by Doug Davidoff | Mar 20, 2015 12:00:00 AM
Selling in the multifamily industry is a unique pursuit. As the sales side of the equation is increasingly getting senior level attention, it’s important that this uniqueness be understood, so that leaders can properly diagnose the cause of whatever problem they are looking to solve; and apply the proper approach to solve it.
What Makes Selling Apartment Leases Unique
When assessing the effectiveness of your sales approach, there are three areas to evaluate that make apartment sales different from other disciplines. and should thus cause us to change our sales approach from other industries’ approaches.
1. Multifamily Demand Is Structural Not Discretionary
Nobody wakes up in the morning and says, “Hey, you know what would be fun today? Let’s find a new apartment and move there.” While there are people who decide to move to a new apartment for reasons of choice, the vast, vast majority of demand (and therefore the sales opportunities that our leasing associates have) is not optional.
People are looking at apartments because they need a place to live, and the reason was most likely caused by something that is not directly related to any particular community. In this way, the multifamily sale is far more similar to car rentals. When people fly to a destination, they need to rent a car.
Most of the sales training used in multifamily is taken from B2B models or the sale of big-ticket items like new homes or even new or used cars. Renting an apartment however is very different. I’ve found that many sales consulting practitioners use car sales as a model to guide their process. While there are certainly some similarities, and some degree of structural demand within the auto industry, the majority of car purchases are discretionary.
2. It’s Not A B2B Sale, But It’s Not Really B2C Either
A common delineation between different types of sales processes is whether the transaction is B2B (business-to-business) or B2C (business-to-consumer). While multifamily sales are clearly selling to consumers, B2C systems are not adequate for this type of sale.
The difference between B2B and B2C really revolves around the complexity involved in the sale. A key driver to determine complexity is the risk involved in making decisions. B2C sales systems are designed for simpler sales, with less risk involved.
The risk associated with deciding on where you’re going to live (the financial and emotional commitment) makes it far more akin to a B2B sale than to a B2C. However, B2B sales processes are designed with multiple formal decision makers, and the apartment decision is far more emotional than a business decision (and yes, we fully acknowledge that all decisions are emotional—but we also note there are rarely procurement departments making rental decisions).
This is an important factor because while the vast majority of sales approaches sound good and feel good in a training room environment, they fall apart in the real world. This means that leasing associates create their own work arounds, and success becomes far more dependent on an individual’s ability to adjust than on the system that was designed to guide the actions. When the demand components are working in your favor you may not notice that drag on results; but when they’re not, you certainly will.
3. Traditional Sales Measurements Don’t Apply In Multifamily
As part of our portfolio of projects at D2 Demand Solutions, we work with vendors in multifamily to improve their sales outcomes as well. One of the first things we do when we begin working with them is to set the important measurements of the effort (if they’re not already in place). While what’s measured is unique from one organization to another, some of the common metrics are:
- Closing rate
- Lead conversion
- # of transactions managed
The problem with these traditional sales metrics is that they don’t communicate anything of value in the apartment industry. Let me highlight closing ratio as an example.
For most organizations the goal is to increase your closing percentage. If rep A had a closing rate of 28% before training, and it was 40% six months later, we can comfortably say the rep has improved, and we’re getting better results.
However, because of how occupancy and revenue should be measured and managed, when a sales team is performing at a high level, a good multifamily housing pricing system will work to lower the closing rate. If we’re closing too many opportunities, then we’re simply not charging enough.
The constrained supply in a multifamily community means that every unit we rent is a unit we don’t have available for the next prospect. So, in essence, our prospects are competing for units. This dynamic simply doesn’t exist in any other industry that doesn’t have a fixed supply.
While there are some other criteria that make multifamily unique, these are the most important three you need to understand to design an effective sales solution for your organization.
Make sure to come back next week when we’ll share the key criteria you should use to assess your sale process’ effectiveness.