Wednesday, November 11, 2009

Close Ratio & Acquisition Costs

I have procured my first renter from my Chicago Reader ad. I received five inquiries from the ad. Two of the five were interested in renting my apartment. I selected one renter. The close ratio of the Chicago Reader ad is 20%.

The acquisition cost of the one renter is $671.00. I ran the Reader ad for 3 weeks at a cost of $57.00 per week. The renters asked for $100 a month off of the rent. It's a competitive market and there are less expensive places out there.

After pointing out all the selling advantages, I offered a one month $500.00 concession. The renters were thrilled and I am thrilled. I did not have to lower my base rental rate. The cost of the ad $171 + the $500 concession = $671.00 per acquisition.

Many sales people and organizations want to take short cuts. They ask "how much will it cost to get a new customer?" I don't know until we go through this process. There's a lot of thoughtful testing that goes on.

Rather than work the process, some like to fill their pipelines with activity. It feels like you're working hard and are productive. I won't argue with the working hard part but it's not productive.

To me, it feels a bit like a panting dog running around chasing it's tail. I prefer a more thoughtful, targeted approach. We now know from this analysis that the Chicago Reader is an effective medium for procuring renters and well worth the investment. Some of the other channels are worth exploring: a realtor, a rental agency and thoughtful use of Craigslist. Hanging flyers was a waste of time. I'd probably still do it in the future but I won't spend a ton of time on it.

I'll continue placing thoughtful ads in the Reader, for sure.

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