As markets grow tighter, supporting the raising of rental rates becomes more challenging. It’s easy to find yourself tongue-tied when a prospect asks why the rates at your community are higher than at another they’ve visited. Here are some common fumbles, bumbles and apologies to avoid when asked about higher rates:
• “You are correct; our rates are higher than next door. That’s just the way it is.”
• “I don’t know why the rent is higher.”
• “I’m not sure why the pricing is where it’s at; the system just sets it up that way.”
• “Yes, we are raising your rent; sorry about that!”
Stop pulling out your hair and fearing raising rental rates! Why are we afraid when it comes to raising rates? Most likely, it’s a result of:
• Fear of rejection
• Lack of market knowledge
• Low confidence
• Not knowing what to say or how to respond
Let’s explore ways to build our confidence and move forward with maximizing our real estate assets. It’s our job to make sure we’re making the most of business opportunities and to do this, we need to approach prices increases armed with confidence and all the best information. We need to look at pricing from a two-fold perspective; from the point of view of the current customer as well as the prospective resident. While these perspectives have some things in common, there are other considerations specific to each.
A great starting place is to develop a solid pricing strategy – a plan of action to determine the optimum price for your community. When drafting your pricing strategy, consider the following:
• Operation and marketing objectives – What budget is required to maintain operation and meet marketing goals?
• Viability of the market – What’s going on in the multi-family market?
• Economic trends – What’s going on with employment, home ownership and other economic indicators
• Supply and demand – What other apartment options are available for your demographic in the area?
• Desirability of the community – How desirable is the community for your target demographic?
• Competitors’ pricing – What are competitor’s charging? Look at similar floor plans or price per square foot.
There is an art to setting rental rates and you should regularly review market conditions to make sure your pricing remains current and applicable. Ultimately, you need to determine what your customer is willing to pay for a home. You must maintain a balance; don’t leave money on the table, but also avoid driving move-outs because the rates are too high. You can do this by building value. Value is determined with a combination of product versus price; help your prospect see how the product you have to offer is worth the price they will pay.
Renewals are another point to consider when determining pricing. Consider the factors that impact renewal decisions as they will vary slightly from those of new prospects. Some factors include:
• Value received for the rent paid
• Sense of safety and security within the community
• Quality of maintenance service
• Appearance or condition of the actual apartment
• Quality of customer service
• Appearance and condition of the overall community
The new prospect generally looks at the following when making the rental decision:
• Viewing the actual apartment available to lease
• Ability to pay rent online without a convenience fee
• Perception of quality customer service
• Security and access control features
• Online service request submissions
• Ratings/reviews of the community
• Wi-Fi enabled community
• Resident survey/feedback program availability
• Pedestrian-friendly location
• Ability for online lease renewal
Once you’ve determined the right price, you need to be able to fearlessly quote the price and support it when challenged. There are 3 key elements to supporting your price quote:
2. Market knowledge
3. Belief in the value offered
Identify your confidence level in these three categories: Personal, Rate and Sales Skills.
Personal Confidence – Manage your likeability factor by building connection and trust. Be positive, passionate and prepared – this will boost your personal confidence!
Rate – Understand the reasoning behind the rental rate so you can quote confidently.
Sales Skills – Develop your ability to relay the value of what your community has to offer in terms of the rental rate.
Ability to communicate value and reasoning of rates confidently occurs when you have all the best market and product information. In this way, you can be the go-to for the customer, building confidence for yourself AND the customer. Do your research so you understand what is going on in your local market as well as the broader state and national markets. A great way to do this is to become a member of your local chamber of commerce.
Belief in the Value Offered
A surprising 40% of leasing professionals cannot effectively compare their product with their competitors! It is crucial for you to identify what is your community’s advantage. One very effective method to successfully identify your advantage is to go out and tour your competitors. When you do, consider the following:
• What are your specific takeaways from the leasing professional’s sales skills?
• What can you take from the tour to assist you in the future?
• What was unique about the community?
• What is their competitive advantage as compared to your community?
• What did you gain from the experience to assist you to gain higher rates and successfully prove value?
Create a chart or checklist to give a visual representation of how you stack up against your competitors. In fact, this can be a great tool to show prospects to help them see how you compare. All of this will help you see and truly believe the value your community offers which will be contagious to your customer!
So what happens when you’ve done everything you should, but the prospect is still not sure about the price? When you are faced with the hard questions about your pricing, you can use these four strategies to help you effectively respond:
1. Show empathy – Use statements such as “I understand your concern…” or “I respect your opinion and question…”
2. Share the “Why” – Link “because” with a reasoning statement or answer with a question to create the link such as “Can I take a few moments to share with you why?”
3. Show value – Discover their specific needs and concerns and show value by delivering solutions to satisfy those needs.
4. Understanding – Make sure the customer fully understands the rental rate and all of their questions are answered.
Work to apply one or two of these solutions at a time and you’ll come to find yourself immune to fumbles, bumbles and apologies!
Amy Kosnikowski Dilisio – Industry Educator and Consultant
The Q Standard