The "Basics" Continue to Drive Resident Satisfaction and

Retention

By

Doug Miller and Chris Pulket

Word Count: 3209


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, dont 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 propertys 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.

As Graph 1 shows, 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.

Graph 1: Impact of Outstanding In-Unit
Maintenance ProbIems on LikeIihood to Renew
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 20% 40% 60% 80% 100%
Residents w/Outstanding Maintenance ProbIems
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Series1
2003
2002


How do outstanding service issues impact satisfaction? Graph 2 shows
the same type of correlation as the previous graph: satisfaction drops
from the "Superior range into the "Red Flag range as the percentage of
residents with outstanding issues grows. Focus time, effort and funds into
making sure your system to provide customer service is as effective and
efficient as possible.

Graph 2: Impact of Outstanding In-Unit
Maintenance ProbIems on OveraII SatisFaction
1.00
2.00
3.00
4.00
5.00
0% 20% 40% 60% 80% 100%
Residents w/Outstanding Maintenance ProbIems
O
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Graph 3 shows 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!

Graph 3: Impact of Office and Maintenance
Response Time and QuaIity
1.00
2.00
3.00
4.00
5.00
0% 20% 40% 60% 80% 100%
"Very LikeIy" to Renew
S
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Office
Response
Maintenance
Response
Maintenance
Quality


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, its
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 "Superior, 3.50 - 3.99 "Average, 3.00 - 3.49 are "Warning signal,
and scores below 3.00 represent a "Red Flag.

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 staffs ability to deliver
service to residents.

Category
2003
Score
Comment
2002
Score
Maintenance Staff Courteous and Professional 4.21 Superior 4.25
Office Staff Courteous and Professional 4.21 Superior 4.24
Maintenance Staff Quality of work done 4.03 Superior 4.09
Office Staff
Responsiveness and
dependability 4.00 Superior 4.07
Exterior Curb Appeal
Grounds, landscaping,
building, lots 3.99 Average 4.02
Apartment Appearance and Condition 3.95 Average 3.97
Building Interiors
Hallways, laundry facilities,
lobbies 3.92 Average 3.93
Maintenance Staff
How quickly requests are
handled 3.79 Average 3.96
Safety and Security Level of satisfaction 3.77 Average 3.91
Overall Average
Score 3.99 Average 4.06

Category
2003
Percent
2002
Percent
Maintenance
Requests
Percent who had requests in the past
year 79.11% 72.91%
Maintenance Maintenance problems still exist 27.90% 20.71%
Renewal
Likelihood Percent citing "Very Likely" to renew 51.33% 56.49%
Referrals
Percent who would recommend their
community 84.18% 88.94%

The most important messages from these tables are:

Residents rated the speed with which work orders are handled as only
modestly "Average, and this score dropped from 2002, which ties in with
the points made earlier.
Residents giving their actual apartment an "Average score has significant
implications. If they do not have strong feelings about their home, how
do you expect them to respond when they get their annual rent increase
letter? What is the impact on perceived value? Asking them to pay more
for something they do not have strong feelings for.will only push them to
go out into the market to see what their options are!
79% of residents submitted maintenance requests last year, which
increased from 2002. Since there is a strong connection between how
these are handled and renewals, properties have great exposure to
negatively or positively impact retention.
Of those who submitted work orders in the past year, 27% of residents
cited that maintenance problems remained in their apartment, and
this figure increased from 2002. Reducing the resources dedicated to
handling service requests led to an increase in outstanding requests;
given the correlation between this and the percentage citing that they
are "Very Likely to renew, this increase negatively impacts retention.
The latter point of the negative impact increased outstanding work orders
has on renewal likelihood is confirmed by the findings. When the percent
with outstanding issues increased from 20% in 2002 to 27% in 2003.the
percent of residents who said they were "Very Likely to renew dropped
from 56% in 2002 to 51% in 2003!
As the percent of residents with outstanding work orders increased from
2002 to 2003, the percent stating they were "Very Likely to renew
dropped almost 10%!

Most Turnover Is Controllable
51% of residents said they were "Very Likely to renew. The more
interesting data comes from the 49% who did not respond this way; these
residents are asked a follow up question of why they did not respond that
they were "Very Likely. And the key finding is that 74% of these residents
cited controllable reasons, up 14% from 2002!

This finding, and those that follow, clearly provide validation of the points
made on the need to not only avoid cutbacks in funds directed to staff,
staffing, education and operational systems.but to even consider investing
more because research confirms the return for investing funds to increase
staff effectiveness and efficiency!

When reviewing the table of non-renewal issues cited, keep in mind the
financial impact of every point, even the ones only citing 3%: 3% of a 300
unit propertys 150 move-outs equals 5 residents; at a cost of $3,000-
$5,000 (if heavy concessions) per move-out, a 3% item has a $15,000-
$25,000 bottom line impact. Taking a broader look, if 74% of turnover is
controllable and you can reduce this by identifying the issues and taking
action, what could the return be for investing funds in the ways discussed
earlier?

Reducing a 300 unit propertys turnover just 5% boosts the bottom line
$45,000-$75,000!

These findings show the importance of focusing on the real issues of
satisfaction and retention. The priority must be on addressing the basics of
Resident Relationship Management - not on traditional programs like social
activities, newsletters and the like. Highlights of the following table of the
top reasons why residents say they were not "Very Likely to renew are:

At least 6 of the top 10 potential non-renewal reasons are directly related
to the basics of staff performance. Items like "social activities were not
a top rated non-renewal reason.but maintenance response time (#4
nationwide, up from #9 in 2002), office responsiveness, maintenance
work quality and office courtesy are!
Overall, 21% of residents cited "staff related reasons.
22% cited "staff controllable reasons.
11% of residents cited financial and perceived value issues.
8% cited property improvement issues.
10% cited apartment feature, condition and appearance reasons.

"Why Not Very Likely To Renew?" - Top Rated Reasons
Rank Category and Ideas
2003
Frequency
2002
Rank
2002
Frequency
1
Buying Home: Consider a
rent-to-buy program where a
percentage of rent goes towards
closing costs with local builders.
This becomes a marketing
advantage, plus will tend to
lead residents to stay longer
so that they can build up their
down payment. You can also
attempt to shift your marketing
messages and programs, so as
to try to appeal more to long-
term renters. 19.1% 1 24.3%
2
Relocation: Have a sound,
well promoted inter-company
property referral program. 16.8% 2 17.5%
3
Rent Increase: The increase is
usually not the issue.its the
perceived value. Consider a
menu of lease renewal incentives
focused on in-unit improvements
that will help residents "love
their home again (carpet
cleaning, painting, closet
organizers, window treatments,
lighting, etc.). The value of
incentives grows the longer they
have lived there. A dual benefit
is improvements also enhance
the value of the asset. 6.8% 3 6.9%
4
Maintenance Response Time:
Techs can waste 1-2 hours per
day deciphering work orders.
So help them by educating
office staff on the key questions
to ask on the most frequent
service requests, and improve
the information given on work
orders. Enough staff? How
about pulling money budgeted
for social activities and gifts,
and use it to at least enhance
the maintenance staff during
the heavy turnover season?
Educate the maintenance team
on any areas of weakness.
Make the most of the service
request functionality in your
property operating system.
Implement "best practices
program and monitor
performance metrics. 4.9% 9 2.7%
5
Rent-to-Value: See "Rent
Increase. 4.9% 4 6.0%
6
Office Responsive:
See "Maintenance Response
Time. More than 50% of
leasing staff time is not
leasing.its providing customer
service. So educate the office
on how to take work orders,
how to maximize the use
of the property operating
system. Implement "best
practices program and monitor
performance metrics. 4.0% 6 3.4%
7
Maintenance - Quality of Work:
Quality can be a function of in-
adequate staff size, education
needs, and the need for work
orders to be processed properly
by the office staff. 3.6% 11 2.6%
8
Safety - Community: Options
vary in cost, ranging from
neighborhood watch programs,
to building controlled access
entry systems, revenue-share
apartment intrusion alarms,
and fencing and/or gating the
property. 3.5% 10 2.7%
9
Office Courtesy: Hire right.hire
the attitude, teach the
technique! You cant teach a
non-"people person to be nice
and concerned. 3.5% 12 2.6%
10
Neighbors: Enforce "house
rules and regulations. Dont
be short-sighted.make sure
selection criteria has not been
loosened too far, as residents
will see the difference. 3.2% 7 3.1%
11
Office Work Quality:
See "Maintenance
Response Time and "Office
Responsiveness. 2.9% 8 2.8%
12 Moving Home 2.8% 5 4.6%
13
Apartment - Condition: If they
dont love their home, how will
they feel when they get their
rent increase? See in-unit lease
renewal incentive program
under "Rent Increase. 2.3% 19 1.4%
14
Community Cleanliness: Dirt
does not sell. Consistent
cleanliness, not just around the
office! Also focus on dumpsters,
and pick-up schedules. Review
with vendor or staff, and push
for better performance. 2.1% 16 1.9%
15
Safety - Neighborhood:
See "Safety - Community. 2.0% 15 2.1%
16
Community Parking: Re-evaluate
site, dumpster locations,
striping, and lease terms
(number of cars permitted
per apartment). Consider
contracting for a professional
evaluation. 1.9% 18 1.5%
17
Apartment - Need Different
Size: If you do not offer the
size needed, use inter-company
property referral program. 1.8% 13 2.3%
18
Location - Overall: Can inter-
company property referral
program help? 1.8% N/R
19
Safety Gate: It is often cited
that gates do not work; the
resident perceives that they are
not getting something they are
supposed to be getting for the
rent they pay. If you have a
gate, make sure it works. If it
rarely does, consider options. 1.8% 17 1.9%
20
Can't Afford: Can inter-company
property referral program help? 1.5% 20 1.3%
21
Apartment - Space, Design: Can
inter-company property referral
program help? 1.5% N/R
22
Found Better Deal: Why were
they looking? Typically due to
perceived value. See in-unit
lease renewal incentive program
under "Rent Increase. 1.4% 14 2.3%

Resident Suggestions Confirm the Desire for "Back to Basics"
All residents are asked "What can be done to improve the community?
Responses are very similar to the non-renewal issues, and the suggestions
once again focus on "basics like:

At least 5 of the top 10 suggestions are directly related to the basics of
staff performance.
26% of suggestions were "staff related.
56% were in areas that are "staff controllable.
Only 3% related to rent!
23% were property improvement suggestions.
15% were related to apartment features, condition and appearance.

How To Improve The Community - Top 20 Specific Suggestions
Rank Category and Ideas
2003
Frequency
2002
Rank
2002
Frequency
1 Safety - Community 8.1% 6 5.7%
2 Community Parking 7.5% 1 8.2%
3 Community Cleanliness 7.3% 5 6.2%
4 Safety - Gate 7.1% 4 6.5%
5 Better Residents 6.8% 2 7.2%
6 Maintenance Responsiveness 6.5% 8 4.2%
7 Safety - Neighborhood 5.0% 9 4.1%
8 Office Responsiveness 4.9% 7 4.3%
9 Maintenance Work Quality 4.7% 11 3.4%
10 Community Landscaping 4.3% 13 2.8%
11 Safety - Building 4.0% 12 3.2%
12 Office Work Quality 3.6% 10 3.4%
13 Office Courtesy 3.1% 14 2.6%
14 Lower Rent 3.0% 3 7.0%
15 Safety - Fencing 2.8% 15 2.5%
16 Apartment - Condition 2.4% N/R
17 Community - Laundry 2.4% N/R
18 Community - Lighting 2.1% N/R
19 Community - Fitness Center 2.1% 18 2.0%
20 Apartment - Carpeting 2.0% 17 2.2%

Planning for Success
Our findings clearly confirm the STRONG correlation between the basics
and renewals. To maximize performance, sound Resident Relationship
Management plans should be crafted, implemented and regularly
monitored at the property, regional and corporate levels. The foundation
for these plans should be researching the issues impacting satisfaction
and renewals. First and foremost, plans must address the staff related,
asset related, and performance related issues identified. And for each
issue identified, the plan should include focused, cost effective, actionable
options, as well as costs, an evaluation, recommendations, deadlines and
responsibilities.

Take Control, Focus on the Drivers of Satisfaction
Clearly the majority of turnover is controllable. Residents will reward a
focus on the basics. The priority for funds should be on the staff, staffing,
education and operation systems that will permit the property team to
effectively and efficiently deliver prompt, professional and dependable
service. Until the true key drivers of satisfaction are well under control,
consider shifting dollars budgeted for "bells and whistles (social activities,
move-in gifts, newsletters and other "soft marketing programs) towards
investments that will permit the staff to better take care of real resident
needs!

In summary, resident satisfaction is driven by "basics such as: a courteous,
capable, dependable and responsive staff; proper handling of work
orders; parking; clean, well-maintained buildings, common areas, laundry
facilities/washers-dryers; an apartment and community that are proud
to call "home; facilities and amenities that are well maintained; good
neighbors/residents; a sense of safety; and, to see the value for the rent
they pay.

Allen and Rocks, Inc., a Virginia-based owner/manager, has a portfolio of
approximately 2,500 units. While they do not have the unlimited financial
resources a REIT or large national player might have, Allen and Rocks
continues to accomplish some amazing things. For 2002 and 2003, they
have won our national award for clients with portfolios of less than 5,000
units. And for both years, one of their properties has won our national
award for the highest score for a property with over 100 units. When
I asked Dave Thomas, VP & Director of Property Management, what he
attributed their success to, his answer came down to attitude and focus.
More specifically, he said there is a company-wide commitment to their
mission. The mission is basic, and simply stated, "We put our hearts into
your home. Their residents sure see the difference, and certainly reward
Allen and Rocks with referrals and renewals!

Article originally appeared in the June 2004 issue of the National Apartment
Associations UNITS magazine.

Doug Miller, President of SatisFacts Research, has nearly 20 years
experience in multifamily marketing, research and training, and has worked
with nearly a thousand communities nationwide. Chris Pulket, Director
of Operations for SatisFacts, was the contributing writer. Copyright
2004, Doug Miller and Chris Pulket. All rights reserved. For addition
information, contact the Frog Pond at 800.704.FROG(3764) or email
susie@frogpond.com; http://www.frogpond.com.