By Glenn Gould, CEO of MKJ Marketing
Every deathcare business with long-term aspirations needs a cremation strategy – not because the cremation rate will continue to grow, but because we will be dealing with ignorant consumers for at least another decade.
About 10 to 15 years ago, the mortality for men was in the mid-70s. So, Dad died at 76, Mom was 72 – and was in pretty good shape because her mortality was in the early 80s. Because she had been attending funerals of friends and relatives for the previous 10 years, she had become an authority on local funeral homes, so she knew where she wanted to go for Dad’s funeral and why.
But today’s life spans are 10 years longer. So, Dad dies at 86, and Mom’s 82, and because the gap between men’s and women’s mortality is closing, she’s probably not in too much better shape than the deceased. Instead of making the funeral home selection herself, she leaves it up to the kids. Her baby boomer kids are in their 50s or 60s, and in contrast to their mother, they are not funeral home authorities; in fact, they are ignorant.
The typical family requires the services of a funeral home every eight years on average. Think about how much your business has changed in the past eight years. The consumer doesn’t know what you offer, and the only criteria they can use when making a selection is price, which contributes to the number of inquiry phone calls we cynically refer to as “price shoppers.” The inquiries sound like price shoppers because all the caller knows to ask about deathcare is what they see advertised, and the most impactful ads are those that contain minimum cremation prices. The caller is not stupid; in fact, they are doing the intelligent thing by making inquiries.
That’s why a cremation strategy isn’t so much about serving cremation families but more about having a methodology for capitalizing on this phenomenon. The strategy is to have the means to reach that consumer – not just to get the low-price business but to gain the opportunity to educate them about everything you offer.
Lower-priced cremation scares some operators because they consider it to be unprofitable. Funeral industry accountants indicate the average funeral home clears approximately $1,200 on the typical full-service funeral. A minimum-service cremation call selling in the range of $1,300 or more will deliver a similar level of profit, particularly when the business operates its own crematory. So, it’s really not an issue of profit, but it can be an issue of controlling costs. When a family is shopping for minimum cremation, it’s critical that the service provider gives them no more than what the family is willing to pay for. That’s step one in making minimum cremation profitable.
SCI has a cremation strategy. Their strategy is to accumulate pre-need cremation business, which is one of their motivations in acquiring Neptune. By combining Neptune with National Cremation and other minimal cremation businesses, they are locking in future market share. In contrast, Stewart Enterprises never addressed the issue. Their combination strategy carried them through the 90s, but they had no response to the current cremation challenge.
Another factor scaring many independent operators is pre-need cremation. The thinking goes that they presently lose money on a full-service funeral pre-need, so pre-need cremation will create an even greater loss when the pre-need converts to at-need. In fact, the opposite is true.
Traditional funerals create a pre-need shortfall when the covered individual dies – not because the funeral home’s cost of doing business increased but because the merchandise identified in the pre-need agreement increased in cost as much as 7 to 10 percent annually. In fact, funeral home operating costs increase marginally, particularly at smaller-volume firms that rotate through recent mortuary school graduates every couple of years. Starting salaries for recent mortuary school graduates have increased very little over the past two decades, and most operators own their facilities free and clear. Pre-arranged cremations include little – if any – merchandise, so the opportunity for a pre-need shortfall is minimal.
What Cremation Strategies Can an Independent Funeral Business Incorporate?
Nearly every larger funeral business has created a discount outlet where they can refer price shoppers who are unwilling to pay their funeral home cremation price. SCI has Advantage, and larger independents have a myriad of businesses ranging from storefront discount funeral businesses to any number of minimal cremation concepts. There’s only one problem with these concepts: They cost a lot of money to start and even more to become relevant and maintain.
New businesses need name awareness, which is a relatively easy advertising challenge to accomplish, but media costs are expensive, whether it’s newspaper, television, SEO, or buying clicks. Relatively speaking, offering an online cremation arrangement website is cheap.
If you’re car shopping, one of the first things a car salesman will attempt to learn is whether or not you shopped for a particular vehicle online before coming to the lot. That’s because the dealership’s online prices are lower than the price marked on the vehicle on the lot.
Hotels liquidate their excess rooms on websites, such as Hotels.com and Expedia. Again, the online price is lower than what is offered to the walk-in consumer without a reservation.
Funeral businesses can also offer lower online prices. Once a price shopper rejects your full-service funeral home price for cremation, direct them to a website where they can make all of their decisions and choices without incurring the overhead cost of making a traditional arrangement in your office. Yes, the objective is still to educate the consumer about all of your services and merchandise – and these options are all presented on the website. The consumer has the option of purchasing a minimal service or can scan merchandise and optional services.
Another option is to complete state-required mortality forms, which can be accomplished by printing the forms, completing them online, or meeting with a staff member in an arrangement office.
The great advantage of the lower online price is that it is easy to explain. It’s lower because the family is not incurring any overhead cost; they make their arrangements without taking a funeral director’s time, which is a very valid point for many smaller-volume firms. The business model for a 200-call funeral business does not allow for excess staffing, so the already-stretched staff has to commit an hour or two to meet with a family for a minimal arrangement. With online arrangements, the family makes their own decisions, and payment is made with a credit card in advance, so there are no collection expenses.
What Can We Expect in the Future?
The marketing textbook Strategies for a Declining Business by Kathryn Rudie Harrigan explains how product innovation and process innovation decline as an industry matures. We’ve observed both of these in the deathcare industry.
However, marketing strategies actually increase as the industry declines, as the survivors need to become more strategic in order to secure superior profits. There are more funeral business operators generating very high profits today than ever before.
If the funeral profession gets its act together, there should be a decline in the number of minimum cremations in time, as baby boomers become better informed about the value of the services provided by a full-service funeral home. In the meantime, operators need to create strategies that will allow them to prosper during the transition period.
If you want to learn more about developing a cremation strategy for your firm, check out the Cremation Strategies Conference on Dec. 4 in San Antonio, TX. Courtney Gould Miller, Managing Editor of The Leader and CSO of MKJ Marketing, is one of the featured speakers at this event. You can SAVE with an early Black Friday deal – add promo code “FRIDAY” at online checkout now through Nov. 30 to receive 50% off your registration (regularly priced at $595).
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