Shopping for Revenues
- Jun 22, 2012
The “Big Three” of ancillary income are often said to be submetering, telecommunications and laundry. However, providers are emerging in the marketplace to devise a variety of other types of services that can provide apartment companies with side income while also enhancing their customers’ experience of living in the community.
One of the creative options that has emerged in recent years takes advantage of loyalty and rewards programs the apartment company may already have in place or may want to implement. Under Resident Gifts LLC’s program, apartment companies can incentivize their residents to perform desired activities—without having to give free rent—and obtain ancillary income that will lower the cost of that incentives program.
ResidentGifts provides an automated and integrated platform that allows the resident—or apartment company employee—to win points that can be redeemed for goods and services at national and local brands. For example, a certain number of points accumulated by the resident will convert to a certain dollar amount, say $10, which can be used to purchase goods and services with name brand companies listed on the website.
Activities that can be incentivized under this program include lease signing, resident referrals, lease renewals, paying rent on time, and even participation in social media, surveys and community events, notes Gerry Wiatrowski, co-founder and chief marketing officer of ResidentGifts. For employees, the rewards program can be tied to meeting budget, leasing or customer satisfaction goals, signing up residents for renters insurance and winning employee of the month awards.
ResidentGifts’ rewards program is “budget neutral” for the apartment owner, says Wiatrowski. “There is no incremental spend. Property owners do not have to find additional budget to cover [the incentives program]. It is whatever they spend today.”
Currently, about 18 national merchants are participating in the ResidentGifts incentives program. These include PotteryBarn, Marriott, Sports Authority, Bath and Body Works, Lands End, Overstock.com, 1-800 Flowers, Cabela’s, Omaha Steaks, Fandango and K-Mart.
There are guidelines ResidentGifts follows in selecting the participating merchants. The suppliers offer goods and services that are particularly suited to the apartment renter; a range of products and services are offered; and retailers are included in the line up, for shopping convenience. Owners and managers can also arrange to have their products and services, such as carpet shampooing, accent wall painting or clubhouse rentals, listed on the ResidentGifts website, and local merchants can be added. ResidentGifts buys the inventory in bulk from the merchants at a discount of five to 70 percent, says Wiatrowski. The company splits those discounts 50-50 with the property owner, such that $10 in redeemable value, for example, may cost the owner only $8. The resident or employee “obtains dollar-for-dollar value or more, but the gift card always costs the owner less than face value,” explains Wiatrowski. Additionally, property owners will receive revenues from unused gift cards. Statistically, a certain percentage of gift cards are not activated by their holders. This is termed “breakage” in the premium and incentives business. ResidentGifts will also split 50-50 with the owner the value from any unused cards, says Wiatrowski.
Currently, ResidentGifts has a goal of signing up more than 100,000 to 200,000 apartment units by the end of the year, says Wiatrowski. Ultimately, apartment companies participating in a rewards program with ResidentGifts can expect to obtain a minimum return of 10 to 15 percent on their existing incentives budget, he says. Returns can be significant depending on the size of the company’s incentives budget. “We are seeing incentive budgets of $75 or $370 per unit,” says Wiatrowski. If 15 percent of that amount is returned to the property owners, they will receive $11.25 or $55.50 per unit.
Another related ancillary income opportunity that has become available is also based on meeting residents’ need to purchase goods and services—and to save money. ResidentGifts added an apartment resident-targeted discount shopping website, Justformyapartment.com, to its program. “This is a non-point-based pure shopping space,” says Wiatrowski. Apartment companies can private label the website and share in the revenues of every purchase, from 20-80 to 50-50 depending on the size of the portfolio. Up to this point, “For no good reason, the multifamily industry has not been considered a viable industry for [shopping discount partnerships],” observes Wiatrowski.
Another shopping provider, Purqz Inc., features on its website product, dining and recreation shopping options provided by more than 250,000 merchants nationwide, according to the company. “Purqz.com offers deep discounts of up to 50 percent available only to apartment residents and employees,” according to Scott Hammond, CEO, who says his website is the largest discount network in the country. Examples of participating national merchants are Haagen Daz, Michaels, Barnes & Noble, Dell, Target, Disneyland, Adidas, Home Depot, Kohl’s, Sports Authority and Six Flags.
While it covers the major national brands, the website actually focuses on featuring local merchants, says Hammond. “That is what makes us different,” he says. In fact, property managers can partner with Purqz to refer local merchants from their areas to be included in the program. These participating merchants will be asked to provide discounts at Purqz that are superior to those offered anywhere else. All of the savings are passed to the resident, says Hammond, and 90 percent of the deals obtained on Purqz are exclusive to the site. “In most cases, we get discounts better than anywhere else.”
The revenue-sharing arrangement under Purqz does not involve paying a commission to the property owner based on sales. Indeed, Purqz charges a fee to the apartment owner for subscribing to the service. However, to derive revenues from the service, the apartment company can charge the resident a monthly amenity fee for the service, or access to the service can be sold to the resident as an annual membership fee. For example, if the cost to the owner is $6 or $8 per year per resident, the shopping option can be sold for $12 or $24 per year. An apartment company can generate $4 to $15 per resident per year by subscribing to the program, says Hammond, and the service can also be offered to residents for free purely as a retention tool.
Apartment companies can also offer Purqz’s shopping service on their own websites and under their own branding. Purqz can create a “white label” portal for their clients. Riverstone Residential and Pinnacle are two apartment companies that have created their own shopping websites (Riverstone Merchant Perks and The Pinnacle Promise). Currently, just under 200,000 apartment units are signed up under Purqz, says Hammond.
Of course, property owners must not forget the “Big Three” types of ancillary income services which may well deliver the biggest bang to their ancillary income budgets. AT&T Connected Communities “creates alliances” with apartment companies to supply high-speed Internet, Digital TC, home phone service and wireless communication services packages to their communities. The services are offered in 22 states.
The company engages in three types of contracts with property owners. Under the Exclusive Marketing Agreement, residents are free to choose their own services provider, but the apartment company agrees to exclusively promote AT&T services. Property managers may also sign Bulk Contracts with AT&T Connected Communities, in which case they receive a single, monthly recurring bulk bill for all contracted units. And under an Exclusive Use of Wire contract, AT&T Connected Communities is the exclusive telecom services supplier for the community and directly bills residents. It has exclusive use of the wiring for the entire property, and the apartment company agrees to market the services exclusively from AT&T.
A spokesperson declined to comment on the amount of ancillary income that can be obtained by property owners. However, commissions to property owners, says AT&T Connected Communities, are determined by the number of residents who purchase AT&T voice, data and Digital TV services.
Besides the additional revenue, the benefits to the property manager of subscribing to AT&T Connected Communities’ program include a dedicated sales account executive to service the account; a sales engineer to deploy the technology; sales training sessions; marketing material to display and distribute on-site; and marketing opportunities to help promote the property.