In 2002, the movie Moneyball brought the world of statistical analysis and sabermetrics to the big screen (it’s also a must-read book by Michael Lewis). In the film, as in real life, math stars as the Oakland A’s MVP, forever changing the way we think about how to win baseball games. In a pivotal scene, Peter Brand (played by Jonah Hill) describes the fundamental flaw in the conventional understanding of baseball recruitment:
There is an epidemic failure within the game [baseball] to understand what is really happening…People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs…Baseball thinking is medieval. They are asking the wrong questions.
Mirroring what Brand said of baseball, there is an epidemic failure in the property management industry to
“understand what is really happening” during the leasing process. In essence, we’re buying traffic, not leases. To buy leases, we need a more perfect understanding of where leases come from.
For Bonaventure Realty Group, a better understanding of the leasing process starts by asking the right questions and challenging conventional responses:
1. How much traffic do I need…specifically?
Any company can tell you that they need more traffic when occupancy is low and less traffic when occupancy is high. Few companies, however, can give you an exact traffic number. Thus, most management companies don’t know when they’re falling short or by how much. This causes an imprecise reaction to occupancy trends, subsequently producing too many or too few leads to cover exposure.
2. Can you ever have too much traffic?
Many people within our industry still believe that you can never have too many leads. This is a misconception that turns us into a turnover business instead of a housing business. At a 10% lead-to-lease conversion, every ten extra leads that are generated over and above what you need to cover your exposure costs approximately 7.5 hours of staff time (between initial lead contact, follow-ups, tours, etc.). This unnecessarily takes valuable time away from your residents, which can cost you at the back door.
3. Do we have a traffic problem or a conversion problem?
Many companies fundamentally don’t know if they have a traffic or conversion problem. As a result, they respond to low occupancy by increasing traffic through more advertising. This is the easier but unfortunately less effective solution. Increasing traffic will most likely aggravate an existing conversion problem by diluting staff attention. This is the quintessential core of the problem buying traffic and not leases creates.
4. What are our strengths and weaknesses at every level of the sales funnel?
Tracking the entire sales funnel is critical to understanding your strengths and weaknesses within the lead life cycle. If the problem is generating a sufficient number of tours, focusing your training efforts on the tour itself isn’t going to solve the underlying issue.
In challenging the traditional responses to the above questions, Bonaventure has diminished the flow of unnecessary traffic and has increased lead to lease conversion rates by 56%.
- We have developed a formula for determining exactly how much traffic we need. This allows us to compare how much traffic is generated per property against a specific benchmark and react accordingly.
- Because we can determine exactly how much traffic we need to cover exposure, we can use our lead management reporting to design the most cost effective and highest converting advertising plan. This allows our teams to use their time more effectively. We’re generating just enough traffic to cover projected exposure, no more and no less.
- We are constantly evaluating traffic versus conversions. First, because we know exactly how much traffic we need, we can quickly identify whether the flow of traffic is sufficient. Second, we break down every part of the sales funnel so that we can see where the problem is occurring and identify whether it is a traffic or conversion problem. This analysis identifies the specific parts of the funnel that need help so that we can provide the most effective training.
- We are working on predictive analytics that will allow us to incorporate projected leads, closing ratios and renewal rates into our trending occupancy so that we can more accurately evaluate whether we need to adjust advertising. In this way, we’re never reacting to an occupancy problem; we are proactively managing the leasing process.
- We are focused on measurable benchmarks that drive the performance and results that we want. Benchmarks allow us to associate behavior with business value.
At Bonaventure, our data initiatives will allow us to continue challenging the conventional answers to the questions that drive our business. And when
it comes to occupancy, we are not interested in buying traffic; we want to buy leases.