Discount Funeral Businesses

February 14, 2014

Source: Glenn Gould Chief Executive Officer MKJ Marketing Whenever a business model is based upon delivering a similar product or service at a reduced price, there is a question as to what factors of the full priced model must be preserved, and what can be eliminated or substituted. Although lower prices are important, it is critical that the discount funeral service operator appreciate the priority families place on a meaningful funeral service; in fact, this is the critical difference between cremation society customers and families that patronize discount funeral businesses. Demographic research studies indicate families preferring minimal service cremation providers (cremation societies) are well educated and sufficiently affluent to afford whatever death care services they want. However, most cremation society customers place no value on service, personalization or memorialization.   In contrast, families preferring discount funeral businesses place a very high priority on funerals; as such, personalization is important regardless of the ultimate cost of a funeral. Experience gained in the 1980's suggests that consumers are more responsive to savings in terms of dollars as opposed to savings in terms of per-cents. So, instead of referring to lower prices in terms of 20% or 25%, the savings should be reflected in actual dollars. Research indicates as much as 40% of consumers in some communities are ignorant of the cost of a funeral, so the most effective means of advertising a lower priced funeral service is with price comparisons. Successful discount funeral businesses typically offer price savings of $2000 compared to local full priced funeral homes. As such, the fundamental question is whether consumers will accept the trade offs necessary to achieve the lower operating costs. The first place discounters' look to reduce cost is by reducing the cost of facilities through smaller, more efficient buildings. Smaller buildings also allow for fewer parking spots, which means the lot size is also smaller. More entrepreneurial start-ups will take advantage of America's many vacant commercial buildings in the form of grocery stores, small manufacturing plants, banks branches and real estate offices. Some of these facilities test the operator's creativity when squeezing all of the facility attributes common among traditional funeral homes into a space 10% to 25% the size of a full size funeral facility, particularly when certain features are absolutely necessary, such as rest rooms, arrangement offices, chapel/visitation general purpose rooms, and in some states a room that meets the standards of a minimal embalming room. Rooms typically not included are selection rooms, separate visitation rooms, 2nd chapels, clergy rooms, family rooms, and of course garages. Consumer loyalty to a funeral business is stronger than it is to most other businesses, and even some institutions (such as churches and hospitals) because consumers have more confidence in a funeral business with a familiar name or the name of a well recognized funeral director. This loyalty is based upon the fear of making a mistake when selecting a funeral home. Regret is a significant emotional factor in funeral home selection. In general anything that can reduce this trepidation is advantageous during the start-up phase of any new funeral business. A new funeral business would fare better if it were associated with an established firm, as it would lend the business greater credibility. Consumers generally agree that well established funeral businesses, with large facilities and staffs typically charge more than do smaller funeral businesses with more modest facilities and staff. At the same time, they believe the traditional firms deliver nothing more than smaller firms in terms of superior services or products, which raises the question why they continue to patronize the more expensive, leading firms? The only conclusion is that price and saving money is not a top priority at the time of the death of a loved one. Instead, they make decisions based upon the belief that the firm they used in the past, with their accumulated experience, will guide them through the process and that it will be accomplished successfully and without complications. Other important factors include:
  • They are more comfortable with a firm they are familiar with.
  • Some experienced consumers understand that they control the cost of funerals with they choices they make.
  • Increasingly, convenience is an important criterion, as drive times become a concern. Basically, a funeral home within the city limits is considered adequately convenient.
  • It is not convenient or easy to price compare funeral homes at the time of death.
Over time, as more families attend services at a discount funeral provider, the concern for credibility will begin to diminish and volume will grow faster once established as opposed to the initial year(s). A primary concern relative to the facility is that no one can accurately predict the number of people that will attend a visitation or funeral, and that it is important that the facility be large enough to accommodate the full number of attendees. In general, families expect 300 friends and relatives to attend the funeral of a family member. This expectation contributes to the general opinion that funeral facility needs to have large facilities. In reality, relatively few funerals or visitations will involve more than 100 attendees; however, it is important to realize that consumers' perceptions often differ from reality. The traditional funeral arrangement process overly complicates the arrangement process. For the most part funeral arrangers rely on the consumer to tell them what they want as opposed to the arranger managing the arrangement session. Consumers with experience making funeral arrangements are not dissatisfied with arrangement room procedures, but when offered an alternative they recognize the benefits and advantages of a more transparent arrangement based upon well defined packages. Many traditional funeral businesses, as well as lower priced concepts, have endeavored to simplify the arrangement process with packages. Where as many middle class families, with financial means will likely choose a safer, better established, alternative; discount funeral businesses are more likely to attract families with severe financial concerns. In fact delinquent or non-payment of funeral bills at established funeral businesses is a common reason for selecting a new funeral service provider; and this is particularly true for discount funeral businesses. As such collections should be a major policy and procedures issue and should be discussed in the firm's operations manuals. Pre-need, and most particularly, pre-paid funeral services, represent the ultimate test of consumer confidence in a business. In general, consumers are much more likely to trust a new or unproven funeral business on an at-need basis than they would on a pre-need basis because an at-need arrangement is over within a few days versus writing a new business a check for a service that may not be delivered for years. The fact that the growth built into insurance policies and trust fund interest rates have not kept up with the inflationary influences that factor into funeral pricing is another reason many discount funeral business shy away from pre-need sales. The profit margins of discount funerals are lower than that of traditional funeral businesses with higher prices, which means the short falls at time of need cut more deeply into the firm's operating costs. For these reasons any new funeral business should devote little if any initial advertising to pre-need; instead marketing efforts should focus on volume building. Summary: In general, price is a second or third priority when making a funeral home selection, however the opportunity to save $2,000 is a sufficiently strong incentive to attract price sensitive consumers.