It's the Fast that Eat the Slow
Friday, March 3, 2017
Posted by: Erin Russell
Excerpt from Funeral Business Advisor Magazine (www.funeralbusinessadvisor.com).
By Gerald Davis, President of Starmark Cremation Products
Identifying cremation trends and responding quickly with corrective actions long before competitors is the best way to beat them. It is hard to comprehend that in 2016 in the United States, a funeral home closed every 39 hours. Admittedly, a few new ones did open, especially in well-established or expanding markets. We need not enumerate the reasons for these closures but note that another 4000 to 5000 funeral homes may close over the next decade as the fast responders tend to overtake the slow responders. I appreciate the wisdom from the book "It's Not The Big That Eat The Small - It's The Fast That Eat The Slow" written by Jason Jennings. Whether your funeral operations are small or large, the fastest to address these trends has a much higher probability of success than those funeral directors that ignore the emerging trends.
So what is this so-called emerging trend? We know that funeral providers essentially need both revenue and volume growth to be successful. Today many funeral providers grow their volume through acquisitions of competing firms, by following local regional population migration, or by offering low priced direct cremation. I suggest there's another way to grow revenue: "Right priced" full service cremations that over time build tremendous volume and revenue.
A growing number of funeral directors are cutting the price on their current full service cremation to about 1/2 the price of a full service burial and some have established a new brand to expand beyond their traditional market areas. These enterprising funeral directors are taking full service
revenue from their competitors both within and beyond their current market sweet spots.
Example - If your full burial service funerals average $8000 including a casket, then consider advertising full service cremation with free use of a rental casket at $4000 or slightly less. I have advocated this concept for some years now and know that most readers of this article will consider the trend to be foolish at best. However, numerous unpublished nationwide cremation surveys with consumers conducted by my staff all lead to a similar conclusion...a significant number of today's direct cremation families will host full services when affordably priced. Many full service cremation families often default to direct cremation when no other affordable and practical funeral services are made conspicuously available.
Some funeral directors may feel this trend can be addressed by merely cutting the price in half of full service cremation on the general price list. But for the fast to eat the slow, this change needs to be heavily advertised in both your immediate and extended market areas to grab share. While some competing funeral homes may match your new affordable full service cremation price with the free use of a rental casket, most will believe you've lost your mind and do nothing as you gradually grow your cremation business with high volume full service cremation revenues.
One alternative to the growth of full service cremations is to grow your volume with low cost direct cremations, but that only works until a lower priced advertising competitor emerges. Then the low priced direct cremation volume is split among a greater number of local competing funeral providers. Another strategy is to add tremendous value to minimal direct cremation with modestly priced memorial services included in a convenient package.
Yet another strategy is to reduce cost of goods sold. In other words, how much more can you cut your costs of a plain corrugated cardboard box? Quick answer, not much. Important, yes, but there are not enough dollars saved to keep your doors open.
Another strategy: How much more can you cut your cremation casket costs? Since these cloth-covered and hardboard casket-like products already cost more than a ceremonial rental casket insert, your funeral home profit and families will be much better off with the heavily promoted use of a rental casket. Better services at lowest cost.
Another alternative, heavily promote the use of very low end veneer or hardwood cremation caskets. This strategy may increase the price of full services with cremation back to higher dollars but generate fewer full services. And, some of these "cremation" products can migrate to burial products which can further reduce funeral home profits.
In the end, it is up to you to determine the strategy that works best for your funeral home to capitalize on this cremation trend. It's important that you and your staff are nimble and have an appetite for constantly adapting and improvising. Remember, if you are not eating, you're likely being eaten.