Tag: funeral operations

Serve more families, work less and be more profitable

Written by Alan Creedy on August 3, 2015. Posted in The Creedy Commentary, Leadership. 3 Comments on Serve more families, work less and be more profitable

Staff shortages among licensed professions have been successfully addressed by changing the model in the medical and legal professions. The solution is simple: focus skilled licensed staff on the right duties and supplement them with trained lower level staff. The result: Licensees handle more cases, work fewer hours, produce more income and, as a byproduct, are happier in their work.

I became aware of such a working model in funeral service last year and traced it to my friend David Tudor. I asked David to briefly share his insights with us.

Alan Creedy

The Highest and Best Use Model For Funeral Home Staff Management

Softening revenue resulting from increased cremation has funeral home profitability very much compromised. In addition to reduced revenue, appropriate profitability has a direct correlation to wages and benefits paid to staff for delivering at need funeral services. Wage costs along with associated benefits often are 45% or more of sales; when, in fact, this ratio should be less than 40% combined.

Since the highest paid employees are often licensed funeral directors it is here we should first focus on determining optimum wage utilization. Consider that a typical at need service requires about forty (40) hours of staff time. Of this total less than ten (10) hours are required to be licensed time. Care must be taken to assure many of the ancillary, non-licensed duties do not involve an inordinate amount of a director’s time.

Increasing staff utilization doesn’t mean working harder…just smarter. A LFD earns premium earnings for applying his/her skills and experience arranging, directing and embalming. Therefore providing structure and support to minimize their time with non-licensed duties must be continually addressed. Accomplishing this is not a matter of directive, but in fact a defined staffing approach and structure. Elements of this include:

Director of Operations (DFSO) – Someone designated to oversee, coordinate and assign new at need cases…not leaving it for a collegial staff discussion. The DFSO also determines the staffing coverage for services, including the assigning of non-licensed part timers for ancillary support duties. This frees directors for the next licensed obligation.

A Pool of Part Time Associates – Using the medical term “PRN;” (use as needed) these are individuals, notified today, for a service need tomorrow. This PRN pool should contain about three (3) to four (4) people per every 100 annual funeral home cases.

About this Pool

They must be recruited, sought out, don’t wait for them to show up at your door.
There are usually three (3) categories of PRN’s:

Visitation Associates – greeters at visitation.

Funeral Service Associates – perform all the ancillary, non-licensed tasks of a LFD.

Transfer staff – physically qualified for first call duties.

They must be trained in your methods and practices (Use of a job description as a training guide makes orientation and training easy and effective.)
Compensation can be an hourly rate, perhaps with a 3 hour minimum or a flat fee. Often they are paid a small stipend to be on call for night transfer duty.
The pool will have turnover, do not let that deter you. Keep focus on maintaining a full complement of part time associates. Consider maintaining a pool of three (3) people per 100 annual calls.

If a LFD can be supported to increase his/her license utilization from 65% to 80% that will mean handling 20 more at need cases per year. (Ninety (90) percent plus utilization should be the goal and is comfortably attainable.) Implementing a PRN pool to support two (2) or three (3) LFD’s can easily mean not hiring another LFD.

A large client of mine, realized this advantage years ago. By increasing their part time staff over a 3 year period, and through attrition reduced their licensed staff more than 60%. Included with the new staff model, their previous sixty (60) hour workweek schedule was reduced to just over forty (40) hours, with no decrease in compensation to staff associates.

In states that allow non-licensed transfers the benefit for the firm and LFD is even greater. Firms create a pool of two (2) to three (3) part time non-licensed individuals. (Trauma experienced first responders are excellent candidates.) The LFD on call coordinates the night transfer from a “bedside – station.”

Bottom Line – To increase your bottom line, don’t burden yourself with misdirecting the use of a licensed associate.

David Tudor is President of The Directions Group, Asheville, NC.

David’s counsel has benefited funeral homes nation-wide for over four (4) decades.

thetudors@charter.net

Is A Scarcity Mentality Keeping You From Being A Good Leader?

Written by Alan Creedy on July 7, 2014. Posted in The Creedy Commentary, Leadership. 2 Comments on Is A Scarcity Mentality Keeping You From Being A Good Leader?

A Scarcity Mentality is the zero-sum paradigm of life.

People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production. They also have a a very hard time being genuinely happy for the success of other people. Yet it is a scarcity mentality that prevails in funeral service and gives rise to so much of the infighting that holds us all back.

One of the primary responsibilities of a leader is to develop people by empowering them. But this doesn’t mean just giving people the keys to the vault and hoping for the best. It is hard and complicated work.

Almost 40 years ago an article appeared that has since become a classic. Entitled: “Who’s Got the Monkey?” it used a charming metaphorical style to illustrate how we often voluntarily become subordinates to our subordinates. Characterizing problems as monkeys we learn that by assuming every problem is a joint problem we actually unwittingly cooperate in this game of transferring monkeys.

Over time, it becomes harder and harder to tell who is working for whom!

The essence of staff development is teaching people to manage their own monkeys

This makes sense and the article goes on to describe a very precise method for transferring monkeys back to their rightful owners. Also included is an equally precise outline for the care and feeding of monkeys:

Monkeys should be fed or shot
The monkey population should be kept below the maximum number the manager has time to feed
Monkeys should be fed by appointment only
Monkeys should only be fed face-to-face or by telephone
Every monkey should have an assigned next feeding time

How A Scarcity Mentality Hinders Your Ability To Manage Monkeys and Develop People

25 years after the original publication of “Who’s Got the Monkey?” Steven Covey published a followup article entitled: “Making Time For Gorillas” In which he very accurately observed that we had made little progress in the development of leadership styles beyond the “Command And Control” style that prevailed at the time of the original publication. “Command and Control” is one of the two dominant leadership styles in funeral service.

Covey’s insight included the observation that for leaders to successfully manage monkeys they must first invest in developing their people. “Command and Control” types are reluctant to do that. Worse,

They are actually eager to take on their subordinate’s monkeys.

“…many managers may subconsciously fear that a subordinate taking the initiative will make them appear less strong and a little more vulnerable.” Says Covey

Covey also tells us that surveys report that executives feel half or more of their time is spent on matters that are urgent but not important. They are trapped in an endless cycle of dealing with other people’s monkeys...reluctant to help those people take their own initiative.

If I were a “Command and Control” type here is what I would do:

Download and read the original articles by clicking on the image below
Let my wife and kids read it so they would have a better understanding of why I never have time for them
Share it with my staff
Get over myself and start making the investment in my people so that I could trust them and I could enjoy my life.

It’s your choice.

YOU CAN BE A SHOP FOREMAN OR A LEADER

CLICK ON THE IMAGE TO READ THE ORIGINAL ARTICLE

How To Stop Customers From Fixating On Price

Written by Alan Creedy on December 2, 2013. 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

New Book on Reinventing Your Business Features Funeral Home

Written by Alan Creedy on May 30, 2012. Posted in The Creedy Commentary. 2 Comments on New Book on Reinventing Your Business Features Funeral Home

I read a lot and sometimes I preorder new books. This Winter I preordered “THE REINVENTORS, How Extraordinary Companies Pursue Radical Continuous Change“ By Jason Jennings. I started reading it last week and when I turned to page 60 lo and behold what did I see? My friend Bill McQueen as one of the case study examples of how to reinvent even a moribund industry.

Bill makes up a healthy part of chapter 3 “Picking the Destination” which begins with the statement:

“The main job of the leader is to be a destination expert, to let everyone know where the company is going and make certain that everyone understands and is willing to embrace constant change in order to get there.”

Some excerpts from Bill’s interview are insightful

“This is a business that was and is ripe for reinvention…the real reason things had to change was because we had to be able to offer the quality of life that talented people wanted and that we wanted to provide them”

“We were wrong in concluding that everyone wanting cremation was a price shopper…price shoppers only want one thing…the absolutely lowest price in town.”

“The breakthrough came when we studied cremations in other societies.”

“The success of the first tribute center led McQueen to the realization that they weren’t really in the business of handling bodies but were, instead, in the business of educating and helping people understand the value of ceremony, ritual and the telling of one’s life story. ‘We weren’t going to be in a business that was about caskets, hearses, and cemeteries anymore but, instead, about helping people transition through loss and come out the other side in a state of peace.’ Once they selected a destination the radical reinvention became easy.

I haven’t finished reading it yet but if you want a copy for yourself click on the picture below:

P.S. ICCFA is hosting author Jason Jennings at its Fall Management Conference.

Book Review: When Growth Stalls

Written by Alan Creedy on March 5, 2012. 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.

Great Advice on Turning Your Business Around

Written by Alan Creedy on January 18, 2011. Posted in The Creedy Commentary. 1 Comment on Great Advice on Turning Your Business Around

I started my career in business turnarounds in the 1970’s when I worked for a company whose business it was to buy and “refurbish” distressed businesses and resell them. DeathCare is in need of a turn around. There are different types of turnaround strategies and turnaround strategists. Many are simply liquidators who cut costs so drastically that the already wounded patient has no choice but to be sold for parts. But the truth is most businesses can be saved if you are willing to do the work.

I became aware of Jack Stack and his Game of Business in the late ’80’s. He is a savior not a liquidator. Saviors save jobs and businesses and investments. I found early on by luck and prayer that the fastest way to rebuild your business is to engage your employees. They know where the waste is, they know what customers really want and, if they really trust you, they will tell you where you might be going wrong. That is not to say that you should abdicate your role as leader and expect staff to run the place. It’s not that easy. Rather, it means engaging them to give you feedback and input and weighing that input with other information to decide what is the best thing for the firm at this moment.

Watch this 6 minute video, it will encourage you. But one last note of warning: if your financial reports aren’t in order or you don’t understand them or they aren’t timely don’t even start.

The Emperor Has No Clothes

Written by Alan Creedy on January 11, 2011. Posted in The Creedy Commentary. 5 Comments on The Emperor Has No Clothes

What employee turnover reveals about your leadership.

Employee turnover can reveal a lot of things. Surely turnover is normal but both too much and too little are signs of serious management issues. The pressures of the last ten years have led many in DeathCare to be frustrated with their employees. An attitude has sprung up that suggests a feeling like: “If somehow I could just fix my employees everything would be alright.”

High turnover rates and no turnover rates are actually two sides of the same coin. Both indicate an unwillingness to develop people and poor to nonexistent communication skills. It is the leader’s role to communicate what is expected of people, to follow through and to teach and to develop. High turnover indicates they have put too much pressure on people to meet expectations without giving them the tools and resources to do the job. Tools and resources include emotional support and guidance. Having no turnover is just as bad. If you are a firm of any size it is impossible that you haven’t got at least one person who doesn’t belong. Even Jesus made a bad hire although He did it on purpose to fulfill prophesy. Most often, when someone tells me (usually with some pride) that no one ever leaves I am willing to take a bet that they have several aimless people who couldn’t find work elsewhere who are just showing up for a paycheck.

Drucker’s Orchestra metaphor is the best illustration:

When a new orchestra leader takes over a poorly performing orchestra he does not have the luxury of letting everyone go and replacing them with top performers. Instead, he must ferret out the worst and work with the remaining average players to help them want to work at peak levels

Great leaders do 4 things extremely well:

Select the right people
Set clear expectations
Motivate people to do their best
Develop people

Interestingly, there are 8 things employees really want from leaders:

Tell me my role, what to do, and give me the rules
1. Clear direction
2. Parameters so they can work within broad outlines.
Discipline my coworker who is out of line
1. Hold people accountable-be fair but hold fast to what is and is not acceptable
Get me excited
1. About the company
2. About what we do
3. About where I fit
Don’t forget to praise me
Don’t scare me
1. They don’t really need to know about everything you worry about
2. Don’t lose your temper
3. Be fair and consistent
Impress me
1. be bold
2. or be creative
3. or be smart
Give me some autonomy
1. Give me a special project
2. Trust me with an opportunity
Set me up to win
1. Indecisive leaders frustrate everyone and make them feel defeated

Do you find it interesting that financial incentives aren’t on this list? Turns out that money is only a demotivator. If you aren’t paid fairly it will demotivate you. Overpaying you will not motivate you or make you more loyal.

Funeral Home Valuation Part 2: Why EBITDA?

Written by Alan Creedy on September 8, 2010. Posted in The Creedy Commentary. 1 Comment on Funeral Home Valuation Part 2: Why EBITDA?

Funeral home valuation, Funeral home appraisal, Cemetery Valuation, Cemetery Appraisal

EBITDA became popular in the 70s and 80s when buyers were trying to locate companies that had strong cash flow outside of financing and capital Expenditure concerns. Since buyers were going to change the capital structure anyway, it was convenient to have a quick apples to apples comparison.

EBITDA or Earnings Before Interest, Taxes, Depreciation and Amortization is a more reliable and cleaner comparison than Net Income.
1) In general, it is a much stronger indicator of ongoing, operational strength for the firm.
2) Taxes are considered “non-operational” in a sense because they can be affected by a variety of accounting and tax conventions. These have no bearing on the ongoing, operational strength of the firm.
3) Interest expense is a function of leverage, not operations. Companies in any given industry will have varying degrees of interest expense based on the debt load they incur.
4) Depreciation expense is an accounting convention recognizing investment in physical assets over the life of that asset. It has no bearing on the ongoing operational strength of the firm. Firms with investments in large capital expenditures like recently built facilities will have high deprection expense while similar firms with older facilities or fully depreciated physical assets will have lower depreciation expense.
5) Amortization expense is another accounting convention dealing with the amortization of intangibles. Because it is an accounting convention, we want to take it “out” also. Firms with goodwill acquired through other acquisitions will have amortization expense while similar firms who have built their business without acquisition will have none.

So, EBITDA is considered by the financial community the way to compare apples with apples. It is computed by adding back to net profits or earnings any income taxes paid by the corporation all interest expense, depreciation and amortization. This is, of course, where many amateurs foul up. A good tax planner will encourage a business owner to take advantage of all legitimate business deductions. This includes inflating personal salaries above market as well as other expenses that might otherwise be personal. As a result, earnings on many independently owned businesses are reported as less than they might be if they were the subsidiary of a public corporation, for example. So, before EBITDA can be truly calculated adjustments should be considered by a professionally trained analyst to represent the true picture of operations. Of course, these adjustments are only legitimate if it is reasonable to expect that an independent buyer will operate in a more efficient fashion or can find economies that the seller has not had access to. This process is called “normalization or recasting”.

After normalization a funeral home typically yields a an EBITDA ratio of between 20% and 30% of NET Revenue with the average falling in the middle. Interestingly, a branch (accounted for correctly) will often yield between 40% and 50% because it does not bear the burden of duplicated administrative or ownership overhead.

Next week proper categorization, operating ratios and normalization.

Disclaimer

While I have experience in business valuation, I am not a Certified Business Appraiser. The explanation and comments contained herein are my own.

The Tyranny of the Ten Call Man

Written by Alan Creedy on August 10, 2010. Posted in The Creedy Commentary. 4 Comments on The Tyranny of the Ten Call Man

A Management lesson from the bible

One of the most common and pervasive staffing problems in funeral service is the man or woman who undermines almost every current and future issue management tries to address. They are the “Mayor of the Prep Room”. No matter what initiative you attempt, they quietly work behind the scenes to undo it. Sometimes they employ a subtle mechanism I call being “cooperatively uncooperative”. This means giving the appearance of being on board but quietly “forgetting” to do what they have promised. Worse they are absolute geniuses in providing what seem reasonable excuses why exceptions must be made. As “Mayor of the Prep Room” every attempt to communicate to staff is answered by a meeting after the meeting where they hold forth on “what we are really going to do.” The worst of them are blatant about simply ignoring expectations and just doing things the way they want rather than the way the are asked to do them. Effectively daring management to “Make Me.”

An example is worthwhile. Recently the more progressive funeral homes have implemented monthly, weekly and even daily staff meetings. Attendance is mandatory. Yet every owner that has been successful in establishing regular meetings has shared with me that it meant they had to chase down and face down at least one staff member repeatedly to make them attend. Many owners and managers simply gave up trying and either exempted them or stopped having meetings. This obviously caused other employees to lose heart and wonder (sometimes openly) who was really running the business. Formal power said the owner –but informal power didn’t agree.

Why do owners and managers allow this behavior? They say that it’s because they believe the person is too valuable to lose. They have convinced themselves that they would lose 10, 20 or 30 calls. And maybe they would. But over time the lack of progress in responding to the many challenges we face and the loss of employee morale (not to mention the loss of owner morale) cost much much more than the loss of those calls. I call these trouble makers “ten call men” because the owners live in daily fear they control that many calls.

I don’t like “ten call men” because they arrogantly wield informal power and prevent opportunity without assuming any risk. They play owners and managers like puppets.

Jim Collins, in his “must-read” book, “Good To Great” makes this observation about them:

“We have a wrong person on the bus and we know it. Yet we wait, we delay, we try alternatives, we give a third and fourth chance…we build little systems to compensate for shortcomings…We find our energy diverted…that one person siphons energy away from developing and working with the right people.

Letting the wrong people hang around is unfair to the right people…

The reason we wait too long often has less to do with concern for that person than our own convenience…Meanwhile all the other people are still wondering: ‘when are you going to do something about this?'”

It is not unusual in my consulting practice to find inspiration in The Bible. On more than one occasion a verse from Proverbs has enabled clients to take long delayed but desperately needed action:

“Cast out the scorner and contention will go out; yea strife and reproach shall cease” Proverbs 22:10

How To Stop Customers From Fixating on Price Part 3

Written by Alan Creedy on July 20, 2010. 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 3^rd 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 June 14, 2010. 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 May 24, 2010. 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?

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