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How To Stop Customers From Fixating On Price

Written by Alan Creedy on . Posted in The Creedy Commentary, Money: Getting it and Keeping it. 11 Comments on 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

Don’t Confuse Me With Your Facts

Written by Alan Creedy on . Posted in The Creedy Commentary. 2 Comments on Don’t Confuse Me With Your Facts

Apologists must be aware of 4 generally accepted fallacies:

  1. Consumers think in a well-reasoned rational way
      1. In fact, emotions are closely interwoven with the reasoning process.  Most often they are dominant.
  2. Consumers can readily explain their behavior and thinking
      1. 95% of our thinking is unconscious.  Our rational mind serves mainly to make sense of behavior AFTER it is executed
  3. Consumer’s memories accurately represent their experiences
      1. In fact, consumers memories represent what they think about their experiences not the experiences themselves
  4. Consumers think in words
      1. We think in terms of images.  If I say the word “dog” you do not call to mind a biological description of a dog.  Instead, you bring to mind a picture of a dog.  And your dog is likely to be different from my dog

We Make Choices With Our Emotions…

We Explain Those Choices With Our Intellect

So we THINK consumers make choices and decisions with their rational faculties when, instead, they make them with their hearts.  We think (and, frankly, they think) they draw an imaginary “pro” and “con” chart and make the best decision based on The Facts.  When, in fact, they are rationalizing a choice already made in the subconscious.

Our emotions, by definition, are unconscious.  So, our challenge, as an Apologist, is to speak to those emotions.  So, never argue the facts, the evidence or try to be rational.  The doorway to this soul is stories.   And, if you have been in practice for long, you have lots of stories.

Your objective is not to persuade but to challenge their thinking.  My friend, Bob Speaks, insists on sharing all options with every customer.  I think this is why he is effective.   His professionalism dictates that he enable people to make informed choices by understanding all their options.  Epiphanies are not uncommon and you know this because you experience the same thing when people say to you:  “We didn’t know we could do that.”

The arrangement conference is not the best place for these conversations because it is typically emotionally charged and barriers tend to be up.  But, that is the hand we are dealt.  This is where the risk comes in.  But, let’s assume you are working with a family that is resistant and closed.  What have you really got to lose?  Most likely they don’t like you any way.  The damage is done so how is “damage control” going to help?  Why not stand up for yourself and share what you believe?

On the other hand industry veterans often recognize resistance as a challenge they need to rise to.

VIPS:

Valuable, Important, Permission, Story

My friend, William Bonacorda, shared a concept with me I have found works in awkward situations.  In a situation where two parties might disagree and there is resistance and tension I have learned to remind myself of these 4 steps.

Valuable: Acknowledge that their perspective is valuable and, in fact they are valuable.   “You know, a lot of people feel that way and even though I am in the profession I can relate.  I appreciate your sharing your viewpoint.”  Is a good opener.

Important: Acknowledge that the topic is important, not only to you and them but to their family and friends.  “Even though more and more people are choosing alternative services it is important that we work through the issues and understand WHY we make the choices we make.  Since we only get to make these choices once, it is important that we at least become aware of the options available to us.”

Permission: Ask permission to share.  Most will say yes, but if they say no, then that’s it.  “Would it be ok if I shared why I chose this profession?  I get a lot of personal gratification from helping families and I feel that if I could share that people might understand me better.”  You have personalized the issue in this case.  You have also made yourself vulnerable which many  people will interpret as trustworthiness.  Which, hopefully, you are.”

Story: This is where I put them in the picture by telling stories; and you have hundreds.  “I chose this profession because I think it makes a very significant contribution to society.  When a death occurs people, including friends and coworkers, are often stressed.  They don’t know what to do.  They anticipate it will be expensive… and it can.  But it doesn’t have to be.  They worry about losing emotional control.

My job is to bring order out of this chaos and restore a sense of dignity.  It saddens me that people are choosing to avoid it all, not because it is my livelihood but because we are wired to need human interaction in times like these.  And I get to see families and friends every year that have to suffer the consequences of poor choices.  In times of stress people need the comfort of others.  Both physically and emotionally.  We need to be touched and we need to touch others.  Let me give you an example, [fill in your own story].”

It is not my intent to create a script.  But I have found this process effective.  I know many of my readers have found effective techniques or approaches and it would be appreciated if you felt like sharing.

 

The Problem is Not Cremation

Funeral Apologetics 101: Stop Clinging To Your Despair

Funeral Apologetics 101A: 8 Principles of Successful Optimism

Disenthrall Yourself of Your Dogma

 

Book Review: When Growth Stalls

Written by Alan Creedy on . Posted in The Creedy Commentary, Practitioner Forum: Insights and Ideas. No Comments on Book Review: When Growth Stalls

When Growth Stalls, How it happens, why you’re stuck and what to do about it.

By Steve McKee, Jossey-Bass 2009

“when growth stalls, everything begins to break down.  Confidence wanes, and it can be difficult to tell which problems are cause and which are effect.”  This simple statement hits too close to home in an industry where stalled growth has become the rule rather than the exception.

Based on research involving 5,696 businesses across a wide variety of industries and spanning several years, the author identifies 3 external factors that catch us all off guard and 4 internal factors that make things worse.  He found that stalled companies were more likely to have high turnover, lower margins and weaker customer loyalty.   Compounding this is a correlation with unhealthy internal dynamics including: issues involving trust and respect, inability to make lasting decisions, a tendency to overthink things and, in a strange dichotomy, a propensity to either resist change or switch directions frequently.

But wait, it gets worse.  Stalled companies also “unintentionally build mediocrity into the system by losing the best people, hiring “C” people and hiring on the cheap.”

External Factors

Economic factors include both price resistance and increased cost of doing business.   These occur over time and aren’t always noticeable until long after the trend is set.   McKee warns us about cutting expenses: “You can cut your way to survival but not success.”

Aggressive Competition introducing new ideas or factors into the market place.  In our case, examples might include cremationists and low-price providers.  McKee offers this advice:  “Keep close tabs on your competition…outthink rather than outspend them…and consistently look for ways to enhance and protect your differentiation.”

Changing industry dynamics:  “The marketplace has changed and [players] no longer know their place in it.”

McKee offers this interesting insight: “When there is change there is a ‘misunderstanding’ that can be capitalized on.”

Internal Factors

Lack of consensus: “When growth stalls…people choose sides, challenge each other…and begin to doubt…”  The focus shifts from “what do we need to do” to how can we all get along.

Loss of focus:  “McDonalds stalled out when they became too intent on adding restaurants to customers rather than adding customers to restaurants.”  Loss of focus leads to the wasting of limited resources rather than optimizing them.   Things are always changing.  So, “either a company moves or the market moves.”

Loss of nerve:  Leadership is especially difficult when a company is adrift.  Self confidence wanes because it is confusing, discouraging, contagious, paralyzing and wearying.  It challenges a leaders whole notion of self worth.  The risk of change seems greater than the risk of standing still.

Marketing inconsistency: leaders begin to be reactive with emotional hot spots and use advertising in a point-counterpoint fashion with competitors instead of consistently staying on message.  People trust brands that have consistent approaches to their message.  Companies don’t know who they are if they keep changing their message in a fruitless search for a silver bullet that will solve its problems.

The Take Away

  • Know you are not alone
  • Knowing the seven factors that lead to failure gives us focus and courage to pick up and move forward
  • The “Top Box” concept gives you an excellent template for follow-through
  • It will require focus, discipline and perseverance
  • Find a way to “Mean something to your market and it will reward you.”

I strongly recommend this book to DeathCare professionals who really want to build a thriving business.  It will take discipline and focus, strength and leadership but McKee’s advice will give you a very strong backdrop to make it happen.

Video Interview

Click here for a video interview of Author Steve McKee focused on the application of his concepts to funeral homes.


 

 

How To Stop Customers From Fixating on Price Part 3

Written by Alan Creedy on . Posted in The Creedy Commentary. 2 Comments on How To Stop Customers From Fixating on Price Part 3

Part 3 Willfully Overpricing to Stimulate Curiosity

Last week we discussed the commoditized customer and the second of 4 pricing strategies: “Using Price Structure to Clarify Your Advantage.”  If you didn’t think I was certifiable last week there is a good chance you will be thinking about sending me for treatment this week.  Please remember: our goal is to use these insights to begin to rethink funeral service’ pricing strategy.

According to the article from Harvard Business Review, from which these discussions originate, this week’s strategy has proven to be particularly effective for mature industries.  Their examples range from coffee to high priced elevator systems.

In a price competitive mature market the logic behind willful overpricing seems counterintuitive.  At the same time, I can well remember that our primary pricing strategy at the funeral home I managed was to be $100 higher than anyone else.  This “strategy” is one I have often encountered as well as its evil twin: being $100 lower than anyone else.

According to research, customers don’t automatically dismiss the higher price model.  Instead, a  higher price often seems to motivate them to take a closer look.  That closer look could (and should) reveal information they care about that works in your favor.  (it bears repeating here that the point of all these strategies is to get consumers focused on value over price)  Some of the things I can think of are quality (“your mother never leaves our care”) or reputation, or an unconditional guarantee, etc. 

In one experiment products were priced at an 80% premium.  Subjects were able to recall twice as much product information than the comparison products; this enabled them to cite more arguments in favor of buying the products.  “The overpricing also evoked a more passionate response to the products which led to a willingness to pay much more than was originally intended. By contrast, people who were exposed to a premium close to their expectations (10%) or one that was outlandishly high (190%) simply acted according to their pretested inclination…”  THIS IS IMPORTANT because most funeral homes in price competitive markets are only marginally higher than the lower priced firms.  This research would tell us they are not enough higher to provoke the necessary attention to value.

The implication is that a price range exists above what customers thought they would pay that causes them to ask value questions.   Willfull overpricing can reverse the downward “price cutting” trend common to mature products and services.  Starbucks deliberately set a price point for a product that, at the time, most restaurants gave away. The price made people rethink the importance of coffee in their lives.

In another example Kone, the Finnish elevator company, used willful overpricing to introduce innovation.  In the 1990’s the elevator industry had become very price competitive.  In this highly commoditized market Kone introduced an innovation that the market (being entirely price focused) was unprepared to take into consideration. 

In order to provoke consideration of their advantage, Kone began responding to RFP’s with two proposals:  A normal proposal with old features and normal pricing and a much higher priced proposal for their innovative elevator system.  It took a while but it caused buyers to talk about the new concept and even to call Kone for an explanation.  The high price enabled them to have conversations about value with people who wanted to know why it was higher priced.

How could this work in funeral service?

Why not create two price lists:  one that is price competitive but strips out all the liability and quality of service (in fact one that maybe highlights some of your competitor’s disadvantages without mentioning them by name) and another that highlights features, safeguards and other benefits that are included.   For instance:  Transfer of remains to the funeral home: 

Normal: use of a 3rd party trade service at our convenience.  We are not responsible for problems or errors $350

Full service:  The deceased never leaves our care, two attendants and a Cadillac Funeral Coach within 2 hours of the first call. $650

I just made these up but maybe you can think of some better ones.

A last point of caution:  the research suggested that if you use this strategy the overpricing should be 50-80% above what people expect.  What price shoppers expect is generally a function of your competitor’s prices.

So, the next time someone says “your price is a lot higher than the others.” see it as an opportunity.  The trick is not to focus on the value that YOU think is important but the value THEY think is important.

funeral pricing, funeral home management, funeral consulting, funeral price strategy, funeral price shoppers

How Do You Handle Price Shoppers?

Written by Alan Creedy on . Posted in The Creedy Commentary, Practitioner Forum: Insights and Ideas. 2 Comments on How Do You Handle Price Shoppers?

As I was preparing this week’s article my friend, Dale Clock, posted this question and a followup on his blog Dale Time. (please click on the highlighted words and read his full comments)   This is a phenomenon that has become all too familiar and one that deserves discussion and feedback.  How do you handle price shoppers?  Do you have a system?  How successful are you?  You can comment on his blog or mine.

Now is the time to share.

The irony of Dale’s question is that this week’s article in The Creedy Commentary is about pricing strategy and is entitled “How to stop customers from fixating on price.”  It is based on recent research reported on in an article in Harvard Business Review.  I decided to delay my article in favor of helping Dale hear from even more readers.  So stay tuned.

How “Best Purpose” Trumps “Best Practice”

Written by Alan Creedy on . Posted in The Creedy Commentary, Practitioner Forum: Insights and Ideas. 2 Comments on How “Best Purpose” Trumps “Best Practice”

How a part time hostess taught me the most valuable lesson.

It was late 1989.  Rachel was then in her mid 70’s.  A retired school teacher, she had worked for us for about 6 or 7 years.  She was a quiet, unassuming and gracious woman who had that gift of always making you feel welcome.  As a part time hostess she was stationed by the front door of our main facility during public hours…often during visitations.  I was President of the nation’s oldest and among its most prestigious independently owned funeral homes.  We served 850 families and operated two cemeteries and a crematory.   Rachel always received more positive comments on our Family Surveys than any other employee full or part time. 

The funeral home was widely respected and even admired by both the public we served and professional colleagues for its high standards of service.  We believed our 70% + market share was a direct result of those high standards.  Certainly, they were a large part of our success.

But Rachel taught me an important lesson about an even more powerful market driver: Best Purpose.

Part of the reason that company was so admired for its high standard of service was a very rigid and unyielding set of employee expectations.  We all had a clear understanding of the “musts” and “must-nots” of our daily behavior and routine.   Mistakes were typically only made once, if they were made at all.  But lest you think this was some closely watched and supervised culture, I should be clear.  The resulting quality and superior performance created a level of “Esprit De Corps” that made the behaviors more or less “self sustaining.”  The problem was not in the performance but in the unrecognized limitation on “above and beyond” initiative that it unconsciously imposed.

Rachel, independently and without permission, deviated from one of our “cast-in-stone” rules and I was delegated to tell her not to do it again. 

Raleigh, NC, where I live, continues to this day to prefer receiving lines over mingling.   We discovered that about half way through visitations Rachel was taking the initiative to bring a glass of water to the widow or widower.   Food and beverage of any kind was strictly forbidden in any of the public areas of our buildings.  It was this act of kindness that I was told to stop.  Now, lest you be too harsh, this was the 1980’s and this type of courtesy was not so obvious back then.  And besides, this story is not about rules (good or bad) it is about purpose which we had but did not emphasize.

I  began my conversation reminding Rachel of the rules and asking her why she was doing it.  She responding so graciously that I still remember it.  She said, “Mr. Creedy, I understand the rule.  But when you buried my husband I remember standing in that same line and thinking I would kill for a glass of water.  So, I try to make their life a little easier by bringing it to them.”  I remember answering: “Rachel, you just forget that we had this conversation and continue what you are doing.”  I went back to the owner and told him that Rachel was doing the right thing and we all needed to be thinking like Rachel. 

The lesson is this:   Maybe the company was successful because of its high standards but Rachel was more successful because she had a higher purpose. 

What is your purpose?  If I asked you without warning, could you tell me in less than 60 seconds without thinking?  Could your staff?

Simon Cooper, President and COO of Ritz Carlton Hotels, strives for “Scriptless Service.”  This means that employees must be able to think, anticipate and act without being told.  They must have the ability and latitude to take initiative when they see an opportunity to help a guest.

Rachel taught me that the highest of standards and expectations without clarity of purpose can cause us to miss the most important things.

How people behave is what they believe.  Does the behavior of your staff indicate they have high standards and high purpose?  Does your behavior?

 

You may reprint this article by including the following on your publication:

 “reprinted with permission, Creedy & Company, www.creedycomments.wordpress.com all rights reserved 2010”

Why Are We Here?

Written by Alan Creedy on . Posted in The Creedy Commentary. 1 Comment on Why Are We Here?

An Easy, Practical Way to Engage Staff

In an aprocryphal story a “burned out” Russian Priest takes a sabbatical in a wilderness retreat hoping for renewal and reenergizing.  Depressed and discouraged, he takes a walk in the nearby woods and stumbles on a military encampment.  Immediately, he is challenged by the sentry: “Halt, who are you and why are you here?”  The priest responds, “What did you say?”  The sentry repeats his challenge: “Who are you and why are you here?”  Now the priest asks his own question: “What do they pay you?”  Startled, the sentry responds, “What does that have to do with anything?”  To which the priest replies: “Because I will pay you that for the rest of my life to ask me those two questions every day!”

Who are we and why are we here?

The answer to these two questions is one of the secrets to engagement.  We talk a lot about motivating employees.  But what we really want is engaged employees.  Employees who see meaning and purpose in their work.  Employees who see their job not as a task but as a responsibility.  Connecting meaning and purpose is the way to do that.

Zig Ziglar talks about his “Wall of Gratitude” where he keeps photos of people who have meant something to him.  I don’t have a wall but I do have a “Book of Gratitude“.   When I look at it I am often renewed. 

Maybe one thing we could do is take a wall in a non public part of our building and put a sign over it that says: “Why We Are Here” and then put photos of those we have been privileged to serve over the past year.   Maybe some of those pictures could include pictures of people hugging our staff.  I am told that happens every once in a while.  Then on those bad days we could go stand in front of that wall and remember “Who We Are and Why We Are Here.”   Yes it will take some work, but not much, and my bet is you will start to become even more creative and add pictures of folks I haven’t mentioned here that give meaning and purpose to what you do. 

 

 

 

Should Packages Be Discounted?

Written by Alan Creedy on . Posted in The Creedy Commentary. 5 Comments on Should Packages Be Discounted?

5 insights to packaging funerals

Numerous funeral homes are implementing and experimenting with package pricing with excellent success.  But little is known about the principles of packaging (elsewhere known as bundling) outside of the fact that fast food and car dealerships have been doing it for years.   Those that have adopted package plans find it has helped them in two ways.  First, it has improved their average overall sale and second, it has improved the arrangement process for their clients by making it easier.

Why package?

Packaging provides two advantages:  First it is a convenience for families.  Most families find the task of selecting from the laundry list of items required by the FTC rule to be onerous if not confusing.  By synthesizing this information into simplified packages it is easier for them to make choices that please them.  So, a primary factor is the emotional convenience and customer friendly nature of simplification.  Second, by pulling together the various elements of a given service type into a single price, value perception is enhanced as people accept services that are “already paid for”.  The key in any pricing strategy is to help people feel they are getting a little more than they are paying for and packaging is the best way to accomplish that.

Packaging do’s and don’ts

Many people bungle packaging by thinking they have to cram a lot of extra items into it that people don’t really want.  Ask yourself this question:  is your purpose in packaging to somehow magically persuade people to pay you more?  If so, don’t expect the consumer to be fooled.  If, instead, the items included in a package are there because they make sense to your funeral arrangers then it is likely to be perceived as value to the consumer as well.  

Keep it simple.  Studies consistently show that when making complex decisions people feel most comfortable if you break their choices down into groups of three:  burial, cremation or mausoleum entombment for instance.  For this reason, all of the better programs we have seen offer a good, better best package and these are presented in two sets:  packages for burial and packages for cremation.   A package should be presentable on a single 8.5 x 11 sheet of paper.   Most find it easier to design the best package and then simply reduce it for the remaining two categories. 

Don’t let people unbundle your package.  The packages are offered for the convenience of the customer.  If they want to delete items to lower the price then gently and respectfully take it away and suggest you go back to the itemized price list.  Keep your discipline.  The first one to flinch loses.

To Discount or not to discount?

The prevailing wisdom among professional pricing strategists is that the cumulative price of the individual items included in the package should be greater than the package price.  They also believe the resulting discount should be in the neighborhood of 10%.  In funeral service we believe this is debatable.  Given that it is a true convenience factor in the arrangement process, discounting may or may not be necessary.  That being said, it is our belief that most funeral directors err on the side of giving too much discount and that discounts should be more in the neighborhood of 5% on traditional burial and perhaps 7.5% (splitting the difference between 5 and 10%) for cremation.  Our reasoning is that discounts of more than that could have the unpleasant effect of sending a signal that you have too much margin in your prices.  Our research supports this as pricing strategists warn bundlers that they should be careful not to discount too deeply.  Enough to encourage people to take the package not so much that you are sending a signal that will backfire on you.  Finally, if you do discount, the amount of the discount should be prominently displayed on your presentation material and also on your statement of goods and services.

Presentation:

The Federal Trade Commission Rule requires you to present every arranger with an itemized General Price List.  But it does not require you to go over it in detail.   We recommend you present it immediately by saying “we are required to give you a copy of our general price list and you should take this with you when you leave.”  Then lay it on the table for them and immediately say, “Many of the families we serve prefer, however, to review our package plans in order to simplify the process of making decisions.  Let’s talk a little bit about what kind of service you were thinking about.”    

Of course, you need to come up with a script that you are comfortable with.  

When someone making arrangements suggests deleting an item to cut the cost we recommend you say something on the order of:  “Well, that is included at no extra charge in the package price.  But if you prefer we can build a custom service using our itemized price list.”  Then stop talking. 

Including Merchandise

There is some debate as to whether to include merchandise in your packages.  Most successful programs do include at least caskets and urns.  Vaults may be more difficult to include as they may not be used in 100% of the services you perform.   The number of choices within a package should be limited compared to an average selection room and quality should fit the package level.