Why Discounting Fees Does Not Work! Part One – Promotional Discounts

What you say you charge versus what you actually get!

As property management consultants we are regularly assessing a department’s profitability, income levels, and fee potential.

This process involves looking at management agreements and what fees are actually being charged to landlords. In most cases, we find that what property managers say they charge (from their promotional material) to what they actually charge are two totally different things.

When it comes to fee discounting, we find it comes in two forms- promotional discounting and listing appraisal discounting. We will explore both of these angles and discuss why these types of discounts can be a real problem!

Promotional Discounting

This usually involves the promotion or advertising in a newspaper or some other form of promotional marketing medium to attract new business by giving a discount or ‘freebie’.

These advertised discounts might be ‘Three months free management fees’ or ‘No letting fee charged for the first tenant’. It could even be in advertising or promoting a much lower management fee than normal market expectations. I have even had a principal ask me if I believe it would be appropriate to provide an incentive and ‘give’ a newly signed up landlord $500 cash!

My point is that this type of advertising does not necessarily increase the number of prospective landlord enquiries, for good reason!

What landlords are really concerned about

In the market prospective landlords are more concerned about whether their rent will be paid on time, they will get a good tenant and their property will be rented quickly. These concerns are service-related. Fees become a secondary concern in a majority of cases.

Therefore our marketing should centre on our quality of service, and our points of difference need to be service-based. This is what matters most to a majority of prospective clients!

Alternatively, a minority of landlords are fee orientated. Fees (or the lack of) are a primary concern for them. I believe that promotional discount marketing campaigns may attract these type landlords.

What a ‘C-Class Landlord’ looks like

Another name for this type of client is ‘C-Class Landlords’. They are typified by these characteristics:
1. Unreasonable and over demanding
2. Like to complain
3. Take up a lot of your time
4. Insist on discounts and lower fees (even after advertising a discount!)
5. Want unreasonably high rent levels
6. Spend little to nothing on property maintenance

This results in poor quality properties that attract only a poor quality tenant. This can mean problems all around! These landlords may also give you no loyalty and be attracted elsewhere for a cheaper deal!

Consider your message carefully

So we must carefully consider what message we are sending out to prospective clients. Advertising cheap or special rates may not necessarily attract the type of clients you are after, but instead, your promotion will stand out to perhaps those that make our work environment painful and unpleasant for property managers, the principal as well as the bottom line of profit!

Be sure to read part two ‘Why Discounting Does Not Work- Listing Appraisal Discounts’.

All the best!