By Leader Contributor Glenn H. Gould III, CEO of MKJ Marketing
Why do we hate wearing masks? Is it because we have to smell our own breath, we can’t catch our breath when we try to talk, and we can’t identify our masked acquaintances?
These are all annoyances, and many things in life are annoying, like traffic, the weather, and sometimes, your spouse. We deal with annoyances all the time. What we really hate about masks is that they are a constant and visible reminder that things are not normal, and we want life to be normal. All living things are more comfortable when the environment is normal.
The reality is life will never return to normal; there will be a new normal that we will adjust to. The decimation of the theatre industry has driven all of us to streaming movies. The travel industry has been replaced by Zoom meetings. There are likely way too many hotel rooms, airline seats, and not enough homes with yards. And it has changed the way we will shop, which will make brands even more important post-COVID-19.
Brands got a boost from online shopping; no longer could consumers depend on a store to stand behind their product, so consumers placed their trust in the branded product. COVID has accelerated this process; 9,300 stores closed in 2019 alone, a 59% increase over 2018.
As a result, primary consumer brands Levi Strauss, Ralph Lauren, GAP, and Charlotte Tilbury are launching virtual stores that feature only their products. These businesses have a strong consumer following that have made purchases at their brick-and-mortar stores and other retailers. The expectation is that brand-loyal customers will find their virtual stores to continue their relationship without competition from other, typically lower-priced, products.
The brick-and-mortar downturn is expected to continue, according to a report released in
April 2020 by UBS securities. Investment bank analysts said 75,000 more stores would be shuttered by 2026 if e-commerce penetration rises from 16% to 25%.
The private equity companies have taken control of a wide array of brands, including department stores like Belk and Neiman Marcus, as well as mall brands like Hot Topic and PacSun. In some cases, a series of buyouts saddled retailers with an immense amount of debt they are incapable of paying off (such is the case with Hertz Rental Cars and major newspapers). Mall operators are acquiring depressed retailers like Brooks Brothers and JC Penny just to keep some foot traffic in their malls. Will it work? Maybe, but Indiana’s largest mall is down to a Macy’s and Dick’s Sporting Goods. Malls have a lot of vacancies; is it realistic enough retailers can be acquired to keep them open?
Many businesses are doing exceptionally well during the pandemic, including the American auto industry. Following the two-month assembly plant shut down in March and April, there was a significant shortage of new automobiles with an unexpected increase in demand. As a result, car lots sold out of late-model used cars as well as all their new cars. Sales have been brisk as new cars began to arrive at dealerships in recent months.
What the automakers have learned from this experience is that consumers will make a forced choice from what is available or order custom-built vehicles at a higher price. This will significantly impact the auto-buying public that waits for end-of-model-year discounts. The same is true of toilet paper and toys for children and adults. This strategy may also extend to airline travel with fewer direct flights. As business travel declines, families will have to make forced choices from available but undesirable flight schedules.
So How Does All This Apply to Funeral Homes?
Death care is certainly not a traditional “brick and mortar” retail business, but funeral homes and cemeteries share one important aspect with the traditional retail industry. Consumers have always been comfortable visiting funeral homes for services of friends and relatives and to make arrangements. During COVID, seniors are taking every opportunity to avoid funeral homes.
Several trends have been observable during the pandemic. Many consumers are requesting to make arrangements, both at-need and pre-need, via the internet or telephone. They are not visiting funeral homes for price comparisons. During the pandemic, cremation has become the default option even among families that have previously preferred traditional services. The direct cremation rate has also increased.
What’s interesting is that funeral customers have contacted well-known and recognized brand leaders in their communities as opposed to low-cost firms. There is no definitive proof, but perhaps this is a return to well-known and trusted brands during an uncertain time, similar to consumers selecting brands online.
In another time, many of these families may have had traditional funerals at a discount or lower-priced funeral home but decided to cremate at a leading legacy-branded funeral home. If this is an accurate appraisal of the situation, it suggests that funeral homes, particularly well-branded funeral firms, should be more comfortable charging appropriate fees for cremation services.
Too often, full-service firms feel it’s necessary to set their cremation prices to compete with direct cremation providers. This strategy has the potential for significant income loss in an effort to serve the low-cost cremation consumer. For most full-service funeral firms, particularly those with their own crematory, it is profitable to charge $1,200 to $1,500 for a direct cremation; it’s not an issue of whether the price is less than the cost of providing the service; it’s a matter of maximizing cash flow.
Preparing for the Future
We don’t know what consumers will do after the pandemic, but we know they won’t make the same decisions as before. The pandemic has changed our comfort zone and caused our priorities to change.
A survey of chief marketing officers by Dentsu indicates the greatest post-COVID challenge will be forecasting consumer behavior; specifically, telling the difference between a temporary fad and a permanent change in consumer behavior. Their greatest concern is a decline in consumer spending. Restaurants will have difficulty recovering as consumers have found the way to their kitchens and learned to cook. Airbnb rentals are more popular with younger people than hotels.
But the pandemic isn’t over, and experts say it could be quite some time before things are back to normal. The emergence of the Delta variant isn’t helping either. Funeral businesses should take this opportunity to retrofit their businesses and pricing to position themselves for an increasingly competitive period.
Many families will be financially challenged and forced to make decisions based upon the fact that their financial security blanket has been depleted. It is appropriate to notate at this point that providing direct cremation services is appropriate for a full-service firm as a means of maintaining market share and serving all families, but there has to be a difference between the funeral homes’ full-service cremation and the low-cost cremation.
Families search for a digital solution when their traditional habits are no longer applicable. E-commerce cremation websites allow families to safely make cremation arrangements in their home, without meeting directly with a funeral director or pre-need counselor. Convenience and lower prices are benefits businesses typically charge for. Perhaps this is the opportunity to begin raising prices for direct cremation?
So, how does a funeral business build a brand? Just like traditional branded products from Gold Medal Flour to Standard Oil, brands are built on consistent and reliable quality and value. Ford Motor Company built its brand on low-cost automobiles that families could depend on even when roads were crude or non-existent.
Funeral homes build brands through:
- Sustained employment of good arrangers that know how to create meaningful and affordable ceremonies.
- Facilities that are clean and disinfected.
- Pricing that is consistent with the service and affordable.
- Advertising that explains what the firm stands for and how they deliver.
- A strategy utilizing strong digital and traditional advertising.