Behavioural Economics: A Little Nudge Can Go a Long Way

A few months ago I came across this article in the Globe and Mail on behavioural economics. Now before you nod off, it’s more interesting than it sounds! Behavioural economics (BE) combines psychology and economics to show how people make decisions in real life. By using BE, companies can influence the way people make decisions and increase the likelihood of purchase.

Companies should keep BE in mind as they craft their e-mails and website content. As the article mentions, “marketers are using BE to examine how customers select products, how they consume them, and what features, prices and designs could be improved to enhance the way consumers make choices.” It’s all about “nudges” … subtle cues that coax people to, among other things, make purchase decisions that work in the retailer’s favour.

One simple example of BE: Since people tend to “follow the herd,” companies label products as “Most Popular” or “Top Seller” to nudge people to jump on the bandwagon and make a purchase. (This is an example of social proof, a popular element of BE.) In addition to trying some of the tactics in the article, companies should give some thought to what offers they can label as “most popular” or “top sellers” and put behavioural economics to the test!

The impact of BE is profound: According to the Globe article, “firms employing BE principles have outperformed their peers by 85 per cent in sales growth and by more than 25 per cent in gross profitability.” Clearly a little nudging can go a long way!

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Three Easy Ways to Help Your Tenants Succeed

A good property manager is readily available and responsive to tenant issues. A great one surpasses tenant expectations by being proactive and taking tenant goals and objectives into consideration. And the good news is, you don’t have to be a mind reader to figure out how to help your tenants succeed. Here are three easy ways to help your tenants succeed:

Feature building retailers in tenant newsletters

If you publish a tenant newsletter, write a short profile of a retailer or service provider in the building. You’ll bring them to the attention of your tenants, reminding them of the key services and amenities your building offers. At the same time, you’ll hopefully give your building retailer a boost in business.

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Support your tenants’ charitable causes

Recognizing your tenants’ charitable causes is a simple way to align with their goals and help them succeed. At your next building event, invite an anchor tenant to promote their charitable cause, either with signage, a booth or donation box. Another option is allowing a tenant to use communal space, such as the building lobby, for their fundraising. For example, you could invite a tenant raising money for a charity through the sale of art to display artwork for purchase in the lobby.

Promote building retailers in tenant welcome kits and manuals

When new tenants move into the building, provide them with a list of building retailers and services in a welcome kit. Ideally, the retailers and service providers – and nearby restaurants too – will provide coupons or discount codes for new tenants. If you’re planning to update your tenant manual, include a list of retailers within the building to raise tenant awareness.    

Kirk Layton is the president of Eservus, an online corporate concierge company servicing over 30 property management companies in Toronto, Calgary, Vancouver and Boston.

The Concierge Equation Quantifies the Benefits of Concierge Services

One of the biggest challenges for property managers is quantifying the financial impact of a tenant service strategy. Many property managers think that a tenant service strategy is a good idea, but they have a hard time justifying the costs, because the benefits are intangible. Or are they?

Using three research-based studies, I’ll show how a property manager’s tenant services strategy can have a quantifiable impact on your bottom line. And more specifically, I’ll show how an investment in a concierge service can save a property manager a lot of money, help drive profitability and result in a significant return on investment.

Equation #1: Offering Concierge Services = Increased Tenant Satisfaction

According to BOMA International’s survey “What Office Tenants Want,” the one amenity that tenants were most satisfied with were concierge services, with an average satisfaction rating of 4.39 out of 5. (Concierge services were followed by health/hygiene programs at 4.27 and secured document removal at 4.26). The survey pointed out that the availability of concierge services were reported by less than 25% of the respondents, indicating that the one amenity that the tenants are most satisfied with is actually offered in a relatively small number of properties. The BOMA study concludes that “if executed well, the addition of some of these amenities could offer an opportunity for property owners and managers to have ‘quick wins’ with their tenants.” And since concierge services was the one amenity that tenants were most happy with, we can further conclude that offering a concierge service can have a more immediate and significant impact on tenant satisfaction than any other amenity.

Equation #2: Increased Tenant Satisfaction = Increased Tenant Retention

So if they have access to a concierge service, your tenants are happier. What difference does that make? A lot of companies across all industries spend a lot of time – and money – on customer service initiatives in an effort to make their customers happier. The theory is that a satisfied customer will keep coming back for more, resulting in repeat business that more than makes up for the cost of the things that are keeping the customer happy. And we’ve all heard that it costs a lot more to attract new customers than it does to retain existing ones. That sounds logical, but is that true in the world of commercial real estate? Do satisfied tenants actually result in more lease renewals? According to a study conducted by Kingsley Associates, a leading market research firm that specializes in commercial real estate, the answer is a resounding YES. Satisfied tenants are more than three times as likely to renew their leases than dissatisfied ones. And since we’ve shown that concierge services can have an immediate and significant impact on tenant satisfaction, we can conclude that offering concierge services directly contributes to lease renewals.

Equation #3: Increased Tenant Retention = Increased Profitability

Okay, now this is really where the rubber hits the road. We know that it costs more to attract new tenants than it does to retain existing ones, and happy tenants are more likely to renew their leases than unhappy ones. But how much should we spend on keeping our tenants happy? What’s the return on investment? Quantifying the benefit of tenant retention strategies has always been a tricky thing, but thanks to a study conducted a couple of years ago by real estate giant Jones Lang LaSalle, we know that by retaining a single 10,000-square-foot tenant, property managers stand to save nearly $1 million on hard costs like lost rent, tenant inducements, and other tangible costs. Retain two, three or more tenants a year and you can see how the savings are going to add up. And since you’re reducing expenses, those savings go straight to the bottom line.

That brings the entire concierge equation into focus:

Concierge services = happy tenants = renewed leases = cost savings = increased profitability

So what’s the ROI of offering concierge services? For a property manager with, say, 500,000 square feet of office space, the cost of providing an online concierge service like Eservus (www.eservus.com) works out to about $12,000 a year. (Eservus is about one-quarter the cost of a traditional lobby-based concierge, with a number of advantages, including 24/7 online access and typically a broader range of products.) Looking at the concierge equation, you can count on increasing tenant retention by offering a concierge service. (Let’s assume that concierge services contribute 25% of the impact of a property manager’s overall tenant service strategy.) So if you retain just one 10,000-square foot tenant a year as a result of your tenant service strategy, and concierge services is responsible for 25% of that, you can attribute annual savings of about $250,000 to concierge services. At a cost of $12,000 a year, that’s a return on investment of over 20 times!

With such an impressive ROI, you can expect to see more property managers turning to concierge services – especially online concierge services – to powerfully augment their existing tenant service strategy. And as we learned from the BOMA survey “What Office Tenants Want,” concierge services are offered in less than 25% of office buildings. So not only can offering concierge services retain tenants and save you a ton of money, they can also provide a competitive advantage for years to come.

Service Quality Training: Arm Your Employees with the Tools They Need to Succeed

I’ve always believed that there are three must-have components of any successful service quality initiative:

  1. Senior management commitment
  2. Customer satisfaction surveys
  3. Service quality training for employees

Without support from the top, service quality programs are dead in the water. Without measuring tenant satisfaction, you have no idea of where you stand with your tenants, or whether you’re improving. And without service quality training, your employees won’t have the tools to succeed, even if they know what’s expected of them.

At Eservus, one of our core company values is to always provide a WOW! customer experience. It starts with the training that new employees receive the first day on the job and continues every day thereafter. We track customer satisfaction daily using Net Promoter Score and compare our scores to our goals. We get back every day to customers who provide feedback – we respond to criticisms and kudos – to make sure that our customers know that we’re listening to them. All of this stems from a corporate culture that’s committed to customer service from Day One. So how does a company develop such a culture? Training is a big part of it.

A service quality training initiative doesn’t have to be expensive – service quality experts can be brought in to present to the entire company, or you can pursue a “train-the-trainer” strategy to help bring the expertise in-house. Another approach is to take advantage of established service training organizations, like Excellence Canada or the Service Quality Institute in the U.S.

So think about whether your employees have the right tools to deliver on a comprehensive and consistent service quality strategy. If they don’t, consider a service quality training program. As we know, an investment in service quality and customer satisfaction goes straight to the bottom line.

Three Elements of an Effective Tenant Newsletter

I recently completed a tenant newsletter for one of our property manager clients … and by “completed” I mean I had the writer and designer put the finishing touches on it! Preparing an effective tenant newsletter is a lot like hosting a tenant event: The keys to success are to engage your tenants in a meaningful way and remind them that you value them as tenants.
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Based on my experience – past and present – there are three elements to an effective tenant newsletter:

  1. Provide tenants with content they can actually use
  2. Remind tenants of what you’re doing for them at the building every day
  3. Engage tenants with newsletter content in a fun way

Provide tenants with content they can actually use

This can be as simple as a tip of the month to relieve neck stress, or a quick and easy way to pack a salad for the office. You can even remind them of some of the retailers that are in the concourse (your retailers will thank you for that as well!). What you don’t want to do is include information that nobody can use … a prime example is the office tenant profile. (“In this month’s newsletter, we’re profiling XYZ Company in suite 1013.”) In my experience, nobody cares about the office tenant profile … except the tenant in the profile!

Remind tenants of what you’re doing for them at the building every day

Do you provide complimentary bicycle racks in the parking garage? What about umbrellas at security? Or an after-hours escort to the tenant’s car? Whatever great tenant amenities you offer, use your newsletter to communicate their availability. At the same time you’ll show that you care for your tenants’ well-being, which is always a good thing.

Engage tenants with newsletter content in a fun way

It’s easy to have a contest for a couple of movie tickets where you ask tenants to e-mail the management office with their one-line review of the latest summer blockbuster, or have a picture of a jar of jellybeans, with an invitation to guess the number of jellybeans (closest one wins the jellybeans!), or a scavenger hunt through the newsletter to find silly clues. What you do is less important than giving your tenants a chance to connect with you in a fun and engaging way.

So keep your newsletter relevant, informative and fun, and you’re bound to reap the rewards of an effective tenant newsletter strategy: increased tenant engagement.

Net Promoter Score Connects with Customers

Okay, so by now you know that I’m a big fan of measuring customer satisfaction. At Marathon, Cadillac Fairview and now at Eservus, collecting customer feedback was (and is) at the core of our service quality strategy. Conducting annual tenant surveys is great – property managers use the results of their surveys to respond to tenant issues and improve service delivery. But how do you collect feedback between those broad-based surveys? That’s where the Net Promoter Score comes in. 

The Net Promoter Score, or NPS, is a simple way to measure customer satisfaction by asking one question: How likely would you recommend [Company] to your friends and colleagues?” (For more information on the methodology behind NPS, click here.) As it turns out, there’s a strong correlation between high NPS scores and profitability. One prominent real estate company to make use of the Net Promoter Score is Colliers, which, according to their website, is “the only major commercial real estate firm in Canada that uses the Net Promoter Score Program … to systematically measure client satisfaction.” Colliers uses the NPS to measure clients’ satisfaction with their dealings with Colliers employees, and employees with the highest scores are acknowledged on the company’s website.

My company, Eservus, has been using the NPS for about a year now, and we find it to be a much more effective metric than our old six-question survey. We can now compare our scores to those of other companies to see how we rate. We set an official company objective to have a Net Promoter Score that exceeded Amazon’s, which, at 70, has the highest NPS of all e-commerce companies. What’s Eservus Net Promoter Score you ask? Seventy-six!      

So if you’re looking for a way to collect feedback from your tenants on an ongoing basis, take a look at the Net Promoter Score. Of course, focusing on other key metrics, such as occupancy and retention rates, will always be important. But knowing that your tenants would recommend you as a landlord … or not … can help guide your tenant service strategy and increase tenant retention, which, as we know, goes straight to the bottom line.