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CRM Prob 3 Q5 Notes

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4 views

CRM Prob 3 Q5 Notes

Uploaded by

Hafiz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5) Capitol Land offers discounts and rent free periods to acquire new tenants and at the

same time it has to spend money on promotions and publicity events to retain existing
tenants. Which aspect is more important and why is this so?

Importance of attracting new tenants (Benefits)


➔ Tenants are the foundation of a Shopping Mall like Capitol Land. Without new tenants to
keep things fresh and attract customers, the mall would not be able to survive.

➔ To ensure maximum occupancy, it is important to replace tenants who have left, as


vacant lots in a mall are wasted space. Potential revenue/rental that could be
generated is lost each day the lot is allowed to remain vacant.

➔ Free publicity, as they always have opening promotions and offers. All these are
bonus marketing events which can potentially attract more customers to come to Capitol
Land and patronize the stores, increasing tenant satisfaction. Costs can be saved on
promotion and publicity events.

➔ Increased foot traffic - Something new and exciting to publicize about, which has the
potential to draw more shoppers to come visit the mall.

➔ Increased Revenue - New tenants can provide Capitol Land with more variety of shops,
which allows them to cater to a larger target audience, and can potentially increase
revenue.

➔ Updated/Fresh Concept/Image - New tenants help keep the mall modern and trendy. It
also provides a chance to remove outdated and unwanted products or tenants to
rejuvenate the mall.

➔ The advantages of attracting new tenants is the disadvantage of retaining existing


tenants.

Disadvantages of attracting tenants:


- It is not easy to attract new tenants to the shopping mall, the disadvantage of
attracting new tenants is the advantage of retaining tenants - vice versa.

- Finding new and suitable tenants that match your mall image and branding strategy.
Niche mall - For example, furniture malls, family themed malls or fashion malls. They all
have a theme and cater to a very specific group of individuals. It is not easy and quite
costly.

- Rent free periods and discounts must be given to new tenants.

- Incentives must also be given, along with a few months of rent free, for the ‘testing’ out
period.
- Uncertain if the new tenants are here to stay, whether they are profitable and attractive
to customers or not.

- Money has to be spent on refitting courses. If it is a new type of outlet/establishment,


maintenance works may have to be done to ensure that the tenant’s outlet is functioning.
E.g Spa - requires water piping and heating and waste disposal to be piped to their
outlet.

Example - Fatburger @ Velocity@Novena


When the famous American Burger chain first made its debut in Singapore at the
Velocity@Novena Mall back in September 2018, there was a lot of publicity and hype behind the
chain. Crowds of shoppers were queuing to have a chance to taste their famous burger and
milkshakes. Queues snaked from the outlet all the way to the entrance of the mall. There was a
huge increase in foot traffic to all shops in the mall as well, because while queuing and waiting,
other shoppers went to patronize other shops.

Importance of retaining existing tenants (Benefits)


➔ Vacancy loss - prevention is better than cure
If the tenant leaves and is not retained, there will be no accruing rent from the vacant
space. Preventing a tenant from leaving is far better than finding a new one to replace a
lost tenant.
There are added benefits to retaining a tenant, and it is more cost efficient to keep
tenants than it is to advertise and attract new ones.

➔ Less Marketing costs


In order to fill the vacant space, marketing the space efficiently and attractively is
needed.
Marketing expenditures can total up to the cost of losing a tenant.
A minimum of $10,000 is needed to get the word out about the vacant space.
Retaining a tenant will eliminate this problem as there is no need to market vacant
space.

➔ Commission
To rent out space, there is a need to pay commission
The commission for a new lease vs a renewed lease will be higher
➔ No need to give discounts & Rent free periods - There is no need to provide existing
tenants with all these. There is also no need to build rapport with them as they have
been in the mall for some time.

➔ Easier to forecast whether they are here to stay - They have shown certain levels of
business, and are therefore easier to work out if they are attractive/profitable and if they
are here to stay.

Disadvantages of retaining existing tenants:


➔ Existing tenants cannot provide fresh or trendy concepts and images. Some may even
look run down and old.
➔ Money has to spent on publicity events to spruce up the image of the mall

Why retaining existing tenants is more important:


➔ There is a saying that goes ‘Make new friends, but keep the old. One is Silver, the
other Gold.’

➔ Although offering discounts and rent free periods to attract new tenants is beneficial to
Capitol Land, retaining the existing ones and earning their loyalty is even more
important.

➔ This is because retaining existing tenants and acquiring their loyalty has more
added benefits as compared to attracting new ones.

➔ It is permanent solution
- If the landlords are able to keep existing tenants satisfied, they can ensure long
term occupancy and a stable source of rental. This is because satisfied
tenants will eventually become loyal tenants, and will stay in the mall for a long
time.
- This enables the mall to gather reliable information from tenants to plan
effective promotions and publicity events for them.
-
➔ Creates Brand Ambassadors
- Repeatedly satisfying tenants will turn them into loyal tenants.
- As they are impressed by the landlord, Capitol Land, they will spread good
comments and sing their praises to other tenants.
- This will enable Capitol Land to be well known for their exceptional care of
tenants and enjoy a good reputation in the industry.
- Potentially attract a lot more tenants to come and check what Capitol Land has
to offer, killing two birds with one stone.

➔ Retaining existing tenants minimises interruption in the community.


- Customers are able to find tenants easily as the tenants are still situated in the
same location.
- Tenants do not have to worry financially about any moving expenses. It enables
tenants to maximise their profits as long term tenants that stay on reduce
turnover rates.

★ Drives & Increases Revenue


○ In conclusion, retaining loyal tenants provides the most profits and revenue, as
they are the biggest drivers of revenue. They contribute more than new tenants:
○ Loyal tenants are less sensitive to rental rates - They do not mind paying
more rent as they trust the landlord and are satisfied with the benefits, whereas
○ New tenants are not as generous - They may not be willing to pay higher rent
as they still have not developed the trust in the landlord.

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