Continuing on from ‘Why Discounting Does Not Work- Part One’ on Promotional Discounting.
Listing Appraisal Discounts
This type of discounting commonly occurs in the listing presentation on request by the client. It also needs to be stated that in a minority of occasions property managers have been known to give discounts even before the client asks!
The fee discount request from prospective landlords comes in several different ways:
‘Is that the best you can do?’
‘Your fees are too high!’
‘If you can match the fee with the other agency down the road!’
‘The other agency is willing to give a discount!’
A good property management agency would overcome these situations by ensuring they have points of difference that are convincing and also train their property managers with effective closing and scripts/dialogue technique.
The problems with discounting
However, the property managers that neither have convincing points of difference nor are trained in fee objections usually crumple at this point. They react in either one of two ways.
Firstly they may state ‘we do not negotiate our fees because we offer great service’ without convincing the client what great or different service that is! They just dig their heels in, hold their breath and hope the prospective client buys it!
Secondly, they grant the client the discount they want! Now in a retail store situation discounting can be a great strategy for business turnover, however, property management I believe is different! The consequences of discounting are HUGE! Discounting causes some or all of the following problems:
1. Overload – the property manager must now manage more properties to achieve a profitable level of income.
2. Burnout – the property manager becomes stressed and overworked and is destined for property manager burnout.
3. Resignation – the property manager resigns as they are burnout and not able to cope with the work overload and stress levels.
4. Inexperienced Staff – if an experienced property manager cannot be located, an inexperienced property manager may be employed.
5. Staff Turnover – the inexperienced property manager cannot cope and leaves, starting the cycle of high staff turnover.
6. Poor Service Levels – high staff turnover and inexperienced staff mean service levels become compromised.
7. Upset Landlords – landlord clients become dissatisfied with constant staff turnover and dropping service levels.
8. Loss of Management – dissatisfied clients take their business elsewhere.
9. Principal Disillusionment – the principal now views their department as problematic, unprofitable and become dissatisfied with their rental department. They tell their fellow principals how bad property management really is!
10. Rent Roll Sale – the disillusioned principal wakes up one day, decides that selling the rent roll is their best option to solve ‘their problem’. The rent roll is sold at a price much lower than that if their fees were kept intact. The principal is surprised at the low value of their rent roll as they thought it would bring much more! The result is a poor view of property management!
Discounting hurts the business all round! Too many times we walk away with lower fees than we could have received had we just done some training on scripts and dialogues and correct listing presentation technique.
Profitability should have full focus!
Profitability should be the main focus in property management. It is so easy to do, yet so few property management departments ever reach their full fee income potential.
I challenge you to make a commitment to profitability and full fees today in your department.
Go for it!