I just got inspired while reading a book called “The Automatic Customer” by John Warrillow.
The book is about subscription business models, from online platforms to membership clubs, and the implications that those types of business entail.
Then it hit me: coliving is nothing else than a subscription business at its core.
Residents pay on a monthly basis. Business models can be calculated based on monthly recurring revenue, churn rate, and the life-time value is based on that.
And so the question is: how to increase the life-time value of a customer?
The answer: you need to create stickiness. You need for residents to extend their lease. In business terms, you need to reduce resident turnover, or put in other words, you need to lower the churn.
There are several reasons why reducing resident turnover is beneficial:
- Residents that stay longer are more integrated into the coliving culture, especially since it takes a few weeks before being familiar with the other residents and starting to engage proactively
- Those residents are therefore more predictable than new arrivers, most probably taking more care of the property and adding value as they see it as their home
- As a business, you don’t suffer from the empty room period, which happens in between the move-out date of a resident and the move-in date of the new one
- And because you need fewer residents overall, you spend less on overall marketing costs, as fewer acquisitions need to be made
Instead of going into more arguments of why long-term stay residents are beneficial, let’s look at nine ideas from Warrillow’s book on how to reduce churn, and how it applies to coliving.
Churn-lowering idea #1: change people’s behavior
Warrillow calls this strategy “Be A Rogue Jet”.
The concept is simple: he explains how most planes with eastbound traffic fly at altitudes of odd numbers (eg. 33,000 feet, 35,000 feet), whereas westbound traffic flies at altitudes of even numbers (eg. 34,000 feet, 36,000 feet).
The only planes that have a free flight range are the rogue jets.
The metaphor stands for getting people out of the “autopilot mode” and make them change their behavior. Only by doing so will you be able to differentiate yourself from the existing offerings.
For coliving, this means that you need to inspire new routines in people, which they could not get otherwise. For example, starting the week with a group gathering for intention-setting followed by accountability groups between residents.
You could also go with more main-stream options such as “offering a yoga course three times a week”, but this can be also done at the nearby yoga studio.
So ask yourself the question: what positive habit can I instil in my coliving space for residents through my own community, culture, or service offerings?
Churn-lowering idea #2: watch the 90-day onboarding clock
I’ve talked about it extensively in my book Art of Coliving: onboarding is crucial.
Why? Because integrating residents into a new culture and habits needs to start from the very beginning. It’s hard to change people’s behavior after they already moved in and create their own habits.
If you are able to create a strong impression and integrate the resident from the very beginning, s/he will be more engaged over time. And that happens through onboarding.
Onboarding can take different forms: from group welcoming dinners, to personal introductions through the community manager, up to creating half-day workshops for new members to learn about the community culture.
The danger comes when you don’t manage to onboard a resident within the first 90 days. If you’re not able to transfer your coliving space’s culture onto the new resident, he most likely won’t integrate afterwards.
Let’s take Warrillow’s explanation and apply it to the coliving community:
“Your biggest competitor for your business is not the rival service (for example: the entrepreneurs meetup community next door); it is your customer’s inertia in not using your service (meaning, not engaging in your community).”
Hence, invest into onboarding at all cost, and make sure that you are able to track how well a resident is able to integrate into your coliving space’s culture and community.
Tip: while you can track that with simple questionnaires, personal 1-on-1’s between the new resident and community manager are the best way to go; not only because it gives you more qualitative feedback, but because it also creates more emotional connection and a feeling of personal care between the resident and your company.
Churn-lowering idea #3: reduce your time to wow
Businesses express a lot of importance to the first impression.
We can go further and say: let’s express a lot of importance to the first big moment of transformation.
That is what is called the “wow” moment. When something happens that impacts you so profoundly that you are yourself impressed by what is positively occurring to you.
In coliving spaces, that can be profound interior changes, or finding a person that becomes your true partner in crime in a short amount of time.
For example, Common’s CEO Brad shared how “when residents find a friend within the first 90 days, the retention rate doubles”.
Using the terminology from the startup world, you can identify your “key metric”, the one experience that happens during the user journey that dramatically increases a resident’s stickiness.
Churn-lowering idea #4: charge up front
This principle is straight-forward: by charging customers upfront, you make him enter a bigger commitment to learn and adapt to your service.
For example, instead of doing month-to-month payments, install a minimum stay of 6 months. If you go for 12 months even, then the resident will have no choice but to choose to integrate, if s/he wants to get the best experience out of the community.
Note: the onboarding process is still a determining factor on whether the person will be able to integrate or not.
Which leads to the next idea.
Churn-lowering idea #5: charge an application fee
The same principle applies here. If you make someone agree to pay an application fee, knowing that there is a possibility that the resident might not get accepted, it shows a commitment from the resident’s side to truly want to be part of your coliving space.
Churn-lowering idea #6: increase your interaction points
Relationship-building is fundamental to new residents to be integrated.
Especially during the onboarding phase, it doesn’t suffice to only have one or two main touch points with the customer. For example, just being there to welcome the resident and then having a check-in the month after will not establish a relationship between your coliving space and your new resident.
Warrillow calls this idea “Communicate like a Giddy Lover”, as his book refers mostly to online subscription businesses. The idea here is that within the first 90 days, the amount of satisfaction increases with the amount of communication between you and your client.
In coliving, it goes beyond simple “email” communication. Here, communication is meant as any type of interaction you have with your resident, whether it is in-person welcoming, having your resident attend a dinner party, engaging your resident in a community meeting, and so forth.
In short, you need to increase the amount of interactions between you and your resident in order to establish a relationship, which in turn creates trust and engagement.
But beware: overcommunication can lead to lower satisfaction. If you try to bring your resident to every community event, sending him ten emails per week and confronting him in person twice per day, it will feel that you’re trying to impose a relationship, instead of truly listening to what your resident needs.
Churn-lowering idea #7: drop a “happiness bomb”
Memories are tied to emotions. And happiness is created when something positive happens that you didn’t expect.
The same goes with residents.
Churn-lowering idea #8: target larger businesses
Applies if you target larger businesses: “larger businesses are more stable and are less likely to change their business strategies on a dime.”
Churn-lowering idea #9: go evergreen
Residents need to proactively turn off the service if they no longer want it. It’s the “membership” model, which could be for the whole rent, or more like Outsite, an additional revenue stream on top.