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Full Price: Developing a Fair Financial Model

      
Date Published: 
March, 2004
Original Author: 
Kevin Bean
Bean Funeral Home & Cremation Services, Reading, Pennsylvania
Original Publication: 
ICFM Magazine, March-April 2004

Is cremation an afterthought at your funeral home? Will your business still be viable—not to mention profitable—no matter what the cremation rate is in 2010, 2015 and beyond?
The time to reconfigure your business model and how you market to cremation families is now, not when your "traditional" business has all but disappeared.

Although today I continue to operate a business my parents founded nearly 50 years ago, the business my Mom and Dad ran and the business I operate are hardly the same. One of the more significant of the many ways they differ is that today nearly 50 percent of the folks prearranging their services choose a different form of disposition, different items of service and different merchandise—if any—from what was delivered by my parents beginning in the 1950s and continuing well into the 1980s (in Pennsylvania).

Picture in your mind for a moment the funeral of President John F. Kennedy.  Now, picture the funeral of his son, JFK Jr. Those two pictures speak volumes about changing consumer attitudes and preferences with regard to funeral service.

This change in consumer preferences, the fragmentation of services selected, the reduction in merchandise purchased and increased competition have created great financial challenges for the funeral profession.

It's Time To Bury The Old Financial Model
Since the advent of "direct cremation," most of us funeral directors have based our financial model on a system that increasingly burdens the consumers who choose a traditional funeral with covering the funeral home's overhead, while treating the direct cremation financial transaction as an "add on." This model does not work, and its failure is ever more accentuated as the cremation rate rises.

Over a period of many years, our funeral service forefathers brilliantly created a system that supported the outcome of the arrangement. They introduced items of service such as embalming, the rental of funeral home facilities, coaches and limousines. They introduced various types and models of caskets and burial vaults. They developed a system that supported the outcome of the arrangement when a consumer came to them to "bury Dad."


Today, we have in place in many markets a not-so-brilliant system in which the outcome supports the arrangement. You've seen the ads: "Cremation—$595."

Personally, I cannot comprehend that anyone's primary consideration in making final arrangements for a loved is the lowest possible price, but research tells us that about 27 percent of cremation consumers make a buying decision based on price. The problem is that as an industry, we've educated the other 73 percent of cremation consumers on how to make a purchasing decision based on what that 27 percent wants.

We have made cremation a commodity. In many instances, the outcome (low price) supports the arrangement. So what's the difference in the eye of the consumer between the cremation services you offer and those offered by your competitors? The price!

By and large, a significant problem in the funeral service profession today is that this model does not support our true overhead. The answer to the problem lies in creating a model suited to today's market conditions that supports the outcome of the arrangement just as the one our forefathers created in the past. That answer lies in the system we choose to put in place for the 73 percent of cremation consumers for whom the primary purchasing decision is something other than price.

To be specific, to support "Full Price" we need to differentiate ourselves from our competition in order to give consumers a reason to call us and pay full price.

One example: having a private, consumer-friendly crematory on site, a facility with a non-threatening and non-sterile appearance operated by certified crematory operators and open for inspection at any time.

At our funeral home, we spotlight value (as opposed to price) in our ads, such as:
•    "Your Loved One Never Leaves Our Care."
•    "Where will my Loved One be Cremated?"
•    "Funeral Directors at Bean are Crematory Operators Certified by the Cremation Association of North America."
•    "There's No Doubt with Bean, our Trained Professional Funeral Directors Handle Everything."
•    "Only Bean has a Private On Site Crematory, Available for your Inspection at any Time."

In light of the events at Noble, Georgia, these messages address issues important to consumers. My friend and colleague Ernie Heffner has run an ad with the direct and thought-provoking theme: "Whose Ashes are in the Urn?"

When meeting with a family to make cremation arrangements, we conduct ourselves in the same manner as when we meet with a family who has chosen a traditional funeral. By that I mean that we make no assumptions as to their wishes.


I hope that, at a minimum, everyone in this profession today insists on an identification viewing prior to the irreversible process of cremation. This is an ethical and a legal necessity, given the litigious nature of our society.

One of the most important questions we ask a family when making cremation arrangements is if they would bring in clothing for the identification viewing. This immediately communicates a high level of respect and signals the fact that we are providing a dignified level of care for their loved one.

We need to focus on the fact that the family has just suffered the loss of a loved one. As Trust 100 President Alan Creedy says, we need to remember Mom, remember Dad.

Many families at first will say they don't want a viewing. However, we have found that after the cremation arrangements have been thoroughly explained, the date and time for the identification viewing have been set and the clothing has been gathered by the family for the viewing, many people will arrive for the ill viewing accompanied by several other family members—sometimes as many as 20 or 30—and sometimes with their minister for a short prayer service.

In fact, this occurs so regularly that we have factored this overhead into our overall pricing strategy. It is a "win-win" situation in that consumers are more satisfied and the funeral home receives a fee proportionate to the level of service provided. The outcome supports the system simply by focusing on people, not on price.

Another means of creating value is package pricing, or compressed pricing, in which you create several packages and include them in your General Price List. As an example, we have a package called "Direct Cremation with Memorial Service Including Ceremonial (Rental) Casket For Private Family Viewing with Committal Service,” which includes the following:

•    basic services of funeral director and staff and overhead,
•    transfer of remains to funeral home within 20-mile radius,
•    preparation of remains for private family viewing,
•    staff and use of facilities for private family viewing,
•    staff and use of private crematory for cremation,
•    up to three days' use of refrigeration facilities,
•    use of ceremonial casket for private family viewing,
•    staff for memorial service,
•    staff for visitation up to two hours prior to memorial service,
•    funeral coach,
•    urn ark,
•    limousine (local),
•    flower/service vehicle (local),
•    committal or other disposition service,
•    acknowledgement cards (25),
•    guest register,
•    personalized memorial tributes & prayer cards, and
•    temporary grave marker
The package includes most of the services and merchandise found in a traditional funeral service, and we price it accordingly, including a proportionate share of our true overhead. We have found that families are more than willing to pay the necessary charges because they perceive value in the many services covered by the package, even though historically the arrangement may have been thought of as "just a direct cremation."

Over the past couple of years, we have seen the introduction of memorial tributes that incorporate several photographs of the deceased along with service information, poetry and scripture or thoughts written by loved ones. These tributes can be tied into a seemingly endless array of themes, from which the family can select, such as the ocean, civil or military service, hobbies or nature.

These types of memorial tributes can be pricey and time-consuming to produce, but we have found them to be invaluable to consumer satisfaction, so we incorporate them into most of the package selections we offer.

Why are the memorial tributes so important? They give family and friends a keepsake of photographs they will treasure all their lives. Recently I met a gentleman in a social setting who could not thank me enough for the memorial tribute we had provided at the service for his best friend.
 
He told me he framed the tribute and keeps it on his desk, where he can glance at the photographs and remember his friend every day.

This type of product can differentiate your funeral home from your competitors. It can communicate that your funeral home is special and offers something valuable that, because of the cost and effort involved, few of your competitors offer.

When factored into your overall pricing strategy, these tributes will infinitely impress the people who attend services at your location, will offer something of tremendous value to the families that you serve and will differentiate your funeral home and promote your brand.

Be Brand A, Not Brand X
What do I mean by promoting your brand? A brand is a promise to fulfill a consumer's expectation of a certain level of integrity, quality and consistency. A premium brand is a recognized product for which consumers are willing to pay a premium based on their higher expectations.

We see brand recognition in everything from facial tissues to ketchup to automobiles. Recently I've noticed that hospitals and homebuilders are focusing on promoting their brands in their marketplaces by differentiating their services from those of their competitors.

Rather than focusing on the price of an arrangement, those of us in funeral service would be well advised to focus on differentiating ourselves with special products and a higher level of service—and promoting the same at every opportunity. By doing this, we are developing a special brand in our marketplace, one that leads families to expect a premium level of quality, integrity and consistency, a level that our companies deliver.

What are some specific concepts you can use to develop a brand? We develop our brand by delivering on our promise to deliver that premium level of integrity, quality and consistency. We do it by reinvesting in our facilities and in our staff, by offering special products (such as those memorial tributes) and by having a private on-site crematory that communicates a special level of care. We do it by offering a level of care and consideration that our competitors do not offer, by personalizing services with photographs and mementos that hold special meaning to those attending services.

We develop our brand by focusing on people, not on price.

You also need to communicate that brand, that level of integrity and quality of service, in all of your advertising. Develop a unique logo and brand your signage, your Web site, your newspaper and television advertising, your newspaper death notices, the memorial tribute folders and memorial folders you offer—everything you can think of.

It may seem adverse to our ingrained funeral service logic to take this contrarian approach by offering more for more. But simply by remembering "Mom," remembering "Dad," by focusing on people rather than on price, you will ensure your client family's satisfaction and your financial success as you adapt to the changing funeral service environment.

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Code: 
A1453