How To Stop Customers From Fixating On Price

Equalize Price Points to Crystallize Personal Relevance.

This is the first recession to show a measurable impact on DeathCare.  Most surprising have been the many reports from rural and “rustbelt” funeral directors that cremation has recently spiked, not because people in their markets want cremation but BECAUSE THEY CAN’T AFFORD BURIAL.   YIKES!!!!

A recent article in Harvard Business Review entitled “How To Get Your Customers to Stop Fixating on Price outlined 4 strategies.  I found the most appealing strategy to be: Equalize Price Points to Crystallize Personal Relevance. The article’s authors pointed out that in :

“most mature markets customers have become unresponsive to marginal changes in value.  They have lost interest in how each product option might serve them… [so] they default to price minimization.  In fact, (and this was interesting) a list of options at different prices doesn’t make [consumers] examine the relative merits of those options, it activates their predisposition to pare the price.” [emphasis mine]

Not a week after reading the article I found myself experiencing the very strategy I liked the most and it was exciting.

I encountered a funeral director who had courageously narrowed his casket price offerings from a low of $1,100 to a high of less than $3,000.  As I stood looking down a row of caskets I actually found myself saying (as if I were a consumer): “Wow, I can pretty much have anything I want.”  Having been in so many selection rooms over my career, at first I was shocked.  Then I found, to my amazement, a feeling of relief.   Here is a picture:

1. Solid Mahogany Urn shaped, Velvet Interior $2,650    2. Brushed Copper, Velvet Interior $2,995  3. Solid Cherry, Urn shaped, Velvet Interior $2,550  4. 18 Ga round end brushed, Velvet $1,740.  5. Oak Veneer, Velvet Interior $1,845  6. 18 Ga two tone blue, square corner, Crepe interior $1,495 7. Stainless brushed velvet interior $2,150 8. L  98 Mandarin $1,150 9. 18 Ga Blue round end, crepe interior $1,575 10. Solid Cherry, Velvet Interior, $2,600.

As I surveyed the selection room above I found myself moving from thinking about what I could afford to which casket I liked best and which would be a good fit for me (just like the research said I would).  And, as if I were an actual customer, I felt relief.  Some years ago I picked a Pembroke Cherry for my prearrangements.  At the time it sold for under $4,000.  I watched it creep up above $5,000 but just figured that was inflation.   When it went over $6,000 I made a mental note to find something cheaper.

Once a consumer realizes they can get pretty much whatever they want for just about the same price they move from thinking about what they can afford to what they want.  The research found that this allowed sellers to price above their normal average.

The implication is this:  Let’s say that your average casket and service sale is running about $7,500 and the range of caskets you are currently offering to reach that average is from $2,500 to $15,000.  The concept of equalizing your price points would suggest that as you narrow your price range you could accomplish two things:

First, you would change the playing field for handling price shoppers and likely increase volume.

Second, you would (as the research found) be able to realize a higher over-all average casket and service sale on what you are currently serving (say from $7,500 to $8,000 for traditional burial).

Of course, this implies that you have exercised some aggressive tactics to control the wholesale cost of your caskets.

This post first appeared in The Creedy Commentary on June 22, 2010

Comments

  1. Fred Cook says:

    This is right on track. Don’t know if the “same price” idea will hold water ling term, but the fixation is truly a problem that needs to be dealt with. We started sourcing imported products to reduce costs, it has worked well, however it is a lot of work due to the lead times and quantity required. We have begun to sell this product to others which gives us some unique insights to how others are dealing with the current economic challenges as well as consumer preferences. It is a very challenging time, indeed. We are working on a new angle and have introduced our own US patented designs that are quite different, but very attractive. They were received very well at our recent state convention and we hope to have stock for limited National distribution this fall.

  2. These are some great thoughts to be discussed while bending an elbow in a small group setting. I have a problem with the old concept of putting the price and profitability mainly on the merchandise sold and not the services sold and delivered. Our business is currently 43% cremation. Most do NOT include the sale of a cremation casket, but a vast majority of them DO include a selection of services. Still, with the focus on traditional services, this concept may have merit.

    • beacham, the concept of narrowing the price range applies to services. As we move toward packaging it makes me wonder what would happen if we narrowed our price range for packages as well.

  3. This is a great insight learned! I have discussed (is this word offer an open minded perspective rather than antagonistic debate?) the issue with our staff and other professionals at meetings offering packages—with prices for burial or cremation with the similar ‘event’ service priced similarly. It costs no more for us to use the same container and transfer the deceased to a crematory than to a cemetery.

    For example, some unfinished lightweight “box”– and have a separate transaction keeping a “memorial urn” or a concrete container on the cemetery ledger since this customer not interested in a vault.

    These are my thoughts and I love feedback.

    Phil C

    • Phil, I am increasingly convinced that customers are disengaging from the process of choosing funeral homes. They see them as all the same. The research I discuss in this commentary shows how to use the very thing we are struggling with to reengage them. The strategy I talk about hear is one of four and I will be writing about the others soon. This one however teaches me that the gap between our low end and high end is simply too large.

  4. Thanks Alan! I agree in many cases that from some consumers perspectives we are the same. I find the challenge stimulating to find what can we do to be unique….that nobody else is willing to do….and that uniqueness provides a benefit with meaning to the client family. We have many great ideas as a profession and most are compassionate–givers at heart rather than true “takers” disguised as givers.

    I also have a strong, passionate belief…..more than a belief, actually….that consumers can and will pay more than what average funerals around the country are priced at when compared to other meaningful life events. I feel that the consumer must feel that benefit as helping them live life better (which can be achieved through P.R. & marketing)–and also expanding the self-imposed geographic “barriers” that we hold onto.

    That said, I also believe in serving that disengaged customer has a great business model for growth. Thus, the number of “ownerships” and “facilities” will diminish, and those remaining will be ones that can differentiate themselves and create great marketing and sales processes to expand their client base.

    • Phil, I agree that the declining metrics of our profession would suggest that we will see fewer funeral homes. Speaking as a student of history that may not happen as quickly as we might think. We should also remember that underperforming firms, like drowning men, tend to take others with them.

  5. Alan,

    This is all well and good for folks who are below 30% cremation. As I see it, all you are trying to do with this type of pricing is preserve life in funeral business as it used to be. If you still serve a primarily traditional market, go for it. And using Chinese caskets to keep the total cost of the funeral from skyrocketing will last for a few years. But it won’t last forever.

    The reality is a $10,000 funeral is just too much for many people to pay. So for the rest of us out there whose cremation rate is approaching 50% or more, we are going to have to learn how to do business and provide services for less income or we need to increase volume. If it costs me $150,000 a month to keep my place opened and staffed I need to do 15 services at $10,000 a piece or 40 services at $3750. Or I have to cut expenses. It’s all just a math problem. I can do it. But the transition from where we were to where we need to be is going to be tough.

    My latest blog entry at http://daletime.wordpress.com/ talks about some of this.

    I look forward to your next series of posts

    Dale Clock

    • Dale, i agree with everything you say, especially the $10,000 part. What this new research is saying and my personal experience in this one instance demonstrated to me is that if you narrow your price range people will start focusing on what they want instead of only cost. the research showed they will tend to choose in the upper range.

      Much more on this later. I will read your own post. thanks again for your input.

  6. In simplicity, I believe the $ 10,000 price tag is not an obstacle when considering what people pay for everything else in their lives. I bring this fact up when doing speaking, showing how people’s $ 2 daily coffee habit is truly a $ 30,000 habit….and the $ 14,000 celebration (at less than 1/3 the cost of a wedding) is only about 0.60 cents a day! Do you agree with me, what would your life be like if you could imagine the value of someone’s life compared to a cup of coffee? From my perspective and experience, many people who are not yet aware of the value a significant, meaningful event offers hear a price….and $ 700 may sound too high when we don’t know what we’re getting. I believe they found when people gathered, told stories, clergy or celebrants who customized the event, and we offer the compassionate advice that the only way past their feeling of loss is straight through it with acknowledgement and celebration.
    I am certainly not chicken little when it comes to being passionate about the value we create. Does anyone agree that the enemy we face is our own self-esteem—believing with passion and conviction while loving what we do, how we can grow to serve a client who may not live in our 3 mile by 5 mile piece of geography with only one simple solution of embalming, and 2 boxes. I don’t have the full answers, yet will always take the actions to figure how to make a 4 figure profit without a box sale or embalming….and we face 35% and growing cremation rate in our area. I think I was spoiled at one time, expecting a closing ratio of 100% on all meetings with clients at the time of death. I’ve learned to let go of that which blocks me–and slowly see other staff coming around to the same conclusion. It’s like the Pareto Principle…..80% of our profits come from 20 % of our clients….so why not treat these “Ideal Clients” special, and attract more of them by fishing in other’s ponds…and “fire” our lowest 20% clients who only make life miserable because they don’t want to be doing business with us.

    I also believe a very growth-oriented business model serves the clients in a $ 1,900 – $ 3,300 price range with separate staff, facilities, and part of the price clients pay is that we are not available on weekends, holidays, or after a certain hour of the day–example, 6 PM. (Other than a trade service to complete transfer of the deceased).

    I like the philosophy of “Amateurs compete (and copy) while Pros create–and find ways to be unique and innovative with relevance, significance, and meaning. If price were truly the issue, wouldn’t the lowest price in any business always be the dominant market player? Don’t we enjoy staying at 5 star hotel better than Motel 6? I have humility saying this, I’m not above using Motel 6 or driving a 10 year old car…I simply enjoy a nice ride in a friend’s Jaguar or Mercedez Coupe. I believe we have our natural desires as people, and as such will go with what we want…not always what we need….and offering compassion with gratitude to lead people validating their concerns is the way to go.

    I’m passionate that those of us who are using education, learning each day and truly desire giving first to others by adding value to their lives will succeed. The amateurs who don’t succeed probably believe in scarcity, are takers rather than givers, and don’t take 100% responsibility for all their results in their lives.

    Phil

  7. Alan we met in Boston in 2009, this is great stuff
    please put on your email list.

  8. Good ideas. This has some merit and deserves some more follow up.

  9. Gerry Fictorie says:

    We offer package pricing on 12 caskets, lowest priced casket 1145 and highest is 2850. ( plus professional and service charge)and when I look at the sales for last years our top end is as popular as low and middle end. Our cremation rate is less than 20%. Price is what customer pays, value is what they get. Thanks for the info Alan, it is good to know we are doing something you agree with.

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  1. [...]             “Equalizing Price Points to Crystallize Personal Relevance” [...]

  2. [...] accompanied him into the selection room I was once again met with a flat line pricing strategy (see How To Get Customers to Stop Fixating on Price) and I really like it.  But what immediately caught our eye was the Trappist casket on display. [...]

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