In case you haven’t  heard,  JCPenney’s “fair and square” pricing strategy that rolled out in January has been a complete disaster. The plan was to rid all stores of coupons and sales by offering products at the lowest price without gimmicks and discounts. Yet the strategy backfired and within 4 months sales had dropped 20%.

But why? This approach seemed to be one that most consumers would understand and appreciate. However, by not studying the customer, JCPenney  failed to recognize key components of buying behavior.  And however unrelated retail and leasing may seem to be, consumer buying behavior is a universal language and something the leasing community desperately needs to focus on.

• Importance of price framing

Prospects are nowhere near as educated about your product as you are and, because of this, it is imperative that you convey the value of your community. One way this can be accomplished is  by “price framing.” Price framing in leasing can refer to only giving prospects your market rents–known as anchor prices. By telling prospects right off the bat that a 2 bedroom apartment rents for $1,300 a month, they automatically begin to perceive a high value in your product.  Then when you close them with a concession and the rent drops a couple hundred dollars, they reference the anchor price (market rent) and believe that they’re receiving a highly valued product at a discount.

• Need for urgency

Another flaw in JCPenney’s marketing scheme was the lack of urgency. Three-day sales and other promotions run by department stores are much more effective at pushing urgency than an open-ended “lowest price always” campaign. Consumers are far more likely to rush out on a Saturday for a bargain they think will only last the weekend. The same can be said for leasing. If you’re attempting to close a prospect, but say that the rent and concession will stay the same for an indefinite amount of time, nothing is compelling them to lease same day– or even same week for that matter. On the other hand, telling prospects the rental rate and concession are only good for 24-48 hours almost forces them into a type of impulse buy because they fear losing the apartment.

• Prospects love to “win”

The biggest mistake made by JCPenney was forgetting that consumers have a need to win. Consumers love bringing coupons up to the register and watching as the price drops because it gives them a sense of accomplishment. Your prospects are no different. They want to feel as though they are negotiating for a lower price and ultimately coming out on top. Your prospect doesn’t need to know that everyone coming through the door is getting the lower rent.

What is the first thing that your prospects ask on the phone when they call your property? Chances are it is “how much are your apartments?”

I would venture to guess that over 80% of apartment inquiries start with that question. However, a majority of these same prospects have most likely searched for your property online, viewed your website or ILS ad and determined the price prior to calling. So why would they even bother to ask for pricing if they already know the answer? I have come up with 2 conclusions to this paradox.

1. They are looking for a move-in special

2. They have been conditioned by our industry to only ask for pricing since that is normally the only information given to the prospect during the call. In other words, when they call your competitors they are not getting sold on the value, amenities or sense of community at a property… only the price.

Leasing 101 tip: “People decide to lease based on value, and the rapport they develop with the Leasing Specialists.”

Price has almost nothing to do with your ability to lease.  When we deflect the price question and focus on value selling and rapport building, we increase our chances of closing. Prospects ask for the price because they don’t know what else to ask for on the call. The truth is that most prospects already know the price, which makes sidestepping or deflecting the price question easier than you think.

Here are 3 steps to deflecting the price question on your phone calls.

1. Ask them “how soon do you need an apartment?” You should take control of the conversation and you should be the one asking the questions. You will often find that as you begin discussing the details of their lifestyle and move, they will become distracted and never ask for the price again until they come in to tour.

2. Ask them “what sort of price range are you looking for?” If they say a price that is within 20% of your range, then they are a qualified prospect. You should respond by saying “that is perfect, you are right about in our price range, how soon do you need an apartment?”

3. Value Sell, Value Sell, Value Sell. If they nail you down and make you divulge the price, start by quoting the market rent and be prepared to explain why it costs what it costs. If your property is $200 higher than the one across the street, explain why. Try saying something like: “our apartment homes are brand new with energy star appliances. They also include water, trash and sewer as well as a bundled cable and internet plan. When you add all of these features up, and throw in our state-of the art amenities, you will find that this is right about in your price range!”

Your prospects will pretend to care about price. But this is because our industry has conditioned them to do so. They most likely know the price before they even pick up the phone, so stop focusing on your rents and start focusing the conversation on value and rapport building. Save any specials or concessions for your closing table and get some leases!

Why do people only ask about price when inquiring about an apartment?  The most likely answer is that leasing consultants have conditioned them to do so.  When someone is only giving out a price or special over the phone, we are telling our prospects that price is the most important factor in choosing an apartment.  But studies show this is not the case.   In most cases location, maintenance, amenities and floor plans are more important than a price point.  

What makes this condition even more puzzling is the fact that an apartment is the most personal purchase a person will make all year.  It is where they will spend 14 hours of their day.  It is more personal then the clothes they wear or the car they drive.  But we never hear of people calling a car dealership and asking “how much are your cars?” 

One of the many unfortunate side effects of the recession is that people became much more price conscious in their shopping habits.  The result is a complete disappearance of the value sell. 

Now we find ourselves in the golden years of multifamily.  With a recovering economy, job market and millions of potential renters shunning home ownership, it is time for apartment owners to strike while the iron is hot.  Three years from now when the housing market recovers and tens of thousands of additional multifamily units come online, apartment owners are going to look back at 2012 and 2013 and say “why was I afraid to push my rents?” 

Start by reselling your leasing teams on the feasibility of such rent increases.  While market analysis and research is widely studied on the corporate level, on the front lines of the leasing battle our people have yet to grasp the leverage they now have on potential renters.  The other night I was watching the movie Ocean’s Eleven and I couldn’t help but think of the current leasing landscape when George Clooney said to Brad Pitt “the house always wins, except when you have that perfect hand and you bet the house.”   It doesn’t get much better than this my friends.  It’s time to go all in!

“In a recent Apartments.com national survey, 48.3% of residents said that their most important search criteria is the cost of rent. This does not mean it is their most important evaluation criteria or that apartment selection is price-driven. This is a common misunderstanding you can’t afford for anyone on your team to have.

What is there to misunderstand about renters telling us that they want the lowest cost rent? We are, of course, supposed to listen to our customers. However, even more important than listening to what they say is doing what market researchers do – measure behavior rather than intention.

The next time income-qualified prospects beat you up on price, first ask yourself, do renters in my market have an option with lower rent? If so, and they are still looking at your property, then price is not the core issue or they would all choose the cheapest option. Qualified prospects who say price is the bottom line in their evaluation when they know they can rent for less, are really just negotiating. If they are not choosing the lowest price option, then price is not their bottom line. So why do they pay more to rent from you? Isn’t it because they value your amenities, location, or relative safety? Studies of consumer preferences show that we choose to spend more on all kinds of things to get options and extras of perceived value. The core issue with your renters is value – as it is with all people who have their basic needs met.

Since the core issue is value, if you raise it, you can raise occupancy.”