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It’s sales 101: if something (a product, an apartment unit) isn’t attracting buyers (or in multifamily, renters), offering a discount is one of your best avenues to increase the likelihood of a transaction. We’re not telling you anything you don’t already know—multifamily markets are no strangers to specials and conditional offers—but what if we could tell you the exact impact your special offers are having on your leasing conversion metrics?At EliseAI, we’re no stranger to actionable multifamily data and insights.
Whether we’re leveraging ALN data to prove the impact of EliseAI products on occupancy rates (+2% vs. area comps), combining insights from tens of thousands of apartment tours (and no shows) to predict show rates by time of day, or highlighting innovative operators who are driving quantifiable NOI increases with EliseAI products, we’re always looking to present actionable, insightful conclusions from millions of conversational data points that can help make an impact in our clients' (and your) operations.
With that in mind, we set out to answer a question that might be familiar to many multifamily marketers—what is the concrete impact of different pricing specials on conversion rates, and which perform better or worse than others? Let’s turn to the data.
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Setting the Stage: 10,000 Specials Analyzed
In order to measure the exact impact of pricing specials like free months and fee waivers as well as conditional offers on leasing conversion rates, the EliseAI Strategy and Operations team analyzed the full prospect journey for 10,000 leads over a 5 month period.
They then benchmarked each of the individual special types’ impact on leasing conversion rates, before comparing them to EliseAI benchmark data from the same time period to accurately demonstrate the delta. Their findings, while largely in line with what you might expect, did reveal some interesting angles to dig into—so without further ado, here’s what the data showed.
Takeaway #1: Free Months Reign Supreme
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In relatively unsurprising news, free months drove the highest delta on lead-to-lease conversion rates, with prospects who received a free month over converting at a whopping 10.10% lead-to-lease rate. That dwarfs the baseline 3.2% lead-to-lease rate, but that’s not Earth-shattering news—one would expect that giving away a free month would have a massive impact on lead-to-lease. What is intriguing about this data, however, is what the lead to application metrics show us.
With lead-to-application rates just shy of 14%, we see that free months actually drive lower lead-to-app rates than all of the other special offers. There’s potentially a qualitative angle here (communities that need to leverage free months may have other issues that only become clear on a tour), but it is intriguing when we compare the delta between lead-to-app and lead-to-lease for all these specials. As the chart shows, drop off from lead-to-app and lead-to-lease is relatively low for a free month, compared to other more lucrative offers (like conditional offer + a free month) that see significantly higher discrepancies between lead-to-app and lead-to-lease.
That leads us to our second key takeaway—are your specials too compelling?
Takeaway #2: Can Your Offers Be Too Good? Maybe!
Qualitative inputs aside, EliseAI data indicates that some offers might just be too good to be true—as demonstrated by the relatively high drop off between lead-to-app and lead-to-lease rates for conditional offer + free month specials. While the study didn’t dive into specific reasons prospects fell out of the leasing funnel, we can make a few educated guesses into prospect behavior to explain these results.
One potential outcome is that the incredibly lucrative nature of the month free + other conditional perks enticed renters to apply who otherwise would have not applied due to factors like minimum income requirements, before they were eventually weeded out during the application process. Application volume was incredibly high when these specials were added in, so if the amount of units that qualified for this specific special was low there could have been too many prospects for the total availability. Either way, the results are clear—huge discounts get prospects in the door, but don’t always convert to leads.
Our final takeaway? It’s crucial to find a balance between lost revenue and conversion rate increases.
Takeaway #3: Fee Waivers Drive Strong Results at Lower Costs
While fee waivers only drove a roughly 2.5x lead-to-lease conversion rate versus the baseline (as opposed to free months pushing that figure to over 3x), the key factor to analyze here is the comparative cost associated with the special. The average rent in the United States lands somewhere around $1,700 per month for a studio, meaning a one month free concession can cost an operator nearly $2,000 in lost rent. In expensive markets, like New York, San Francisco, or Los Angeles, the impact of one month free can be even more detrimental to the bottom line. The average set of application fees falls somewhere between $50 to $100—a significantly smaller amount for a management company to pass up on to fill a unit.
With those comparative figures in mind, we see that fee waivers produce arguably the highest ROI of any type of special offered. While the impact of fee waivers on lead-to-lease isn’t quite as dramatic as, say, free months, the lost revenue impact is negligible in comparison. For savvy operators looking to get the most bang for their promotional buck, EliseAI data shows there are worse choices than waiving fees.
Leverage Data-Driven Insights with EliseAI
For leading multifamily operators looking to get more value out of their marketing dollars EliseAI can help, both with round-the-clock lead nurturing and with operational improvements derived from concrete data points. The EliseAI Strategy and Operations team works with operators large and small to refine their workflows, incorporate data-backed insights into their operations, and drive better conversion metrics with a best-in-class combination of technology + expertise. Interested in learning more about how EliseAI’s products and people can help improve leasing conversion rates up and down your funnel? Get in touch with us today via the form below to learn more.