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TFC-BS Wire: Early this morning we have confirmed reports from the Cornfield that casket sales are soaring!  Funeral homes report the increased demand for full service burials are causing serious issues from scheduling of services, dwindling inventory of embalming fluids, lack of limousine/hearse stock to scarcity of high end caskets. Additionally, cemeteries report land grabs akin to “the gold rush” for spaces available to bury the masses at their final resting place.

This phenomenon has a negative effect as consumers are abandoning cremation in droves. Crematory operators are scrambling to find solutions to find revenues as cardboard container sales, urn and online cremation sales are plummeting.  Cremation societies and what was deemed as “cut rate cremation” providers but the funeral industry are now facing foreclosures and bankruptcy.

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WAKE UP!

Yes, it was only a dream and of course it’s April 1st.  No such luck, its all a dream!

From the Command Post with a big cigar and laughing at the absurdly of wishful thinking; Cheer’s Y’all! #thefuneralcommander

parting-logo@2x

Parting.com launched its site which has virtually every funeral home in the United States with pricing for services listed for consumer comparative analysis.  This disruptive innovation is the first of its kind in the funeral industry; the FTC, State and other funeral directory websites have never been able to accomplish…listing General Price List information for consumer comparison.  It’s reported that a small percentage (9%) of funeral homes offer any pricing information on their website which provides Parting.com with a tremendous opportunity for consumer search using the internet for funeral homes.

Parting.com offers line item pricing from the GPL for basic services, embalming, visitations, etc. as well as direct cremation from the funeral homes listed.  As a service to the consumer, the listed funeral home’s prices for at typical funeral (basic service fee, transfer of remains, facilities for viewing, facilities for ceremony/staff, embalming) are conveniently added from the GPL listed.  Average national prices for a casket, dressing/casketing and outer burial container are separately listed but all added together to provide the consumer a comparative look at firms in the particular area of search.

In addition, most of the funeral homes listed have photos of the location (most look like Google earth shots), a link to make an appointment as well as a function for a consumer to review the service provided at the funeral home.

Innovation in the funeral industry continues to evolve especially in technology sector.  I remember in the recent past funeral homes that did not have a computer in the building (I still get applications for one of my companies that appear to be completed on a typewriter) and had a fax with the rolled paper.  From my vantage point, Parting.com has created a truly disruptive innovation site that no doubt is defined below:

Wikipedia defines Disruptive innovation: is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances. The term was defined and phenomenon analyzed by Clayton M. Christensen beginning in 1995.[2] More recent sources also include “significant societal impact” as an aspect of disruptive innovation.[3]

Interestingly, if a consumer is already searching the internet for a funeral home, they certainly have no or very little relationship with a provider.  Consumers now will have the benefit of comparative pricing if they are so inclined to use Parting.com instead of having to call or visit the funeral home for additional information.  Parting.com has “upped the ante” for funeral homes to create more interactive and informational websites to showcase their particular value, services, etc. to secure the internet shopping consumer.

Want to know more?   Tune into Episode #9 of Funeral Nation TV we interview the founders of Parting.com and learn about their disruptive innovation in the funeral industry.  From behind a thick fog of smoke and the Command Post, Cheers Y’all!  #thefuneralcommander

blog post 19 nov

The funeral industry continues to evolve and reflect that survival and growth are contingent on consolidation or strategic alliances.  Just recently, Pierce Mortuary Colleges  announced the merger with Worsham College of Mortuary Science.  Interestingly, the announcement was made after a provocative interview on Episode 5 Funeral Nation TV about the need for change in the funeral service education system. Coincidence?

Vandor Corporation and C.J. Boots Casket Company, Inc. announced a strategic merger agreement this week which will strengthen their collective positions in the funeral marketplace for manufactured and fine hardwood products.

Earlier this year Matthews purchased Aurora Casket creating a funeral service/product manufacturing giant.  The new company is the only of its kind offering caskets, cremation solutions/equipment, memorialization products, cemetery products as well as funeral home management solutions.  Interestingly, their primary competition in this sector has been woefully left behind scrambling around the cornfield seeking headlines of significance.  Of course the acquisition of Stewart by SCI sent a message exemplifying the necessity to consolidate for growth and survival of funeral homes.

What I have found most interesting is the reactions by funeral professionals to merger/acquisitions mentioned along with others that have been occurring as of late.  I can best categorize the majority of reactions as emotional rather than a business perspective.  When I say emotional, I mean like a street corner argument between the Sharks and the Jets in West Side Story.  “I’ll never use so and so; I’m glad I went to school here because blah, blah; these guys are taking over the world” and so on.

consolidation

The decisions of merger, consolidation and acquisition are for strategic and financial stability long term.  The due diligence ( defined as a comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential for those Dancing with the Stars readers) is conducted with expertise probably not taught in most mortuary school accounting classes.

Most that bitch and complain about the business of consolidation and merger rarely have done anything other than receive a check for their employment.  So little contributed yet so much said.  Few business owners or those that have developed businesses engage in the junior high cafeteria rhetoric because they have a true sense of the difficulty operating in our current market environment.

In a nutshell; in order to survive and thrive in the funeral industry whether a learning institution, funeral home, manufacturer or service provider, consolidation is key.  The decisions are made for the overall good of the brand and enterprise, not because of which colors look the best in the logo or the proverbial “we have always done it that way.”  Get used to the headlines and I can assure you there are many more such alliances ahead.  These are exciting times; either jump on board, do something yourself, create disruption or just stand there waiting for the good ole days to return.

From the Command Post and through a heavy fog of cigar smoke, Cheers Y’all! #thefuneralcommander

 

 

part 2The first post “Loyalty and The Funeral Industry (part 1)” has created great responses.  When I say great I mean many responses, not all them happy with me.  I was particularly pleased to find out that my readership includes some “big company executives” that I suppose perpetuated the old Southern saying “a bit dog always yelps.”  I’d like to remind readers that I am sharing my experiences and perspectives from being a funeral industry product/service provider, a funeral service provider, and from funeral consumers themselves.

When I took the leap from the field sales role into entrepreneurship of developing and owning a funeral home, I wanted to take a different approach.  First, I wanted to learn all I could about funeral home operations, processes, the consumer and the markets that I intended to operate.  Because I had no shackles of legacy keeping me bound to “we’ve always done it this way” (a phrase I abhor), I initiated what I was taught in the military called a “table top exercise.”  I went on home removals, facility removals, sat in on arrangements, studied P&L statements, etc. and basically categorized what I believed to be each step of the process on paper. Yep, I wrote down every step, one by one.  Simultaneously, I studied the principles of Six Sigma to create a template of process to overlay of my observations.

One of the most important steps during this process was listening to families during arrangements.  Obviously I could not ask families anything, however I created questions later to be asked in a focus group. The focus group study was conducted in another state with a similar demographic of the first location to be opened.  The issue of funeral home brand loyalty was important because we had no brand or name within the community and we wanted to know how to attract families to our new approach to service.

We had 2 sessions with consumers (about a dozen or so in each, multi ethnic) that had at some recent point made arrangements for a funeral of their loved one.  In a focus group study you may know that the questions sought after are not always asked “point blank,” but they are woven into the process.

One question was “if a new funeral home opened in your town, say in a former bank building in a nice area, would you use that location?” Some of the respondents raised their hand, but only a few.  For those that did not, the question was asked why? Basically, they did not know anything other than it being a new funeral home and didn’t know who was involved which would make them reluctant. The facilitator went on to other questions and then came back around asking “if that new funeral home in the bank building had licensed funeral directors, perhaps with a history of service, would you then give them a try?”  About 2/3 of the participants raised their hands indicating yes.  Again, the facilitator moved to other questions and then settled on prices that they actually paid at various local funeral homes.  We had already surmised the local average of burial and cremation costs by conducting a GPL survey.

We found it interesting that the participants responded with all sorts of dollar values.  The facilitator had to further explain that he was looking for the price of the burial services/casket or cremation services/urn only, not cemetery, outer burial container or obituaries (quite a lot of negative response on obit costs).  Finally, the question came back to “remember that new funeral home in the bank building, operated by licensed directors with experience or credibility?”  “What if that funeral home offered similar burial services and caskets for at least $2000 less, would you use the new funeral home?”  All the hands went up.  Then “if this same new funeral home offered similar cremation services and urns for at least $1,000 less, would you use the new funeral home?” Again, all hands went up responding positively. So there was one of the answers we were seeking; there is a point where loyalty has a price.  This group offered us quite a bit more from how/where they got their information (internet, newspaper, television, etc.) to importance (or lack of) having the actual product on hand or digitally presented would sit with them; all important elements of creating a new operating platform.

We have experienced success at our new brand of funeral service because of this and other “listen to the consumer” processes put into place.  Asking the consumer to provide us information prior to actually physically coming to the funeral home either on home removal or online was met with positive response.  Basically, my theory of getting all the “data collection” out of the way early and focusing in on the life lived was right.  Our proprietary TouchPoints arrangement system engages families in a co-creative process, not a “inquiry of data.”  We made tremendous strides operationally including the death certificate prepared prior to arrangements, digital presentations, consumer engagement via social media which all created a positive funeral experience…building loyalty the new way.

In development, I knew that price was not the compelling reason because other factors are even more important.  I always hear “well, you get what you pay for” in many circles when new competition starts eroding market share. Again, back to the car analogy; the next funeral you have look at the make and models of the cars on the lot (if there are a lot of Buick’s, you are in trouble). The consumer will decide the value proposition.

Frankly in my opinion (and we all know I have one) loyalty must not only be earned, but maintained.  Just because your firm has been serving since Sherman burnt down the South does not dictate loyalty.  Continuous improvement is sometimes painstaking and changes must be made.  A great example of this is a dear friend of mine that has been in the business 35 years and is an owner of a firm serving a local community, primarily Italian, since the early 1920’s (yes, he’s from “up North” and my friend).  The traditional families his firm serves for over 90 years has shifted to a nearby township leaving his location in the middle of a demographic market that has completely changed, including real estate values.  The families still come to him, but he realizes at some point they will begin to look elsewhere for many reasons.  Being proactive, he made a decision to follow the families by moving the entire operation to the township where the majority of his market has moved. His summation is that he needs to follow his market, not stubbornly resist the inevitable. Go into cities and look at boarded up churches…consumer shifts from not only location, but from traditions.  Sound familiar?  I think someone famous once said “go where they are.”

One last observation I personally experienced learning about is online funeral consumers.  By paying attention, we found that families were seeking online services from other states for their deceased loved ones right in our operational zip codes only because our locations were conducting the trade work. So what did that mean?  This particular segment of consumer had no “relationship” with a local funeral home (including ours), searched online, and made a choice based on the information found on a website.  Now I know what some of you will say (yes, I know who you are). “Well, we wouldn’t do the trade-work which is perpetuating the whole thing in the first place.”  Don’t.  The family clearly did not choose your firm in the first place for whatever reason, why not at least get some revenue from the transaction?  Being proactive, we addressed this consumer segment accordingly.  The online funeral consumer segment is growing.  If you think about it, this is the epitome of no loyalty.

So, what’s your firm doing to create and maintain brand loyalty including capturing the folks in your zip codes looking elsewhere?  Why are they seeking funeral services by some other firm that yours? Perhaps your website is not suitable with information (really, take a look at funeral home websites, I dare ya), or the prices you charge may be out of balance for the market (and the consumer has to come see you to get them at your location in a bad area of town).  “Networking” at the Lions Club is going stale, “marketing” by obituary placement in the local paper, restaurant place mat ads and printed calendars is failing.

“We’ve always done it this way” is not the answer for loyalty in the funeral business.  As usual, I am looking forward to the responses prompted by what I shared.  As always, don’t shoot the messenger (however I have been shot at before), but let’s have lively discussions.  So from the Command Post and through a blur of cigar smoke, Cheers y’all! #thefuneralcommander

 

 

part 1I have spent some time in the past years studying the shifts of “loyalty” in the funeral industry from a few different perspectives; from a funeral industry product/service provider, as a funeral service provider, and from funeral consumers themselves. My observations are from actual experiences/research including my tenure as a sales representative for a funeral products company, a funeral home owner/partner and a funeral industry entrepreneur.  There is quite a large amount to share, so this blog will have several segments over the next few weeks.

My first real loyalty (or lack thereof) experience in the funeral industry was when I worked for a big funeral products company. It was my mission to sell our provided products/services to the funeral homes in my assigned territory(s) and secure those relationships with multi-year contracts.  The contract was primarily to provide caskets, urns and some ancillary stuff at a discounted/rebated rate for 100% of the funeral home product purchases. My reality check was during my visits to the funeral homes I would notice products in the garages being stored that were not from our brand.  Additionally, you know how funeral directors love to talk, I was always made privy to why the urn sales were down by “you didn’t hear this from me, but we have whole closet full of X brand urns in the basement.”  What made these example scenarios interesting was “rebate check” time when I delivered the rebate check and it was lower than expectations.  Then it was “chickens come home to roost time” because the number of services provided and products sold were way off base. One of my favorite responses was “we are really here to assist you, but paying you a rebate for purchases from another company was not added to the contract.”

The even larger disillusionment while busting my fanny to not only sell for the company but to generate revenue for my family came when I unwittingly uncovered that I was not the only one in my territory selling my company products; so was my company.  Through local distributors under a different brand name my company was selling a “less expensive product with different features” to the same funeral homes that I supposedly had developed business relationships and even “100%” contracts.  Of course, my direct supervisor vehemently denied that any such activity was taking place until I actually showed him a price list and photos of the product.  That’s where the fun began.

During a particular company meeting I addressed this issue to the company leadership and frankly the responses were hilarious.  First starting with denial, then to “not the same products, these don’t have the same blah blah features” to “they are not manufactured with the same standards and finally “these products are not going to your customers.”  Being like the Coast Guard motto “Semper Paratus” I came with all the evidence with photos of the “non-features” and those photos taken in funeral homes within my assigned territory base.  You can imagine my popularity numbers were flying high with the company “big cheeses.”

This issue simmered for a few months and finally fully substantiated on a customer trip visit to the manufacturer.  While touring one of the plants, I noticed unfamiliar shells of caskets on the factory floor.  There was a point of manufacturing process that we prided ourselves as “unique.”  I watched one of the unfamiliar products go right through that same line and the process performed exactly like the other “core-line” products by the same personnel.  Taking the initiative, I asked the person performing the task in the factory “what type of casket it that, we don’t have those in our area?”  God bless him, he beamed “it’s a BR549 (names and brands not used here to protect the guilty).”  Basically, my suspicions confirmed that my company was manufacturing, selling and offering caskets to the customers in my territory without me receiving any of the revenue for those sales.  Some loyalty.

The influx of “foreign” caskets a few years ago was all the flurry of conversation.  Articles written, comparisons made, law suits brought about.  The “American made” label was touted by some of the companies basically offering that consumers would be totally off-put and “no one should be putting their momma in one of those.”  Hold it a second.  Remember that factory tour?  Stacks and stacks of “Made in China” boxes were abundant and in clear view for all to see.  Huh? And oh yea, how about the “we have a plant in another country, but it’s still our skill and craftsmanship that makes the difference.  I won’t even get started on urn manufacturing, just turn over the product and look for the “made in what country” label for your own answer.

There are other instances but not enough ink or finger typing endurance to share more.  My summations for the reasons for these examples of “lack of loyalty” are simple.  Although funeral homes enjoy the support provided by some of the vendors that provide their products and services, as owners we always seek better pricing.  If nothing else, the contract is supposed to be a binding “loyalty” contract, however I dare say they are pretty much nothing more but a piece of paper.  The vendors get all indignant about this issue, but as the example above with the BR549 product line, contracts really don’t mean anything to the vendor either.  It’s a vicious cycle; funeral homes vie for the best price (notwithstanding contracts) and manufactures sell however and to whomever they can find to buy their products.

I’m old enough to remember vehicles made overseas and how we viewed those vehicles.  Guess what’s at the top of the best selling cars on the road in America?  Some of those very cars we made fun of back then (see 20 Best Selling Cars July 2014).  The point here is consumers demonstrate some of the exact purchase and loyalty behaviors that we mimic but complain about in the funeral industry.

Why are we so shocked that consumers choose less expensive service/products (to some in our industry the analogy code words are “discounters,” cremation societies and online purchasing)?  Subsequent posts to this blog will address these same behaviors from consumers.  Don’t shoot the messenger, it’s an issue worth addressing;  I look forward to your responses and the discussions.  My cigar is about completed…so from the Command Post; Cheers y’all! #thefuneralcommander

 

 

 

 

casket salesMy post earlier this week Let’s Make a Casket Deal has brought many responses.  If the funeral home operational model is in dire need of change to adapt to the shifting consumer market, shouldn’t the casket companies do the same?  The most resounding in box and emails from funeral directors I have received this week is that their casket salespeople are scarce until a promotion or “big sale” is being perpetuated (especially this time of year). A few nights ago, I had dinner with funeral home owners and directors.  They too had the same observation that casket company reps seem to show up now basically “hawking” (not my words, but from a funeral home owner) caskets or whatever their quota says the immediate need dictates your attention.

There was a time that casket company salespeople actually provided training and useful information other than “let’s make a deal.”  Again, the funeral world is changing, but are casket companies adapting?  Do you really need to look at a lithograph to buy a product, or can you go online and see for yourself? Merchandising?  Does a funeral home owner really need advice to know that the profit of a casket is whatever you decide the retail cost minus the wholesale cost? Does the phrase “buy low, sell high” ring a bell?  One of my favorites casket company quotes “YOUR WHOLESALE AVERAGE.”  All I care about is my net profit per sale!  If you don’t know that you can make the same net profit from a 20 gauge as a high dollar 18 gauge, send me an email and I’ll help you out. There is no direct correlation between your “wholesale average” and your net profit per sale…it’s the casket company’s way of saying “your wholesale average is helping our net profits.”

Just for fun, let’s take a quick economics and history lesson.  The cost of a particular white 18 gauge casket in 2004 was just under $1000 and in 2014 it is around $1950 (who knows what it will be in October).  I’m not really good with math, but that’s quite a stark increase in cost. Back then if the margin was $1.500 on this casket the consumer would pay around $2,500.  So, if the same margin was added to this product today the consumer must pay around $3500.  If today you purchase a white 20 gauge casket (or shop around for a similar product) for $700 and the margin is $1,500, the consumer pays around $2,200.  It’s not what you sell, but what you keep.  I have always wanted to conduct a consumer study by having white caskets, same color interior and different gauge/materials/interior material all lined up with corresponding retail prices.  What would the consumer buy?

Now you would possibly hear from some (most likely a casket company) that “we have conducted that test, and they chose the model with all the bells and whistles because of the perceived value.”  BUT; what if this was an actual at need purchase made with real dollars and has to be added to all the other funeral home, cemetery and cash advance costs?  Think about it.  Which of the before mentioned white caskets are you, the funeral director “better off” selling?  Either one.  IT’s the families financial and personal choice and they are happy and your net profit per sale is the same.  Help me understand where “your wholesale average” makes a lick of difference here?

Times are changing and so is the entire funeral industry operating model; from serving the shifting consumer, the funeral home, to the vendors of products and how they sell to us.  It’s time to take an objective and new look at how to purchase, price and position our goods we provide the families’ we serve.  So that “knock at the door from your new best friend to let’s make a deal” requires more scrutiny. Remember, it’s that time of year.  Cheers y’all! #thefuneralcommander

bad dealIt’s September; kids are back to school, college football is here, we pack away our white shoes, and some casket companies are playing “let’s make a deal.”  Obviously it’s been a tough year for casket sales and once again they are making last minute efforts to “make the year” for their investors (but more important for company bonuses).  It used to be called “pull ahead” where funeral home owners were asked to buy extra caskets at a “great deal” meaning a discount on top of the normal discount and savings from the upcoming price increase.  However, upon a close look and drill down into the numbers, it’s not difficult to decipher which entity is getting the best end of the deal.

Just this past week a fellow funeral home owner reached out to me for my opinion on a casket company’s “let’s make a deal” offer.  Immediately, I found it amusing the casket company was making an offer that was contrary to their original contract and the assumptions made from the wrong date of contract expiration.  Contract?  Who needs a stinking contract? This was the first evidence of desperation and what appeared to be deception attempting to “make the year.”

Here is the overview of what’s “behind door #1.” The casket company wanted the funeral home owner to purchase a pretty good size bulk number of caskets before September 30th. The bulk order would be discounted (in addition to their normal discount/rebate) and the firm would have a short time period to pay for the bulk order.  There were restrictions on what type of caskets that could be included.  AND; based on the current contract (you know the one they got the date wrong), they would “forgive” what looked like a shortfall of achieving a purchase bonus rebate and “give” the firm that particular amount calculated AND just renew the current contract for another x amount of years.

So let’s break this down.  The casket company wants the funeral home owner to buy x number of caskets now and store them until this purchase is depleted.  I have a few problems here.  Isn’t the casket company that came up with “just in time delivery” so funeral homes are not required to “warehouse” caskets? Does this defeat the purpose of that “room” the funeral home paid for over time?  So, is the funeral home owner is supposed to fork out a five figure check over a short period of time (equal payments of course) for caskets that may not be used for months?  Of course, the casket company explains how much savings are realized with such a purchase by “avoiding the impending price increase.”  So the rationale is spend five figures of cash up front to maybe save 3-5% on purchases you are going to make anyway…damn the cash flows!  Oh yeah, you can’t order the casket that you sell the most…they don’t count.

If the casket company is “sucking eggs” from low sales, do they even acknowledge that the funeral home probably has suffered financially over the same time period?  Back to the contract (you know the one the casket company holds near and dear, but willing to “forgive” all when in their odds).  In this particular case, the casket company said that if the funeral home makes the bulk order before September 30, then those caskets will make up all shortfalls for the “wrong date” and a new contract will start October 1.  The “math” says that the funeral home has another 6 months on their contract and with their average monthly casket purchase history; there could be a shortfall of maybe 30 caskets which would keep the funeral home from the “purchase bonus.”

I’m not real good with math, but if the funeral home owner buys their average amount of caskets monthly for the next 6 months and monitors their purchases, the worst case scenario would be that the funeral home would need to buy an additional 5 caskets per month.  Of course, take into account that November-February is typically the “high season” so the additional purchases may not be necessary. The amount of units the casket company offered for this “deal” exceeded the amount of the impending “shortfall.”  This smells like the fish you caught over the Labor Day weekend and just remembered are still in the cooler.

“Behind door #2” is the ability for the funeral home to continue their average casket purchases over the next 6 months, monitor purchasing units for needed additional adjustments, hang onto their cash, order just in time products (only the ones that they really need and use), earn their “purchase bonus” and renegotiate a new contract.

Let’s take a look at what should be “behind door #3” but is highly unlikely to ever get revealed.  An annual contract, not multi-year. Let’s say the casket company provided a 25% discount/rebate over 3 years.  Good deal?  Only if there are no price increases over the life of the contract.  The first year of the contract is great (unless you signed in the wrong time of year, see note below) and let’s suppose that the casket company increases their prices an average of 4% per year.  That means the last year of your 3 year sweet deal you are now getting a 17% discount/rebate in real dollars, not the “Monopoly Money” casket companies base their figures.  By negotiating annually, a funeral home can appropriately avoid the price increase shell game. Renegotiate the next contract in conjunction with price increase time.  AND make every casket purchase count.  It’s not the funeral home’s issue that the casket company “doesn’t make the same margins” on certain caskets. Certain lines, non-gasketed and cremation caskets are…caskets.  If the casket company is unwilling to include their “low margin caskets” to the count of discount/rebate/bonus, then purchase those caskets from another casket company (include this information in the contract).

If your “new best friend” casket sales representative has been (or is getting ready) to play “Let’s Make a Deal” take notice!  It’s that time of the year; price increases from suppliers, adjustment to GPL/product price lists, recovery from the financial strain of the slow summer season, and bulk purchase offers so the casket company can “make their year.”  Make good financial choices based on math, not loyalty.  After all, your competitor may have a better deal from the same company; there is no loyalty from the “Let’s Make a Deal” crowd.  Coming soon to The Funeral Commander blog: the “loyalty” post for us to ponder.  Cheers y’all!  #thefuneralcommander

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