No deposit, no problem: as part of its marketing mix, Madison Apartment Group offers prospects the option of paying a security deposit alternative to reduce move-in expenses.

By proactively creating a true marketing mix that addresses residents needs for an attractive, well-appointed property an attentive onsite staff and competitive or better-than-market-rate move-in costs, Madison Apartment Group has gained a real marketing advantage in attracting residents to its apartment communities nationwide.

A key element in its marketing strategy was the decision in 2002 to offer a security deposit alternative to prospective residents as a means to pique interest in its communities. This affords the company better protection against losses caused by damaged apartments or skipped rent than traditional security deposits.

At lease signing, Madison Apartment Group leasing consultants offer a prospective resident a choice between paying a traditional security deposit (which typically costs between $500 and $1,000), or purchasing a surety bond tot the security deposit alternative at a significantly lower cost.

For example, for $500 worth of coverage, the resident pays only a $87.50 security deposit alternative premium. The one-time, non-refundable premium is paid to the surety by the

A Multi-Pronged Approach

Central to its strategy for growth, Madison Apartment Group, founded in 2001 and based in Philadelphia, acquires under-managed apartment communities and repositions the assets using a multi-pronged marketing approach.

A critical element of its marketing strategy is "Madison Academy," a boot camp of sorts for inherited onsite staff who came with the purchased community. Madison works to retrain employees through the company's formalized training program on such issues as phone technique, community presentations, creating friendships with prospects, follow-ups and closing sales.

Based on its operating philosophy that the company must compete for residents in every market, the goal of Madison Academy is to prime a professional leasing team to create marketing that has a competitive edge.

Madison Apartment Group also has relied on concessions, such as a reduced security deposit or discounted rental rates, to attract residents to its communities in markets where the competition for residents was especially intense, including Atlanta and Denver, These tactics have become far less common recently as the rental market has strengthened and returned to healthier levels,

Customer service with an emphasis on resident retention and "closing the back door" has also been central to the firm's leasing strategy, renter at lease signing and remains in effect for as long as the renter resides at the leased apartment. Additionally, the bond continues to provide coverage at no additional cost if the renter renews the lease or moves to another apartment within Madison Apartment Group's portfolio of 91 communities, comprising more than 21,000 units in 17 states.

Even though the bond premium is non-refundable, 85 percent of residents have opted for the security deposit alternative at lease signing. The security deposit alternative allows residents to have more cash available at move-in when they may need it most.

Credit Risk Options

Madison Apartment Group also requires that renters with a conditional credit profile pay a combination of the surety bond and cash deposits, if they chose the security deposit alternative over the traditional security deposit.

For example, residents who have perfect credit histories are only required to pay the $87.50 for the surety bond if they choose that over paying a traditional security deposit of $500. But prospective residents who pose a perceived credit risk would be offered the opportunity to buy the surety bond, plus pay a nominal cash deposit in place of a much larger traditional security deposit. Even if a resident selects the bond/cash deposit option, the total cash outlay for the security deposit alternative is considerably less that it would have been with a traditional security deposit.

The security deposit alternative program is integrated with Madison Apartment Group's online resident screening provider. As a result, both processes are streamlined into one convenient step for the leasing consultant. During the screening process, the security deposit alternative is automatically offered as an option to the renter and at the appropriate levels based on the resident's risk score. Not only do the integrated programs minimize errors, they help onsite leasing staff to better comply with the company's corporate policies governing leasing criteria and security deposits.

A Marketing Advantage

Onsite leasing consultants must undergo training to familiarize themselves with the new program.

But once trained, the staff consistently cites the security deposit alternative as a critical marketing tool in the leasing process.

"Residents have embraced the security deposit alternative program since we began offering it," said Heidi Trotter, Regional Property Manager, Madison Apartment Group, Atlanta. "They appreciate the fact that we offer them a way to move into our communities without the pressure of having to pay the equivalent of one or two month's rent upfront as a security deposit. Security deposit alternatives have given us an advantage over our competition in the region."

Anne-Marie N. Niklaus, CPM, is Regional Vice President, Madison Apartment Group, Philadelphia. She can be reached at 215/575-2410 or [e-mail].