satisfaction, reducing unnecessary turnover and improving a property's bottom line are to focus on the staff, provide prompt and professional service, as well as meet residents' basic needs and expectations. (See the table entitled Top 20 Suggestions on How to Improve a Community.)

At this point it should be no surprise that nine of the top 10 and 15 of the top 20 suggestions were in controllable areas. And, of the top 20 suggestions, 20 percent were directly related to the staff; 51 percent were management-related issues; 15 percent related to the apartment; and 18 percent were regarding property improvements. The implications are clear--make sure the basics are delivered continuously.

Resident Ratings for Services, Staff and Property--2002 Survey
(5-point rating scale: 1 being lowest, 5 being highest)

Category                                             Score   Comment

Maintenance Staff      Courteous and professional    4.25   Superior
Office Staff           Courteous and professional    4.24   Superior
Maintenance Staff      Quality of work done          4.09   Superior
Office Staff           Responsiveness/dependability  4.07   Superior
Curb Appeal            Grounds, landscaping,
                        building, lots               4.02   Superior
Apartment              Appearance and condition      3.97    Average
Maintenance Staff      How quickly requests
                        are handled                  3.96    Average
Building Interiors     Hallways, laundry,
                        lobbies, etc.                3.93    Average
Safety and Security    Level of satisfaction         3.91    Average
Overall Average Score                                4.06   Superior

Maintenance Requests   Percent who requested
                        maintenance in past year              72.91%
Maintenance            Maintenance problems
                        still exist                           20.71%
Renewal Likelihood     Percent citing "Very Likely"
                        to renew                              56.49%
Referrals              Percent who would recommend
                        their community                       88.94%

Top 20 Reasons Why Residents Say
They Are Not "Very Likely" Te Renew

Seven of the 10 top reasons and 15 of the 20
top reasons given by residents participating in
SatisFacts surveys are controllable by property
management to varying degrees--with seven of
the top 20 being directly related to the staff's
performance, most notably responsiveness.

Rank   Category                        Frequency

1      Buying Home                         24.3%
2      Relocation                          17.5%
3      Rent Increase                        6.9%
4      Rent-to-Value                        6.0%
5      Moving Home                          4.6%
6      Office Responsive                    3.4%
7      Neighbors                            3.1%
8      Office Work quality                  2.8%
9      Maintenance Response Time            2.7%
10     Safety Community                     2.7%
11     Maintenance--Quality of Work         2.6%
12     Office Courtesy                      2.6%
13     Apt.--Need Different Size            2.3%
14     Found Better Deal                    2.3%
15     Safety--Neighborhood                 2.1%
16     Community Cleanliness                1.9%
17     Safety Gate                          1.9%
18     Community Parking                    1.5%
19     Apartment--Condition                 1.4%
20     Cannot Afford                        1.3%

65.3% of the reasons residents provided for not
renewing their leases are controllable.

Staff Related                              16.1%
Staff Controllable                         21.9%
Management Financial Issues                12.9%
Property Improvement Issues                 7.2%
Apt. Feature/Appearance Related             7.2%

Top 20 Suggestions on How to Improve a Community

Rank   Category                    Frequency

1      Community Parking                8.2%
2      Better Residents                 7.2%
3      Lower Rent                       7.0%
4      Safety--Gate                     6.5%
5      Community Cleanliness            6.2%
6      Safety--Community                5.7%
7      Office Responsive                4.3%
8      Maintenance Responsive           4.2%
9      Safety--Neighborhood             4.1%
10     Office Work Quality              3.4%
11     Maintenance Work Quality         3.4%
12     Safety--Building                 3.2%
13     Community Landscaping            2.8%
14     Office Courtesy                  2.6%
15     Safety--Fencing                  2.5%
16     Pets--Mess                       2.5%
17     Apartment--Carpeting             2.2%
18     Community--Fitness Center        2.0%
19     Apartment--Painting              2.0%
20     Pets--Problems                   2.0%

Stay Focused On Getting Back to Basics

SatisFacts Research consistently shows the same thing: a significant percent of turnover is controllable, and residents are looking for a property team that sweats the details. The results do not say that residents want activities or other "bells and whistles." The results demonstrate that there is a clear need for focusing on the basics of sound property management. And, quite honestly, properties see the impact on retention that comes from this back-to-basics approach. What do residents really want?

* A courteous, capable, dependable and responsive staff

* Work orders handled promptly and properly

* To be able to park nearby

* A clean, well-maintained building

* Clean, well maintained common areas and landscaping

* Clean and operable laundry facilities

* An apartment that is cared for that they can proudly call home

* Better residents

* To feel reasonably secure

* Operable security gates and systems

* To see the value for the rent they pay

SatisFacts Research is a full service customer satisfaction research company, specializing in the multifamily industry, and is the proud provider of SatisFacts Resident SatisFaction Telesurveys. Doug Miller, President of SatisFacts Research, bas nearly 20 years experience in multifamily marketing, research and training, and bas worked with nearly 1,000 communities nationwide. Chris Pulket is Director of Operations for SatisFacts. To reach SatisFacts, e-mail [e-mail], or visit www.satisfacts.net or call 866/655-1490.