Raising Rents While Getting Resident Buy-In: Key Takeaways from Netflix
- Jan 16, 2019
What are you binging these days on Netflix?
I ask because I totally know you’re watching something. The streaming service currently has 118 million subscribers globally. Odds are, you’re one of them. Oh, also, I’m always on the lookout for more shows to watch. Currently I’m watching You (and really considering changing the passwords on all my devices), as well as giving Tidying Up with Marie Kondo a shot (while getting anxiety sweats over whether an old 5K t-shirt is really sparking joy or not) and throwing in some Parks and Recreation for good measure (Chris Pratt).
So, assuming you’re a subscriber, what did you think about the news that Netflix is going to be raising prices—its largest increase since launching the streaming service? Annoying, but you’re going to keep using the platform, right?
Netflix certainly isn’t the only streaming platform out there, but it’s going to retain—and maybe grow—its user base. Well, that’s their hope, anyway. And as property managers, you can take away some insights from this on how to raise rents at your property without alienating or losing your renters.
Make the announcement in advance. Netflix announced that it will be raising prices for existing subscribers. It didn’t announce it and then do it, or, even worse, not announce it and hope people don’t notice their bills are higher. This gives people an opportunity to opt out, if they so choose, and also gives the company an air of transparency. People like that, even if they don’t have a choice in the matter. Before your residents’ leases are coming to an end, let them know that the rents will be raised. Give them several months’ notice if you can. This will give them time to get over the sticker shock and decide that it’s worth it to stay, because they love their place. It also gives them time to find a new place if they choose to leave. So, if that does happen, they’ll still have a good view of your community, and hopefully give you a good review on an apartment-rating site. Tell them to let you know if they’re considering not renewing their lease, so you can start marketing the apartment at the higher price and showing it to prospective renters. There’s really no downside.
Only raise the rates by a small amount. For most Netflix plans, the monthly rate will go up by $2. Just $2? I spend more than that daily on my coffee! I won’t even notice a monthly $2 increase—is what most people are probably saying (also, me). It’s that old “frog in boiling water” scenario, where the frog would jump out if it were thrown in boiling water, but if it’s in water and you keep raising the temperature slightly it won’t notice that it’s too hot until it’s too late. And then you get to eat that sweet, sweet boiled frog. Anyway, that price increase will add up over time, plus when you consider the millions of Netflix subscribers, well, that’s a lot of money overall! Consider that tactic with your rents: Make an increase that’s big enough to get you a higher ROI, but low enough that the residents don’t feel it’s really hitting them hard. Ideally you want to retain your current renters, since it costs more to get new ones. So don’t go nuts with your price increases, and compare it with nearby apartments.
Make valid justifications for the price increase. Netflix has a ton of new high-cost content, and it needs to pay for them. Sandra Bullock was just in a Netflix movie! The Obamas are going to produce a show! Adam Sandler doesn’t work for free, you know (even though his new movies are resoundingly terrible. But, in fairness, once you hit the career high of “Stop looking at me, swan,” there’s really no where to go but down)! You get the picture. And a lot of people are willing to pay to get access to this type of buzzy, high-quality content. If Netflix was just raising prices for the sake of it, people might be a little bit more likely to jump ship. When you’re raising prices at your community, give residents a good reason. Are you investing in a new, state-of-the-art gym? Are you going to hire more maintenance staff to help serve the renters’ needs? Are you installing the margarita machine in the lobby that I keep asking for? If the residents know the reason, and especially if that reason will benefit their experience at the community, they’ll be more likely to buy in to your plan.
What other ways can you get residents on board with a rent increase? Will you continue your Netflix subscription even with the higher fees? Seriously, what else should I be watching? Post your comments on our Facebook page or send a tweet to @MHNOnline or @jfiur.