TO PARAPHRASE AN OLD QUESTION: If prospective residents call and nobody hears them, do they still make a sound?
Property managers know that missed calls are missed revenue. Yet the typical property misses nearly half of the calls coming in to the leasing office. That's why 24/7 call centers like those offered by Carrollton, Texas-based RealPage and Greer, S.C.-based LevelOne are becoming such a popular option.
“In the past, we probably only answered about 50 percent to 60 percent of the calls during the day,” says Donald Davidoff, group vice president of strategic systems for Englewood, Colo.-based Archstone, which switched to a call center in early 2010. “And about 12 percent to 14 percent of our leads came in afterhours. If they didn't call back the next day or leave a message, we lost them.”
Similarly, Essex Property Trust implemented a call center last year for all of its prospective resident calls and credits the move with helping push its portfolio-wide occupancy levels to the high-90 percent range, despite the trials of the Great Recession.
“We've seen an increase in traffic, and we have better close ratios now,” says Michael Dance, CFO of the Palo Alto, Calif.-based REIT. “And over time, we may be able to reduce the number of sales associates on staff.”
Outsourcing to call centers, however, is only step one. Tech-savvy multifamily firms also are carefully tracking which advertising mediums prompt prospects to call the leasing center: Did they hear about the apartment community through print advertising, an Internet Listing Service (ILS), Craigslist, even Facebook? The strategic combination of call centers and lead tracking is a surefire way to maximize advertising dollars and boost occupancies and rents, which is more important than ever in today's tough economic climate.
Information is Power
An effective marketing campaign will lead prospects to call your leasing office, and call centers are often the best tool to ensure that no calls go unanswered. But call centers aren't just about building occupancy and reducing site staff. More leads can mean more pricing power too, even when there are no units left to lease.
Archstone implemented LevelOne's call center for all of its 178 properties earlier this year and is now capturing about 98 percent of all calls. The company ran a test last year at 20 of its properties (comparing against 20 nearby control properties) to measure the effect of pairing the call center's extra leads with its revenue management software.
In the process, it was able to overturn a hoary old chestnut of conventional thinking: Extra leads at a fully-occupied property mean nothing. Archstone was able to improve per-unit revenue by 1.5 percent at its occupied properties based on the new demand curve generated by the combo of LevelOne and revenue management software data. That doesn't sound like much, but at a 250-unit community with average rents of $1,000 a unit, that's an extra $45,000 annually. The cost to use LevelOne's call center at such a community averages $9,600 annually, resulting in a return on investment of an astounding 468 percent.
The results are even more impressive when you factor in the test's time line of January 2009 to September 2009, a tough rental environment for most apartment owners. “If it was an up market, we would've been able to raise revenues [even] more,” Davidoff says.
Call centers, though, handle more than just phone calls: They also offer 24-hour e-mail response services. Like many multifamily managers, Burke, Va.-based Van Metre Apartments, which uses LevelOne, sees its highest level of website traffic after 7 p.m. But for those firms that don't use call centers, e-mails sent after 7 p.m. likely sit unopened for at least 14 hours, maybe longer. And the chances of closing on a qualified prospect decrease every hour that contact isn't returned, says Carissa Barry, vice president of marketing for Van Metre, which owns and operates about 2,400 units, most of which are located in Northern Virginia.
“If you're a smaller company, you're at a competitive disadvantage by not following up on your e-mails quickly, especially in a day and age when most consumers do their research online,” Barry adds. “The AvalonBays, Archstones, Camdens all have a call center, so everyone is now available 24 hours a day, seven days a week.”
Still, not every company is sold on the benefits of outsourcing the call center. A couple of years ago, Camden Property Trust began using RealPage's call center for its after-hours calls, and considered going full-force with it. But the company wanted to have greater control over the process. So in 2009, Camden rolled out a 10-person internal call center, saying that it feels its own employees could sell—and cross-sell— apartment units to prospective residents better than a third-party vendor.
Camden's call center is open from 7 a.m. to 7 p.m.—when about 90 percent of the company's call volume is received. It still uses RealPage to handle that additional 10 percent of calls coming in after-hours.
“We looked at outsourcing it, and from a cost perspective there really wasn't that much difference,” says Dennis Steen, CFO of the Houston-based REIT. “But we felt that it made better sense to have our own employees man the phones. We want someone who, if they can't lease one unit in one submarket, could refer the caller to another community down the road.”
Yet those who champion outsourcing say that knowledge is easily transferred. Multifamily firms using LevelOne, for instance, provide the vendor with a “product knowledge” packet, which details all of a property's features and allows the property owner/manager to privilege which points should be highlighted first.
“LevelOne is as good as the information that the management company provides them,” Barry says. “That product knowledge packet is very in-depth, probably 20 pages long.” The packet is a living document that can change as the property changes. “We just installed wireless hot spots at one of our communities, and if we want them to highlight a new feature like that, we can change it on a whim,” Barry explains.
One criticism of outsourcing, from Camden and others, is that the information used by the third-party is isolated to each community. As Steen points out, cross-selling can be an important sales tool, yet third-party call centers are more focused on pushing the merits of the one community mentioned by the prospect.
But LevelOne is working on it. The company will soon roll out an expanded product knowledge kit that includes more “sister property” information. “It won't be such a silo,” says Ben Holbrook, vice president of sales for LevelOne. “We're going to mirror what they do on site which is, if they were about to lose the lead based on price and availability, we'd be able to transfer the conversation to talk about a sister property.”
Following the Lead
In many ways, call centers are all about maximizing advertising dollars. Multifamily companies spend on average about $170 per unit annually in marketing costs—that's more than $50,000 a year for a 300-unit property. After spending so much to create community awareness, those dollars are wasted if nobody answers the call or e-mail.
But an equally important consideration is measuring any single ad's effectiveness. After all, there are many different ways to get the word out—ILSs, Craigslist, traditional print advertising. But which gives you the most bang for your buck?
It's not always easy to figure out just what advertising source is responsible for driving a prospect to your community (see “Traffic Control” on opposite page). Often, a call center will start a guest card for each prospect who calls, noting the advertising source that brought in the prospect. But when the guest card is completed on site, the source will change, either because the prospect forgets or the site staff simply forgets to ask.
A study conducted by LevelOne last year outlined that disconnect in a white paper, which matched the call center's guest cards with its clients' rent rolls. The study found that the advertising source listed on the lease was wrong about 70 percent of the time.
“All of these systems rely on a human element,” says John Helm, founder of San Francisco-based ILS MyNewPlace. com. “The consumer sometimes doesn't know or care, and the site staff's trying to close the deal. They're not going to interrogate someone about how they found the community.”
Like the rest of the ILS industry, Helm has struggled with tracing the leads that began on his site all the way to a signed lease. Spurred by the LevelOne study, Helm and his staff combed through more than 200,000 records from his biggest clients to determine the most accurate return on investment.
MyNewPlace found that, on average, its clients were spending about $275 per lease. Armed with that information, MyNewPlace decided to create a new pricing model. The firm now guarantees a $275 lead-to-lease cost for its clients. If it can't give an average cost of lease of $275, it will give its clients a credit.
“We rolled out the guarantee program to tell the customers, ”˜Look, the tracking data in your property management system is flawed. We're highly confident that our leases close, and if you'll let us prove it to you, we'll refund you if we don't come in with a certain cost-perlease number,'” Helm explains.
Some management companies remain skeptical of the effectiveness of ILSs, however. One criticism is that in the most competitive markets, you have to pay for a more expensive premium listing, or you'll get buried.
Van Metre recently cancelled its ILS listings with a few sites after analyzing its return on investment. The company budgets about $250 per lease for stabilized communities in its advertising budget but found that while the costper- lead was spot-on, the cost-per-lease was hefty. The firm spent about $1,350 to advertise one of its communities with a premium ILS listing and found that it generated about 34 leads in July, just $40 per lead. But those leads resulted in only two leases, a whopping $675 per lease.
“A lot of firms justify their advertising cost by the number of total leads they get in but not the number of closes,” Barry says. “But at the end of the day, I'm looking at my numbers, and if I'm over $250 per lease for any given advertising source, then it makes me stop and think twice.” At least Barry can sleep well at night knowing that, thanks to a call center, no leads are going unanswered.