It’s Not the Funeral Product Industry!

When did it happen? Has the funeral SERVICE profession always been product focused? I think a long time ago, 25+ years ago - during the good ol’ days of unit pricing- caskets were always part of the success equation but not as much as a focal point (business wise) as they have been as late. I believe that we can blame the government! Well, it isn’t their fault completely, but when it came down that all funeral services and merchandise had to be itemized on the Goods and Services contract, monies had to be attributed to the various components.

Did the merchandisers at that time come up with The Plan? “If we get the funeral home operators to attribute a good portion of the dollars from the Unit-Price total to the product, then the product would become a very important part of the financial success equation.” Whether they did or not we are left with under-price service offerings and over-priced merchandise. Another contributing factor could be the structure of Memorial Societies’ packages. Usually they target service fees, thus driving down those prices. This leaves merchandise as the one thing that funeral homes could supplement the decreased returns on their service offerings.

The Funeral Arrangement Lottery
Upon the completion of every arrangement, when the manager or owner looks over the contract, there is an uncontrollable force that draws the eyes to Merchandise column, bringing feelings of glee or melancholy. Solid copper, inlayed mahogany - instant margins are calculated in one’s head and it’s a good day! With the current pricing structure, it would be more profitable to have families select a cherry casket with immediate cremation than a cloth covered lift lid with a traditional funeral. Maybe it should be called the Funeral Product Industry. I apologize if this strikes a chord, but if the sale of merchandise is what gets you excited, it’s going to be a glum future.

Reality Check
The Pollara Report spells it out quite simply, consumers value funeral merchandise the least! For those who may not have seen the results, please see them below. Coupled with this sentiment from the public, they also told us repeatedly that they feel costs are too expensive. In addition, Canadians surveyed stated that the No. 1 reason for preferring cremation is that it is less expensive.

Value of Products and Services (10 point rating scale)

• Professional services such as embalming, conducting the funeral, visitations, & the receptions (7.1)
• Out-of-pocket expenses including flowers, notices in the newspaper / memorial cards, clergy & church fees (6.5)
• Cemetery property, including plots, niches or crypts (6.5)
• Transportation such as a hearse, limo or other car (6.4)
• Memorials such as bronze markers / granite headstones (6.3)
• Caskets (5.6)
• Urns (5.6)
• Vaults (4.2)

Impressions of Funeral Industry

• Funerals are too elaborate, prefer a service that was simple & cost effective: Agree - 78%, Disagree - 16%, Don’t Know - 6%
• Funerals cost too much, industry should be regulated: Agree - 71%, Disagree - 17%, Don’t Know - 12%

Reasons for Preferring Cremation

• No. 1 Reason: Cremation is less expensive - 23%

Source: Pollara Report, March 2004

There could be two reasons for this response. Either we are not communicating the value of all of our offerings (both services and products) or they are not seeing any value in anything we offer! The merchandise suppliers obviously supply funeral homes with “product knowledge” but who should be supplying the “service knowledge?” The one who creates it of course - the funeral home! Do you provide your staff equal amounts of service knowledge as compared to product knowledge? How are your services presented? In many instances it doesn’t take long for the “service presentation” to become product focused. “Mrs. Jones, the difference between a funeral service and a memorial service is that the …” Gee, didn’t they tell us that they do not value caskets and now we have just tied our most profitable service offering to something that doesn’t have a perceived value.

Is this the slippery slope? So the consumers have a low perceived value of funeral products, they tell us that funerals are too expensive - with the casket being the biggest ticket item, then we try offering our services where the definition of a funeral is dependant of the presence of a casket, and the number one reason for the preference of cremation is that it is less expensive. Is all of this just a coincidence?

We must realize that the rest of the world does not have the love affair that we as funeral professionals do over merchandise. For myself, I definitely want a solid maple casket placed in a double-reinforced copper vault, but we cannot assume that the public will be as passionate about funeral products as we are. Furthermore, we didn’t have to wait for the Pollara Report to tell us - the public has been telling us for years.

As previously suggested, cost is not the primary driver of impressions of the funeral industry, however, it remains an important consideration as a majority of Canadians who have yet to arrange a funeral believe that it is an expensive endeavour.  This perception is compounded by the fact that Canadians do not appear to attribute significant value to funeral products and services, beyond the professional assistance they would receive on the front line.  With the trend toward simplicity evident across all demographic cohorts, this value defines what future funeral clients will be searching for, for themselves and for their loved-ones.

Source: Pollara Report, March 2004

If we have been successful in educating our families that Funerals equals Caskets, and they do not see the value in Caskets, then what are they telling us when they say, “I don’t want to have a funeral.”?

This is not the fault of the manufacturers; they are just conveying their message to their customers (the funeral homes) very well - offering product knowledge in the form of seminars, print, Internet, etc. Are you spending as much time educating your staff and communicating to your customers the benefits of your offerings as the manufacturers provide to you about theirs?

The Solution

• Align your service and product offerings (and the manner in which they are conveyed) with what your customer values - if they are not product focused nor should you be
• Reformat your pricing by shifting some margin from merchandise to services
• Invest in training and equipping your staff with knowledge to properly present your service offerings

The Effect
By lowering your merchandise prices you will:

• Further the cause of strengthening the relationship with your customer as they will feel that they are not being forced to purchase something that they feel is over priced
• Be able to inform price shoppers that you have the least expensive merchandise in town
• Reduce the probability of third-party merchandisers (casket & urn stores, Internet casket & urn website, cemeteries, etc.) having an impact on your merchandise sales
• Encourage families to purchase higher quality products, which will convey a positive message to others attending the service.
  • Friend: “Gee, Martha that looks like an expensive casket you got for your husband.”
  • Window: “Actually, not really, it was quite reasonable.”
• Be able to reply to the cynic who says, “You funeral directors jack up the prices by two or three times wholesale!” “No we don’t.”

The Path to Get There

It is all well and good to tell you to raise your service fees and lower your merchandise prices, however it would not be right on my part to put this idea in your head and then leave you out on your own. This transition is easier said than done and if it isn’t well planned out, it could be disastrous to your business. You will need to be prepared to be able to justify your service fees - but I will leave that up to you as you are the experts of your offerings and of your community. Once mastering the communication of the value of your services, one option to help this transition is to create funeral packages for each of your service offerings. There are more complex pricing strategies available but by following the packaging model, you will be able to transition the service / product pricing structure easier, increase average funeral values, and provide more value to your families.

The intension of this article is not to bash the manufacturers of funeral merchandise but to convey to the funeral home operators that they must align their strategies and offerings with those of their customers. And if this alignment is successful, the consumers will be more apt to purchase products as they should have a higher perceived value of then which in turn will increase merchandise sales, and also make the merchandise suppliers happy!

So, who is going to be the first in town to have the lowest priced merchandise? Maybe the one with the new competitive advantage.

What are your thoughts on this subject? Am I bang on or out to lunch? Please leave your comments below.

Funeral Costs - What I Didn’t Get to Say

I had the opportunity to be on the Seattle NPR Weekday radio program this morning. The show was hosted by Steve Scher with guests, John Eric Rolstad of the People’s Memorial Association and Char Barrett of A Sacred Moment who performs home funerals. The show covered three main topics: Embalming, Cremation, and Funeral Costs. If you want to get the gist of what is happening in the Pacific Northwest, I would recommend that you have a listen to the program.

To listen to the Replay visit: “Funerals on Weekday at KUOW 94.9”

A couple things that weren’t mentioned but should be noted. The home funeral movement I feel is appropriate for those families wanting something private and under the ideal conditions. Dry ice might retard decomposition, but I would question if the family was prepared to deal with purge, urination, defecation, or the more unpleasant things that funeral directors have quietly looked after like tissue gas and maggots.

I give credit to Char for carving out a niche that she is serving - her website is informative and the families that she looks after will be the benefactors of her passion. Her website is: http://www.ASacredMoment.com.

When it came to funeral costs, John, from the People’s Memorial Association, referred to its price survey of funeral homes from western and central Washington state. He stated that there is such a wide range of prices for similar services - 300 to 400% compared to other industries that are 10 to 20% citing Target, WalMart and Costco. Unfortunately, it was the top of the hour and the host, Steve couldn’t see the disappointment face when I was unable to expand upon funeral costs - but this is what I would have said:

John is referring to commodities - things that do not have a qualitative differentiation in a given market. Funeral services couldn’t be further away from a commodity. The flaw in their survey is that they have requested a stripped down service to try to compare apples to apples. What aren’t considered are the differentiation factors like the level of service, the location and quality of facilities, and time frame and number of transfer staff dispatched to a residence, to name a few. Also, not considered in the price survey are other items such as DVD tributes, online memorialization, facilities, equipment, and knowledge of creating and facilitating events that are very personalized.

A more relevant comparison would have been to look at other service / experiential oriented industries like hotels - Motel 6 vs. Crowne Plaza or McDonalds vs. Seattle’s El Gaucho Restaurant - and oh, what about a cup of coffee? I am not saying that one has to choose the most expensive, but not everyone is shopping purely on price. Research that I have seen indicates that only 17 to 22% of consumers are truly shopping on price but the majority of consumers are value shoppers.

“With a more educated consumer and with a wide variety of funeral service providers, the business model of a Memorial Society is obsolete!”

Memorial Societies were formed to give people the opportunity to choose a simpler, less expensive option. A generation later funeral homes are either serving specific niches or offering a wide range of service options. Now with so many different choices, families can get whatever service they want. Just as funeral homes 50 years ago assumed that everyone wanted “traditional” funeral services, Memorial Societies should be aware that not everyone wants the cheapest! For someone who wants the absolute cheapest, I would forgo a Memorial Association membership fee and compare prices - save your 25 bucks.

It is a consumer-driven market so only those funeral providers who cater to what their community wants and what they are willing to pay will survive - if they are too expensive or too cheap they won’t.

I would like to thank the host, Steve Scher and the producers, Sage Van Wing and Katy Sewall of KUOW for inviting me as a guest on their show. I would invite comments from Char, John, other listeners, and my readers and fellow funeral professionals to continue this conversation.

Final point: I believe that any dialogue that serves as a catalyst for the general public consider how they would like their last wishes to play out is a benefit to them, their families, and to the funeral industry.

Yes, Make Your Prices Available Online

Well I’m not sure what the final results are yet - the answer is YES! Yes for everyone. The Internet is becoming the main source for people to gather information and for those who are looking for funeral information will undoubtedly want pricing information. If you don’t have your prices online, visitors will think that you have something to hide - do you?

Many full service funeral homes say that they will lose all of the price shoppers to the lower-cost alternative providers - not true. Have you ever looked for a hotel online? If so, do you always choose the Motel 6 - probably not. You look for value. So will the visitors to your website. Some funeral directors say that they want to be able to talk to people so that they explain their prices over the phone or in person - like it or not, a lot of Internet visitors don’t want to talk to you, so give them what they are looking for - your prices. I am not saying just throw up your General Price List (GPL); what I am suggesting is to use the Internet as an opportunity to explain your services and the value that you provide over your competition. By differentiating yourself from your competition you can demonstrate your value and aid your visitors in the decision making / shopping process.

Here are three examples of funeral homes that do a great job of explaining their prices and differentiating themselves from their competition.

• How to Compare Prices (www.forestlawn.com)
• 10 Reasons to Call (www.klecatskys.com)
• Pricing Strategy (www.baygardens.ca)

If you would like assistance in creating “differentiation” between you and your competitors so that you can win the online shoppers, call me at 1-(800) 810-3595 or at (250) 744-3595.

I will be creating a tutorial next month to show how you can offer your price list for via email and how you can teach your visitors through a series of email - stay tuned!

If you have any experience with having your price list online, I would appreciate your comments - please fill out the form below.

Online Price Lists: Yes or No

Do you have your funeral home’s or cemetery’s complete price list online?
Take the survey and then find out my thoughts are about online price lists as well as some suggestions.

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