Referral programs are commonplace in many industries and are a popular way to attract new customers or generate leads. While this type of program can help fill vacancies and certainly has a place in the multifamily industry, it may not be the most effective strategy for reaching your budgeted occupancy and revenue goals. Take time for a review to see if your resident referrals are giving you the best return on investment (ROI) or if you could shift some of those dollars for better results.
On the surface, it can seem like a referral from a current resident is an ideal way to bring in a new lead. After all, a personal recommendation can appear innately more trustworthy than other sources—but that’s not necessarily the case. According to Vendasta, 74% of customers trust online ratings and reviews just as much as they trust an in-person recommendation.
Further, online ratings and reviews can have a much wider reach than word of mouth. A single resident saying positive things to a single prospect who may (or may not) sign a single lease has less impact than a broad pool of prospects searching the internet, reading a balanced selection of positive and negative reviews, and then submitting leads.
Lead source attribution can be unreliable when it comes to resident referrals, which can make it difficult to track your program’s ROI. For example, a prospect may find you online through an ILS and consider submitting a lead—until his friend says, “Stop! If you use my name, I get a referral reward!” Because of this interruption, you could wind up paying twice (once to the ILS and once to the resident) for the same lead. You may need to tighten the rules related to what constitutes a resident referral to avoid this situation.
Adjusting your budget and reallocating funds doesn’t mean you have to discontinue your resident referral program altogether. These programs do have proven value and can be important to your bottom line. But you can trim costs by reducing the value of your incentives—for instance, you could replace a gift card or cash reward with a discount on rent, a one-time opportunity to waive a late fee, or an upgrade to the referrer’s apartment home. Another option could be to limit the timeframe of your referral program, if appropriate.
However, after doing a little research, you may find that it is simply time to move on from resident referral rewards and to spend your advertising dollars in a different manner. A professional service that manages your referral sources and leads while also protecting your online reputation may deliver better overall results and help increase revenue to your bottom line. Be sure to weigh all of your options with a critical eye to determine the best choice for your community.