[Note: To follow is an excerpt of a radio show interview conducted by Peter L. Mosca, host of Income Property Investment Talk dot com, with Michael Anderson, CCIM, founder and co-owner of RealSource who is filling in for Nate Hanks who is the co-owner at RealSource; Bob Turner, Owner, Southern Properties, LLC, and Mindy Williams, President, RentandRetain.com, will explore proven practical ways to hold on to your valuable customer base, win repeat business and maximize assets. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/102809.]
Mosca: Customer retention provides the competitive advantage necessary to survive in any market. There is no doubt that with the weakened economy it has shifted concerns from staffing and acquiring new customers to client retention. Is there a way to know for sure that customers and clients are satisfied?
Williams: The main way you can tell if your customers are satisfied or not is if they are staying and then the second one is if they are referring their friends. I come from the property management aspect of this so if your referrals continue to be strong that means you are doing a good job. If you are losing people right and left something is happening in the office, something is happening on site that you need to change and alter. It can be done but it needs to be done quickly.
Mosca: Bob, is it as simple as meeting with them and asking them?
Turner: You’ve got to do a lot more than that. You’ve got to be so knowledgeable in their business that you could actually be in their shoes every day and do their job, otherwise you are missing out on what needs to be done with your clients and customers or partner. Be involved in their business, know how to run it for them and be in front of them most of the time.
Mosca: Mike, from your perspective working with real estate entrepreneurial investors, how do you know for sure that they are satisfied?
Anderson: We have to be in their head all of the time and in these difficult economic times when you’ve lost so much value in a lot of the investments over the last 18 to 24 months, you really have to sit down and think about where they’re coming from and turn their economic situation around. The only way to do that is spend a lot of time with them and understand their immediate needs and concerns and let them know what you’re doing to sure up the ship.
Mosca: Can you talk to us a little bit about the relationships that you have with builders and others in the new home sale arena?
Turner: On a regular basis I am out in front of the builders knowing where the markets are going to be, where they need to be, where they buy their lots, what product they need to sell, what product they need to build, and what price it needs; you’ve got to spend a lot of time. You literally are managing and running their business for them. What we do in my company is we tell the builder you go build the houses and we will take care of everything else. That’s what we have to do. We have to be smart enough to run their business day in, day out, know when they are doing stuff right and where they are doing stuff wrong and have the ability to tell them. We listen to the market.
Mosca: Mike, as co-owner of RealSource, you work with real estate entrepreneurial investors providing them with institutional level products and services. Is that something that you focus on in terms of keeping clients? Is market and location strategy a big part of that?
Anderson: It really is Peter. As you know, this is probably the very best time if you are an entrepreneurial investor or institutional investor to be buying in this market because all of the values are so deeply reset. The key to advising a client right now is that just because everything is relatively inexpensive compared to where it was a few years ago doesn’t necessarily mean it’s a great buy. You have to really advise them as to which markets are likely to recover and drive the values to those assets up. In the process you really have to know which markets are likely to recover first and that’s the process that you want to make your client aware of in these kinds of market conditions.
Mosca: Mindy, as president of Rentandretain.com, is market something that should be a part of the property manager’s perspective when they are working with clients or perspective clients?
Williams: No matter where you are coming from you have to feel confident selling especially what product you have. Depending on where you are in the country, if everyone around you is bombing, you need to figure out a way to not bomb or to do it differently from everyone else. I am more from a marketing perspective so Mike and Bob are great at finding places, building them and where to invest. My job would then be to get in there and to find more customers, more residents and then figure out a way to keep them longer.
Mosca: With companies losing about 10% of their base each year it seems that retention should be something that we all focus on right now, especially in today’s market?
Williams: Absolutely. We’ve done tons of studies in property management and on average it costs about seven times more to find a new resident than it does to keep your current one. It’s seven times more expensive to find a new resident and our turnover is just huge. Industry wide it is anywhere, actually 2 years ago it was anywhere in the 68 – 78% range so we are losing two-thirds of our customers each year. Now I am sure it is a little bit higher. We are in a tight situation where if your competitor is offering a special, our customers can up and move and if you are looking at $800 or $1000 a month, you are losing a significant amount of money each year if you can’t hold onto some of your customers.
Turner: We have to be very creative on how we are going to turn product over, how we are going to keep building and building some inventory to even have an opportunity to make money. What we had to do a year and a half to two years ago as the market started heading down severely, we had to figure out how they were going to get rid of the inventory they had, if they could even make money on it. We structured trade deals where we took houses in on trade just like a used car. If you owned a house or you would come to us or you’d buy our house, we’d buy yours and then we would turn around and have to get rid of two houses to make one work. We got rid of the new one, put the person in it, then we took the existing house as we call it and we did lease purchases, we did leases to make sure you stop the blood flow for the builders so they could continue in business. Then you figure out how to go make money. We had so many different ways that we had to really think through where are you at, where are you headed, and how are we going to get there? We had to buy time as we keep saying in the business, now we are buying time till this market changes. We’ve been taking trades for a year and a half to two years. A lot of builders are just now starting to do it and we’ve had to be very, very creative.
Mosca: Builders across the country right now must be saying, “we need Bob Turner in my neck of the woods.”
Turner: That’s where customer retention comes in. There is one basis that I have used for many years in my business and it’s real simple book called “Raving Fans.” It’s a simple read, but you will read it two or three times before it really hits home with you and you start thinking about how do I do it right for the customer. That’s what all of our business models are about, how do we take care of the customer. The customer may be the builder, it may be the buyer, it may be the tenant, whoever it may be, you’ve still got customer service the right way to do it with whoever that customer may be. All of my business is based around referrals. I don’t do any advertising for customers whatsoever. I don’t spend a nickel on it.
Williams: The one thing I stress in a lot of my seminars is that if you are the boss your customer very well may be your property manager or your onsite manager or your leasing consultant, whoever is running the operation for you. That may be your customer and you need to make sure you treat that person right because it filters down from there.
Mosca: I am guessing that anything you can possibly do to get to know your individual customers and clients that has to be crucial?
Anderson: Absolutely Peter. What I find that works best is a program we call “client meet and greets.” We rent a room in a hotel, hospitality suite, provide a meal and then engage our customers, our investment clients at about 20 to 30 of them at a time and get to know where their concerns are and let them know that we are aware of their concerns. I think that’s really important, especially in troubling times. I think that your customer wants to know that you are aware of their problems, that you are paying attention and that you are not hiding under a rock. From there, you give them your strategies moving forward. Here is what we are doing to protect your investments today, here is what the market looks like, and don’t paint it in rosy colors. These people are experiencing it first hand. They need to know that you are aware just how bad it is and explain it just exactly the way that you see it. It is not a sales call. It is a customer understanding meeting or relationship that you are trying to establish. Then from there, talk about where the opportunities are. Not only what are we doing to protect your current investment and assets, what are we trying to do to provide solutions to some of your concerns, but also where the opportunities are for the future. For us it is the best of times. If you are a real estate investor, this is your market. This is where you make your money but it just really is a matter of getting with your customer base. Be involved with investors and help them understand the opportunity in front of them and then how to take advantage of it.
Mosca: I’m wondering if consumer electronic technologies, sustainability and energy efficiency are ways that builders are separating themselves or creating a niche in these markets?
Turner: They are but not as much here. Our energy costs are pretty marginal, they are economical and we build pretty energy efficient houses. The Memphis climate is not severely cold and not too severely hot. We keep moving. We don’t ever stop and wait. We are steadily moving to get to that next market. That’s where we are having to change and reinvent and become that niche builder that we have a product here that everybody wants.
Williams: No matter which niche market is your target market, being green is cool. I know a lot of the Gen Yers out there are especially looking for socially responsible apartment communities or are working with companies who can do that. I think there are several ways you can do that. First of all if you work for a property management company you might want to look at water conservation and energy conservation. Those are the two of the easiest things you can do if you have an existing product already. In fact, one manager in Dallas walked around her pool; it was a bigger apartment community. I think she had 350 units. She walked around the pool one summer afternoon and found 17 dripping faucets just from residents sitting by the pool. Get in all of the apartments, check the air filters, make sure they are clean, make sure your HVAC units are working effectively, and that’s one way that we are going to do our part so save the environment and to save some energy. You can start a recycling program, program the thermostats in apartments is a big deal. There are all kinds of community projects you can get together to help clean up the town and be more socially responsible. Even if you aren’t building a new product, you can look within your existing product to see how you can make it more green.
Anderson: Over the twenty years that we have been in business, we have probably reinvented ourselves half a dozen times based on not only what the market was telling us, but also what the client was telling us. Up until this recent downturn in the economy, we were tenant in common sponsors. We were investing clients’ tax deferred proceeds from sales into larger income properties, primarily multi-family properties. When the capital markets went away there was no liquidity, there was no selling going on so our business went on to take advantage of this economic downturn and take advantage of some of the distressed properties that are hitting the market. We had to sit down and reinvent ourselves in the distressed market business, which oddly enough we started in the late '80s and this is the exact same market we started in. We have come full circle in 20 years but one of the things that we’ve learned is that the client will never lead you astray. If you listen to them and you pay attention to what they see, what they need, where they want to go, where they see the opportunity, and position yourself to help in that process, you can never go wrong.
Mosca: What are your golden nuggets for today?
Anderson: The most successful things that we have ever done in customer retention especially in the investment area is listened. In particular, we’ve listened closely to our critics. We’ve established advisory boards from our clients that we have paid to come in and criticize us and tear us apart. Don’t underestimate social media. We have a number of groups that are discussion groups that we helped form and that we participate in that are designed to help us look for ways to improve. The most important things are listening and transparency.
Williams: People remember how you make them feel so if you are a salesperson, if you are a manager, if you are a boss, when that person leaves your office or leave the encounter with you, did they feel good about it? If you think about your favorite teacher growing up in school, you are probably going to tell me some of the characteristics or the personality aspects of that teacher that you liked. People remember how you make them feel. Concentrate more on the interaction rather than a cheesy sales pitch or trying to get the person to sign a renewal.
Turner: I think there are a lot of people that are looking for that deal out there and there are lots of deals and Cash is King right now. If you have equity and money and you need to be buying property, you need to look at land. Land is the greatest investment. It hedges you against inflation. There are income producing farms, timberland, a lot of other things that are out there that people are overlooking. They want to go buy a house that is a real house but the real market is a little tough right now and maybe it's not their best investment but land I can tell you from my portfolio, my land and farm operations have gone up in value double-digits over the last three years. The big purchasers now, if you go and look, the big purchasers now are trying to buy every income producing farm, operating farm that they can when it comes on the market.