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Multifamily Marketing Investments Derived Using Strategic Models

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You know a marketing campaign is an essential component of the success of real estate investments. Without one, chances are good you’ll have an empty, expensive building eating up your capital.

But deciding how to set marketing budgets for multi-family communities can be daunting, at best. The most important starting point in the allocation process is to base your strategic model on your expected leased rate and at least one relevant driver. What types of drivers should you consider? Although your strategic drivers will vary depending on your goal, these will naturally encompass a few key areas: marketing investment, revenue, and both your desired schedule and return on marketing investment. Let’s examine how each potential driver impacts your strategic model.

If your driver is a desired schedule, this model prioritizes when lease-up will be achieved. For example, “I want to achieve lease-up (say, 90%) eight months from TCO.”

Drivers based on marketing investment, in comparison, help you determine how much you have to spend. For example, “I have $280K earmarked for marketing in year one.”

Some developers may be driven by desired revenue, or a desired return on marketing investment. For example, “We need to gross $12M with 48X ROMI in 2019.”

Strategic drivers are important to identify and incorporate. However, having appropriate “governors” in place is equally important in ensuring your chosen marketing campaign model is realistic and achievable.

An unrealistically aggressive model is both frustrating and demotivating for your marketing and leasing team, whereas an overly conservative model may cause you to lose prospective residents to competitors, and leave cash on the table.

Here are three sample governors to consider.

Total addressable market (TAM) is one governor to evaluate. A market analysis identifies the unique number of qualified prospects in your specific addressable market—maybe a radius around your development, a collection of ‘feeder’ zip codes, and roughly estimated out-of-town or out-of-state prospects. Campaign models that demand prospect engagement beyond these numbers will be problematic. One example of a difficult situation would be if your unique market contains approximately 31,000 addressable individuals, but your model demands 70,000 unique site visitors, in which case, you will likely not achieve your goal.

The second governor to investigate is resident acquisition funnel performance benchmarks. This includes looking carefully at best in class, average, and worst in class funnel volumes and conversion rates seen and experienced on other projects, as useful benchmarks. Such as with the TAM governor, models that push conversion rates beyond reasonable norms will prove challenging. For example, if your model requires that you capture a 15% conversion rate from unique site visitor to inquiry stage (USV>INQ) and your market’s average is only 4%, it’s unlikely that you can hit this target, even if you offer a highly anticipated product and have a killer website.

Cost per lease execution (cost per EXE) is a third governor for consideration. This involves agreeing on the marketing dollars you should reasonably expect to pay to acquire each new resident, after any cancellations and denials. Consider whether Cost per EXE should be equal to or less than your lowest available monthly rent. For example, if your lowest priced studio is $1,300/month, a reasonable cost per EXE might be $1,275, capturing a minimum 12x return on a standard 12-month lease term.

There is no replacement for a solid plan when it comes to campaign investments. Ideally, strategic models drive a marketing plan that allows for continual optimization, and carefully selected governors then ensure realistic and achievable goals. While the process may initially seem daunting, executing these steps mark an essential component of successful multifamily marketing campaigns.