Top 5 Tips for Modeling and Planning Ground-Up Development Campaign Targets
For multifamily owners with new developments in progress, planning their lease-up campaigns can sometimes feel confusing and abstract. For both pre-leasing and post-TCO campaigns, it can be hard to know how to approach setting goals, budgets, and schedules, and how to measure success apart from lease application submissions and occupancy rates.
We recently helped a client with exactly this: developing a multifamily lease-up campaign for a new luxury asset just outside Portland, Oregon.
Here are our Top 5 Tips for modeling and planning campaign targets for ground-up developments:
1. Determine your lease-up rate goal and target date
This should be the easiest part, and will be critical to determine everything else. For example, perhaps your lease-up rate goal is 90%, and your target date is within 12 months of TCO. Your target date will be driven by a variety of factors, possibly including the asset being a short-term hold, upcoming recapitalization, or status as a core asset driving long-term cash flow.
2. Determine your marketing campaign budget
You can determine your marketing campaign budget two ways: top-down, or bottom-up. Most owners have fixed and pre-determined marketing budgets for an upcoming time period, so top-down often works best. If your budget is flexible or still in the process of being determined, bottom-up can be a powerful way to calculate budget requirements. In this scenario, we often suggest that the campaign’s planned Cost per Lease Application should drive campaign budget, grounded in the asset’s lowest priced unit, for one month. For example, if you need to gross 15 lease applications every month for 12 months to hit your lease-up goal, and your lowest-price unit is a $1500/month studio, your monthly campaign budget would be $22,500 and your first 12 months of campaign investment would be $270,000. Keep in mind this budget should include the costs of brand-building, demand creation, sales enablement, and market intelligence tactics, not just lead generation.
3. Determine your key performance indicators
Now that you know your lease-up goal, target lease-up date, and budget, you can decide how you’re going to measure campaign success at the programmatic level. Owners know they need to build brand awareness, generate interest in the asset, and drive inquiries and tours to the property, conduct top-notch ‘wow I want to live here’ tours, and capture lease applications. Owners also know there are complicating factors such as lease cancellation and denial rates and tenant turnover rates, and that driving qualified leads to the site and property is key, as is continuing to delight and retain existing tenants you’ve worked so hard to attract and nurture. In the campaigns we create for our clients, sample key performance indicators (or ‘KPIs’) we use to measure success or failure against our goals and objectives are:
- Reach: A simple proxy for brand awareness, often measured as an index including unique site visitors, social network size, and database/list size).
- Unique Site Visitors > Inquiry Conversion Rate: A rate that indicates the percentage of unique site visitors who make contact by phone, email, text, walk-in, or chat, as an aggregate, anonymous figure. Similar asset class benchmarks indicate 5% USV>INQ would be an average result.
- Inquiry > Tour Conversion Rate: A rate that indicates the percentage of inquiries who tour the asset. Our benchmarks indicate that 40% INQ>Tour would be a very good figure.
- Tour > Lease Application Rate: A rate that indicates the percentage of people who tour who then sign a lease application. Based on benchmarks in Oregon, 12% would be a good goal to set in year one.
- Cost per Lease Application: The hard cost to the owner required for each and every lease application, whether that prospect is declined or cancels their application. As mentioned above, this figure should hover around the lowest priced unit in the asset, which is typically a studio apartment.
- ROMI: Your return on marketing investment. This is a metric that illustrates the relationship between the marketing dollars invested in the campaign and the resulting leasing revenue as an ‘X’ figure. Given that marketing investments are often frontloaded with brand-building and demand creation activity, and revenue will grow over time, that figure will change from, for example, ‘2X’ to ‘20X’ as the campaign progresses. This is a good measure of marketing efficiency.
4. Model a few paths to goal
Once you have achieved steps 1-3, you can run a few different models to see how you might get to goal via a unique, thoughtful mix of marketing programs, tactics, and investments, throughout the period of time leading up to the target lease-up date. For example, you might lean more heavily on driving a high volume of traffic to the top of the funnel, and average conversion rates throughout the funnel stages, or you might choose to drive a smaller number of highly qualified leads to the top of the funnel, and assume higher conversion rates from top to bottom. We often recommend running three possible paths to goal, and determining which set of funnel stage targets and KPIs seem most viable and appealing to you—given the market, the asset, and any unique circumstances surrounding the deal. Excel worksheets are your BFFs here.
5. Create a campaign plan
Now that you’ve completed steps 1-4, and you have selected a good campaign performance model, you are ready to begin a full campaign plan. Your campaign plan should begin with your lease-up goal, budget, schedule, target audiences, and key objectives supported by specific target metrics. For example, the Brand Building program in your campaign plan should have a Reach goal, and specific tactical targets for unique site visitors, social followers, and list size. Your plan should be broken up into program areas and tactics, with specific budget allocations and key milestones or deadlines attached to those tactics. This will become your guiding document through the year, which you will likely need to adjust based on campaign performance and situational changes.
We hope this has been helpful to you – good luck hitting your unique goals!