You would think that an aging population would mean record setting profits in the forecast for the funeral industry. Many would suggest that this industry is “recession proof” for the simple fact that everyone will die eventually; so you’ll “never run out of clients”. The reality though is there are a number of factors that influence this industry and times are changing.
Health Is Hurting Business
Even though the population is aging, people are living longer. Advances to medicine are great for people, but are hurting business. A report by Crain’s New York Business discusses how New Yorker’s are now living an additional 17 years past 70. As stated in the article, the problem with this is that people are having a heart surgery at 70 and then moving to Florida or South Carolina for another 15 years. While this is great for businesses in retirement communities, it is hurting the areas people are moving away from.
The Numbers Don’t Lie
The cost for services is rising, and people are seeking alternative options. According to the National Funeral Directors Association, the median price for a funeral (including service, casket, embalming, wake, transportation, and burial) is around $8500 dollars. As costs continue to rise, people are choosing more cost effective options. New York state has seen a 95% increase in cremation rate from 1999 – 2013. The main reason for this is that cremation typically cost about half of what a traditional service does. People are choosing to instead have a loved one cremated and then hold their own celebration of life ceremony at home or other venue rather than go through a funeral home for a wake and service. In 2015, the NFDA projected for the first time in their history, the number of burials annually will be exceeded by the number of cremations. By the year 2025, the cremation rate nationally is expected to rise by 56% from figures reported in 2010.
As times are changing, so too should funeral homes if they want to address these issues.
You’re Offering Too Much for Too Little!
A major issue causing a decline in profit margins is that funeral homes are offering too many features and services. Today many caskets offer the same features from top of the line models to the base model. An ICCFA article on this issue has noted that “corner pieces, head panel embroideries and other structural features (such as the memory drawers) are very popular. But instead of being reserved for our highest-priced units, these features are (for the most part) available from the top to the near bottom of the line”. The issue with this is that the cost for caskets is based off of the cost of material for the casket. Many people have trouble choosing the more expensive model made of mahogany opposed to the cheaper pine option that looks quite similar. When you’re purchasing a new car, the base model and top end will both look similar. The reason people will buy a more expensive model is because it comes with additional features like a backup camera and GPS. Caskets should be sold in tiers based off of the features. If someone wants the bare minimum, that is the base model. If you want to include the extras, the cost should be adjusted depending on the add-ons.
Online Competitors Are Selling Products, You Should Sell Services
Casket sales are not the only thing affecting profit margins. Online companies and retail giants like Costco and Walmart are now selling caskets and urns online at a fraction of the price. Price matching these companies is hard to do for most independent funeral homes. There is something you can offer that they don’t – services. The real way a funeral home makes a profit is through serving families. Funeral homes can offer a variety of services to family ranging from options on the day of the service, use of the space, and aftercare.
Many funeral homes have services they can offer to families. This includes a menu of services that can be selected for the funeral. By creating packages that offer different levels of service, funeral homes can attract people looking for a cheaper option. If the cost of a base model casket and service brings the cost down closer to the cost of cremation, some families may be inclined to choose a funeral opposed to cremation. Tiered pricing would also allow people to mix and match their service and casket to get a price that works for them.
Event space and aftercare are also services that can be marketed to families. Many funeral homes have invested money into large space for people to gather. The use of their space should be marketed to families to let them know the capabilities of their space. One example of this is Monahan Funeral Home in Providence Rhode Island. The family that owns the funeral home has converted the space next door into a bar. The funeral home is able to offer packages to families that utilize the bar space for afterwards. This is a growing trend where funeral homes are offering packages to bring in caterers with liquor licenses to bring in a social aspect to their services. Unique approaches to the event space and the types of aftercare you can provide families are all innovative ways to market your services to families.
It’s Time to Embrace Change
In many cases, families are not aware of the different services that are available to families. By marketing innovative services to people; funeral homes can attract new customers by highlighting the unique offerings they have. Consumer trends are always changing; businesses need to adapt to these changes and adjust their offerings to continue to draw in consumers if they want generate business.