Part One: The Importance of Referrals
I’ve written previously about the importance of finding and keeping “good” tenants. Finding these tenants may be difficult and can be a stressful part of being a successful landlord. By now you already know about creating appropriate rental standards and the importance of effective tenant screening.
What if I told you that your next tenant could be vetted and delivered by someone you know and trust? Yep, those of you in the front row already guessed it, I’m talking about referrals. This is part one in a four part series on referrals. Here, I’ll cover the importance and benefits of referrals to landlords.
Referrals are the most sought-after type of marketing, especially now. Why else would seemingly every business under the sun be doing everything they can think of (from running contests to creating fake accounts) just to get “likes” for their company’s Facebook page? It’s because a “like” is seen as a type of referral, despite being as simplistic and watered-down as a referral could be, and referrals are marketing currency — practically exchangeable for direct sales. Why are referrals considered so valuable? Let’s take a look.
The Move Towards Referrals
While it may seem strange to us now, during the golden age of advertising, ads in television and other media were actually seen as trustworthy sources by many consumers. In fact, the earliest ads on television were part of the show, with the host or star giving a recommendation directly into the camera. As time went on and ads became more and more intrusive, and people stopped seeing them as a trustworthy source of information for a product or service. Instead of informing consumers, ads became concerned with manipulating them.
Today, people not only ignore most advertising, but they actively try to avoid it. People take thousands of songs with them, wherever they go, instead of subjecting themselves to radio ads. People rely on DVRs to record their favorite TV shows so they can skip all the commercials. Top web browsers have the ability to install add-ons that will block advertising on the web. This shows the typical American’s view on traditional advertising. It also dictates the need for consumers to develop new strategies to inform themselves about products and services.
The Rise of Referrals
In the marketing world, when a customer recommends a product or service to someone they know it’s called “word-of-mouth” advertising. Since people don’t like making bad decisions, so they’ll often search out the opinions and expertise of the acquaintances they trust the most. If that person has extensive knowledge of the product or service, or is an expert in the field, even better. And it’s not just the person receiving the referral that gains, giving a good referral is a source of honor and prestige as well.
Where do we see this today? One of your good friends posts something they like on Facebook, you think, “We have similar tastes, maybe I should check that out.” Looking at a product on Amazon you’re unfamiliar with, you check out the customer reviews, looking for the ones that seem to value the same things about the product you would. Looking for a restaurant to try, you check some of your favorite Yelp reviewers to see what they recommend. And wondering what book you should read next, well… Oprah, obviously. Even if these examples don’t resonate with you, I’m sure you can think of something that you would need a referral from someone you trust before you would buy or use it, perhaps a mechanic or dentist.
Referrals and word-of-mouth
A Nielsen study from less than a year ago shows a staggering shift away from traditional advertising and towards reliance on word-of-mouth by consumers. 92% of consumers world-wide said they trust word-of-mouth from trusted aquantances over any other form of advertising. The second most trusted form of advertising was online customer reviews at 70%. Confidence in traditional media advertising declined around 25% since 2009.
The 4 benefits of referrals to the landlord
No. 1 – More exposure
As a landlord, you are providing a product and a service to someone looking for a home. Should a consumer rent your property, it’s almost assured that it will be the largest expense he or she has. The typical consumer will be even more particular about where they end up renting than which brand of paper towels they buy. We’ve seen how much people value referrals from consumers, especially friends and family. The first benefit to you will be more exposure. But what other benefits are there?
No. 2 – Cost of acquiring tenants
In part 3 of this series we’ll look at ways to encourage referrals, but for now I’ll just say that referrals bring willing tenants to you. You don’t need to win them over with expensive or extensive advertising, they already want to live in your property and give you money for the honor of doing so. Besides avoiding the cost of traditional advertising, you may also be able to spend less readying the property for them, as they already want to live there.
No. 3 – Time spent acquiring tenants
Since the potential tenants are lining up for your properties, whether you have vacancies or not, you may not even need to worry with other forms of advertising or taking time to show the units to uninterested applicants. You’ll also be able to shorten, or even eliminate, the time of vacancy between tenants — especially if the outgoing tenant refers their replacement in advance.
No. 4 – Quality of tenants
Referrals from current tenants work both ways. Tenants are a trusted expert concerning your property for the potential tenant. They are also a trusted expert concerning the quality of the potential tenant for you. Remember, people want the status and prestige that comes with providing a good recommendation. If nothing else, the referring tenant is just one extra source of reference for the applying tenant. This is one source that wants to keep you happy and you can hold accountable.
These are just some of the benefits of attracting new tenants through referrals from your current ones. If nothing else, think about adding a focus on referrals to your current advertising strategy. Next, I’ll be showing you how to identify the best sources of quality referrals.
Photo©Monkey Business Photos via Canva
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