The real cost of customer satisfaction in property management
Property Management is essentially relationship management. Customers expectations have changed. More than ever, Property Managers need to place relationships at the center of their business. Creating and nurturing valuable relationships starts with measuring and analyzing customer satisfaction.
Relying solely on metrics such as vacancy rates, arrears rate or number of inspections outstanding doesn’t cut it anymore, they are seen as a given and don’t make any business stand out.
Customer satisfaction is all too often a forgotten performance metric but is the one impacting your business bottom line the most.
Here are the four elements being impacted:
- Tenants turnover
- Landlords turnover
- Staff turnover & engagement
- Brand reputation & new business opportunities
A tenant turnover costs on average $1,800 per property, between loss of management fees, repairs, cleaning, advertising, inspections, and letting-related costs.
With an average annual turnover of 30%, for a portfolio of 150 properties, this represents $54,000 annually. Based on a 4% of the tenant turnover being avoidable and excluding 60% of these costs as being recovered (fees, on-charged expenses, etc.), an average of $4,320 annually can be saved, for each portfolio of 150 properties.
Moreover, a high turnover rate may lead to Landlord questioning performance.
The industry average landlords churn is 15%. For an average $2,500 annual contract value (8% management fees on a $600/week rental), a 15% churn represents $375 per property.
For a portfolio of 150 properties, this churn represents $33,750 annually. We’ve excluded 40% of attrition as ‘unavoidable’ (property sold, landlord moving in, etc.).
Staff retention & engagement
Lack of systems for transparency and accountability leads to poor team engagement. Low engagement leads to lower productivity (18%), higher absenteeism (37%) and error rates (60%). All of which negatively impact the business’ bottom line.
According to HR experts, the costs of re-staffing a position is at least equal to 40% of its total annual compensation.
Property Managers turnover rate varies between 22% and 45%, which means a cost of $5,280 to $10,800 per Property Manager’s position (based on a $60K annual salary).
72% of landlords trust online reviews as much as personal recommendation, and 90% of landlords say that positive online reviews influence their decision.
Studies show that average or bad online reviews cost 22-60% new business opportunities.
Lost opportunities cost based on a portfolio of 150 properties with a targeted monthly growth of 1.5%, the impact of reviews can cost $14,850-40,500 annually in lost business opportunities.
The total cost of a lack of proactive client loyalty management creates is $58,200 - $89,370 annually, for each portfolio of 150 properties.
You can’t afford to ignore expenses like this on your business overhead!
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