I have long believed that most price shoppers in DeathCare begin with the price question solely because they don’t know what else to ask. That belief supports another which holds that what most shoppers are really looking for is someone they can trust. Thus I understood why it was important that we engage shoppers over and above simply answering their questions and that the longer the conversation the more likely we are to win the call. All was well in my little land of making 2 plus 2 = 4.
Conversely, I have always struggled with what is, to me, the almost obsessive way DeathCare providers chase after unprofitable calls and ignore profitable calls. Think about it!! We will spend an unreasonable amount of our advertising money to attract direct cremation. We will start cremation societies, and compete aggressively on price to go after what is (for at least a little while longer) the smaller, albeit growing, part of our market. Yet we spend little or nothing going after the higher end…who are often our best customers. This inordinate and incomprehensible behavior has reached its peak in the pet cremation trend.
To be sure, I completely get the idea that pet services afford us an opportunity to interact with families we don’t currently serve in a positive way. But spending in excess of $150,000 to chase after unit margins of less than $125 is beyond my mathematical ability. I cannot help asking myself how much greater my return would be if I spent that same $150,000 chasing after unit margins of $6,000. Then it dawned on me. And if my epiphany has merit, it scares me. Perhaps we have so much trouble with price shoppers and so willingly distract ourselves…even to the point of sacrificing limited resources…because we, ourselves, don’t adequately relate to the value we bring. Most price shoppers don’t know what the questions are so they resort to price. It may be that we, too, have forgotten how to quantify the value of a life lived for ourselves and so we feel inadequate in explaining it to others. Or, worse yet, we don’t know the answers.
If you are successful with price shoppers I hope you will comment. Enlighten me. What are the trigger points?
many of us have been told that every “extra” call revenue falls straight to the botoom line and is pure profit as we have already overcome the looming-large fixed cost hurdle. while in some ways this premise is true, the great question you raise is where is the greatest value to be found in the distribution of resources.
while price is part of the equation, trust and demeanor are are the real deal clincher. i have been told several times by price shoppers that our rganization had the highest qouted price but they called us because we took the time to assist them in figuring out what they really wanted/needed. they usually tell us that our competitors just “throw price lists at them” and walk away. hope they keep that up!!!
allen, like you, i am also baffled by the fight for the direct out customer. we love all our customers, but hey, who is really paying the bills?
Well, as someone who does both, I reply as follows…
There is nothing Mike stated that I don’t agree with, except that I fight for every customer.
It is my opinion that a traditional funeral home has a fairly small circle of influence, especially if there are a lot of funeral homes in the area. I believe that a good number of people see “Death Care Providers” as a commodity. Regardless of how good my firm is, there are a limited number of deaths within a geographical area. When I purchased the funeral home almost 12 years ago, I took over a historic business that was run into the ground and in shambles. I fixed that, but this former NJ boy was competing with three local, home grown funeral directors and even if I am as good as my mother thinks I am, there are still people who have lived in town their entire lives that will use one of the guys that they went to school just because of that reason. We have too many funeral homes in our community…four, when there only needs to be two.
I decided to start the cremation society ten years ago to create a bigger playing field. I routinely serve families 60-100 miles from my rooftop. Our cremation society is rarely the lowest priced firm in the market, but we provide great value for the dollars spent. We have a very limited advertising budget, but a significant marketing budget that, along with word of mouth, has allowed us to grow to several thousand members and be the recommended “funeral home” for dozens of hospice organizations around the state.
Just this morning, I was looking over our tax returns and I have managed to be profitable in this endeavor. It could always be better, but it could always be worse.
As far as the telephone…that is my primary job and I learned it from one of the most successful funeral home owners I know. It’s not always convenient, but I am the first one to answer the phone and it allows me to engage folks who are “shopping”. Some allow themselves to be engaged, but some are only concerned about price and I think that is only going to get worse. It also allows me to keep my finger on the pulse of what is happening here, making sure we are getting things done as they should be.
But, hey…it’s just one guys opinion.
Alan
It’s the “Value” question once again. These two questions need to be answered for funeral service to succeed in the future. 1. What is the Value of a funeral/memorial service/gathering/farewell party to the public? And once that is answered the next question is 2. What is it that funeral homes do that relate to that Value.
I’m not sure that funeral service can answer the 1st question by themselves. We need help. I have my opinion and will expand on it in a future blog post. But I would love to hear what other funeral folks think.
The justification I most frequently hear is that a pet business opens opportunities to serve families that would not otherwise consider the human side of the firm. Served well, the belief is that a family will choose the company they utilized for their pet. For those firms who are hugely dominant in their market and seeking the next best thing to grow their share, this could make sense to me – especially if they can improve their margins in the future. But, your theme of stepping over dollars to pick up pennies is well-taken.
Today we have to be very careful to go into ventures without a good game plan. Each unit that one opens has to be set up in a way to be profitable on it’s own merit. I have yet to see the numbers of a profitable pet service which includes all the expenses. Many show profitablity but do not include items like buildings expense, real estate taxes or staff to the equation. This is a happy failure in my book. I know that they believe in this service is more public relations but it seems to high a cost for me to justify.
When you add a memorial society to your mix you should have a plan to use it with your funeral home . This would allow you to increase your charges for cremation services at the funeral home and if the shopper finds your prices to high, then you can suggest the memorial society.
A memorial society has to be operated as a stand alone business and you have to market it as if you were not in the funeral business.
As margins become thinner we have to make every venture generate a profit.
It appears the answers are in front of us; in Alan’s commentary and his readers responses.
A firm attempting to be all things to the market place faces the likelihood of not being good enough for the market place in at least one of them. Perhaps the most difficult of tasks is defining what one will be and then being it.
Being the moderately priced provider of cremation services as a stand alone entity can benefit enormously from the synergy of the relationship with the traditional funeral home and vice versa. The relationship must, however, be clearly defined, properly accounted for and closely monitored. It must, as Tom Belford states, stand on its own with clearly defined cost allocations.
The traditional funeral home is challenged to be the provider of moderately priced cremation services without requiring that its full service traditional families subsidize them. Which of course, has the possibility of making the traditional service more expensive than it should be, driving those families to the moderately priced alternative. The dog may regret catching its tail as it’s self-inflicted bite could be painful.
Speaking of dogs, the truly profitable stand-alone, fully accounted for pet care companies are very rare. In addition to the mathematical part of Alan’s equation, it seems to be a very large amount of work for a seemingly limited return. There is a recognized dearth of quality people to serve the families grieving the death of a human, and those who do it well put in long and difficult hours. Do we expect them to extend their responsibilities to pet care? Finding quality people to care for pets, with their compensation packages being borne exclusively by the pet care company, seems quite a task. I’m not against pet care, I’ve just yet to get my business arms around it just as I’ve yet to see an income statement line item for synergy costs.
One has to wonder if the greatness of this idea is promulgated by those selling the equipment to address it? There is certainly, within funeral service, precedent for such a thing. Then again, I might just be cynical.
Mr. Taylor and others have touched on I belive the biggest problem of cremation at traditional funeral homes. Subsidizing of the cremation price by the traditional service customer. Well said on your dog analogy.
As a conservative Christian person I have found that being able to articulate to the Christian community the value of ceremony and the importance of the body at funeral services is far more effective in preserving value in what we do than trying to make religious ceremonies more secular. The focus on selling funeral “stuff” I believe cheapens what we really sell. Dr. Thomas Long’s book on the subject while theologically deep is very helpful. The secular solutions seem to be a mixed bag. SO, get out there and start converting!!!
Hi Alan,… I agree that the funeral industry must get better (a lot better) at communicating value for what it charges. An age old issue that we face in this industry is that people don’t want to be perceived as “salespeople” when in actuality we are all “salespeople”. So in as much as we should continue to work with our teams to make sure that they have our value offering presentation down, I also wanted to address the comment you made about the pet death care industry.
To cavalierly say that a unit margin of less than $125.00 being rationalized against a $150,000 investment is “negative” without more facts lacks justification. I’m not sure what the unit margins of a cup of Starbuck’s coffee or a Subway sandwich are, but I’ll bet they’re less than $125.00 (those franchise fees alone are well more that $150,000), and somebody seems to have made those work. I would venture to guess that the folks at Blockbuster said that same sort of thing when pay-per-view movies first hit the scene. (We can talk about Borders and the e-reader technology too if you want.)
No doubt, if a funeral home’s resources are fully engaged at full capacity, all of the time, handling human funerals and preneed, then their only focus should be driving high ROI on that activity. We’d certainly have a case of “limited resources” on our hands. But, given the choppiness of the death rate; most funeral homes staff at levels that inevitably result in excess capacity an awful lot of the time. Many, like you and I over the years have extolled the virtues of more active preneed programs to leverage that excess capacity. But, what usually happens is that funeral directors want to be funeral directors and not preneed sales people. So, if a funeral home wants a more active program they typically hire a preneed salesperson (and pay for this incremental expense via insurance commissions) or they outsource to third party sellers for the same net effect. At the end of the day, in spite of enhanced training to improve ROI on at-needs, a fair amount of excess capacity at the firm remains unleveraged. You can’t cut it, so if you’re interested in enterprise growth, you keep asking how to best deploy it for any ROI north of zero percent – which is what you’re getting right now. If incremental investment is required for building and equipment, then run the math on the business volume necessary at expected unit margins to deliver an ROI at or better than the cost of capital. I don’t know about opening a Starbucks or Subway, but I know someone “pretty well” that could help assess the value of entering the pet death care market.
There’s little debate that pet death care is but one concentric strategic-circle away from a funeral home’s core focus – human death care. And, there’s a pretty good chance that doing a great job handling the death care needs of a beloved pet that’s perceived as a member of someone’s family will do a lot in terms of positive brand building for a human funeral business – and logically over time – build rapport with families perhaps never served before. Will human funeral directors be good at handling a grieving pet-parent’s needs? Some will, and some won’t. But, my experience is that a “four-legged at-need” is a pretty short putt for most of them, shorter than preneed sales. What many funeral homes find particularly exciting is that this sort of “disruptive innovation” (see The Innovator’s Dilemma by Christensen), may well be an investment to consider regardless of short term ROI.
To chime in on John Horan’s comment, I agree with him that funeral firms who are dominant in their markets and want to grow share should see value in the pet death care business – especially the high end/high touch end of that market segment. But, I would add that the ones who perhaps have the most to win with a carefully executed move in that direction are the #2 and #3 firms in many reasonably sized metro markets – especially markets that have been rather played out by preneed over the past 10 years.
In regard to comments made about few examples of profitable pet death care businesses, I simply say: not true. There are examples of profitable stand alone pet death care operations a plenty – they have varied business models that usually involve a mix of high end and low end services that engage a blend of B2C and B2B (calling on veterinarians). For line extenders in the human funeral industry, if there is excess capacity in facilities, equipment, and human resource to be leveraged, the consolidated bottom line can look really good. In those scenarios, getting hung up on allocating expenses that are otherwise associated with the core business to new business initiatives makes little sense in my opinion.
Hi Alan – I push your Commentarys to my iPad so I can read them on flights, so I cant directly post comments. You are preaching to the choir with this to me. However my father and brother often challenge this concept. Any business is good business or might lead to it?
I totally agree with your statement that they simply don’t know what to ask, but they are seeking information and have to start with the only thing they know, which is money. However that one question allows one to ask questions of our own in an effort to try to answer other questions they may not know to ask and in doing so we build that relationship that most time is what they are buying – knowledgable counsel from a person who shows interest and concern.
I was at a wine tasting dinner the other night and the couple seated next to us asked the normal question – “what do you do”. The next question was “do you do cremations”? After a short discussion of how it works in our State (crematory prohibition for funeral homes), she clearly stated that she was going to call us to prearrange. “I would much rather deal with someone who I enjoyed a great meal and a glass of wine with than to pick someone out of the phone book.” Price was never mentioned and I know it was not the issue or a concern.
Signing off from Delta Flt 2121 to Phoenix in and effort to warm up for a few days.
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Alan – I think this comment is timely and accurate. Lets move this message along. Basil