Part 2:  “Using Price to Clarify Your Advantage”

Increasingly, funeral markets are being commoditized.  This series is adapted from an article in Harvard Business Review entitled “How to Stop Customers from Fixating on Price.” You can purchase a pdf copy directly by clicking on the link.   In the article the authors point out that:

“Most people think commoditization occurs only when competing products or vendors are indistinguishable in terms of features or capabilities.  But research tells us that commoditization is as much psychological as it is physical.

A commoditized market is one in which buyers display rampant skepticism, routinized behaviors, minimal expectations and a strong preference for swift and effortless transactions regardless of product differentiation.  The key is not what you do to your product but what you do to your customer.  You must find a way to reengage a customer who is past caring.  Commoditized customers choose on the basis of price because they have become convinced that the options available are equally palatable and the minor differences are not worth investigating.  Fresh rounds of innovation go unnoticed and better formulated marketing messages don’t get through.  The best way to get them to sit up and take notice is to take price and alter it in a surprising or challenging way.”

In part 1 of this series we discussed the first of four strategies for altering your pricing strategy: “Equalizing Price Points” Today’s approach uses price structure to clarify advantage.  Remember our goal is to cause the commoditized customer to take notice of the advantages we offer by altering the way we price.

In the reference article the authors cite Goodyear’s struggle many years ago as they developed newer and better tires.  We are enamored of the many real and valuable benefits legitimate funeral homes offer relative to such things as service, quality, merchandise and our ability to facilitate the bereavement process.

Goodyear adapted their pricing strategy in a way that caused customers to stop and think about the differences instead of thinking that “a tire is just a tire”.   Like us, Goodyear engineers were enamored with the many technological and complex improvements in quality and tread life they were innovating.  The problem was that customers didn’t care because tires were priced by quality not what customers valued about quality.  When Goodyear changed their pricing strategy by aligning price with tread life consumers stopped opting for the cheapest tire and changed their buying behavior completely.

How could we alter our pricing strategy in ways that consumers would focus on value?  I am not sure I know any longer what consumers value; but the majority, I am convinced, still feel that “Mom’s Body” is a sacred thing.   Given that as an assumption, here are two ideas that I am throwing on the wall for reaction:

1. All the funeral homes I work with are operated by people who have a high level of personal integrity.  That integrity creates “value” boundaries expressed in a variety of ways.  But the most common is the attention to detail and the quality of the measures they take to protect and preserve the body…including the process of cremation.   Such things as “chain of custody”, internal control procedures, safeguards, licensing and the consistency and clarity of processes are important to them.  This may or may not be true of low cost providers or discounters.  I am told that often it is not.  Most frequently they cut corners, outsource a lot of work and are not always as diligent about safeguards.  The problem is the customer doesn’t know this. Or worse, they don’t know if they care.

So, let’s say integrity and trust are valued at your firm and you hope that they help distinguish your service.  Hampered as you are by integrity, it makes it difficult for you to offer the same low price to compete.  And your integrity prevents you from cutting the corners to enable you to do that.

What if you made cutting corners the customer’s choice? You could do this by creating packages based on the level of care the customer wanted rather than the quality of service.

Here is one small example.  Let’s say you do all your own cremations, “chain of custody” is rigorously observed, etc etc.  But, you have a discounter who says he will do a direct cremation for $549.  You might create a competing offer in which it is carefully and respectfully disclosed that for that low price you outsource in the same way your competitor does, you cannot guarantee any of the values you normally offer and you require a “hold harmless” agreement in the event anything happens whether within your control or not.

According to the principal of using price structure to clarify your advantage potential customers will be forced to think about how sacred mom’s body really is.

2. How about suggested prices? Here is one that is totally outside the box.  We are required to offer General Price Lists listing our prices.  But what if those prices were only a suggested reference point instead of fixed.   In other words you would make it clear to customers that they need only pay for the value they feel they have received.  For those of you who offer unconditional guarantees think of this as a reverse guarantee.

Am I out of my mind? Not really, The Museums of Modern Art and American History in New York City have been doing this for years.  The admission fee is clearly presented as a suggestion.  Restaurants in cities like Vienna, Berlin, Seattle and Denver are trying it too.  They are finding the “Pay-What-You-Want” model is both sustainable and competitive.  Research shows that customers, on average, pay 86% of the suggested price.  This average is a blend of those that paid full suggested price and those that paid less, but everyone paid something.  I shared this with a funeral director friend (thinking he might ask me to step out of his car) and he recalled a time when a family was so delighted with his service they deliberately overpaid his bill by $500.

The point is: by offering price as a suggestion you create a situation where people start thinking about what they value and pay for it accordingly.

We have two more strategies to discuss, but this one deserves input.  Think about how you could alter your pricing strategy by aligning what customers value with price instead.  Be creative.  We need to get their attention.