“They’re positioning themselves as unique in the market. They’re not trying to be all things to all people.” –toy industry analyst Chris Byrne on the FAO Schwarz turnaround. Too many funeral businesses try to serve the entire community, even to the extent of providing no-cost traditional funerals to the indigent. Differentiation, by definition, means realizing that your concept will not apply to everyone and charging the people who want what you have enough to be profitable. This has been the most difficult message for funeral service to learn. As consumers, most of us inherently understand positioning as a marketing strategy. We understand the position of the retail discount store relative to a mid-price range department store versus Saks and Neiman Marcus. Having purchased cars, we immediately comprehend how an Infinity is an upgrade from a Nissan, but doesn’t have the panache of a BMW. Even though we understand the concept of positioning with other products and businesses, most funeral home owners fail to implement positioning in their own business and in their own market. The absence of positioning in funeral service is the primary contributing factor to the shifts in funeral home market share that occur in most communities over time. Positioning strategy is a matter of understanding how funeral homes profit from traditional funerals and cremation costs, and deciding which position a particular facility best fits. The most profitable position for a funeral home is as the quality leader. The quality leader can charge higher prices, enjoys better profit margins and is insulated from discounters. But being the quality leader demands superior facilities, staff and a sufficient level of advertising to maintain a high level of awareness within the market.
Capturing the Position as the Alternative to the Leader
The challenge most funeral homes have is that another funeral home in their market has a firm grasp on the most desirable position. How should a funeral business position itself when the most desirable position is unattainable? For many funeral homes, the strategy is to position themselves as quality, but in contrast from the market leader. For example, many consumers believe the market leader only does one kind of funeral, having attended so many funerals at the leader’s funeral home over many years, and for the most part, noting they all appeared to be about the same. As such, over time, people begin to think the leading firm does only one kind of funeral and it’s expensive. Research studies conducted by MKJ Marketing for funeral home clients nationally include questions regarding the availability of cremation services from funeral homes in their community. As much as 59 percent of consumers indicate that a leading funeral home in their community does not provide cremation services, or that they do not know if that firm provides cremation services. Contrasting a funeral home against the leader is a matter of understanding how consumers perceive the various firms in a market and creating an advertising plan that takes advantage of the consumers’ perceptions. This can be accomplished with personalization, flexibility, serving selected religious groups and ownership. For example, a client recently mentioned how no national corporation would offer an aftercare program similar to theirs because of the expense involved. This firm purchased a lovely small home and invested in extensive remodeling to create a suitable facility for an aftercare center. The firm schedules grief-counseling groups throughout the week, and its investment in aftercare is significant, but what is the payback? In this community of two funeral homes, what better way is there to demonstrate the difference between the national corporation and a family-owned firm than by providing a special service the competitor can never match? Over time, the difference in the firms will become evident, even to the competitor’s most loyal clientele. Many special features and benefits are available from family-owned funeral homes that national corporations simply will not, or cannot, match. Feature these differences in your advertising to reinforce the value perspective. While you can probably think of others, here are a few examples:
- The importance of selecting a funeral home that operates its own crematory
- Special talents and training of individual staff members
- Participation in civic events
- The advantages of a funeral home and cemetery operated by one company
- Holiday grief programs
- The convenience of multiple facilities
- Pet cemetery or crematory
- Local ownership of mausoleums
The objective of advertising is to verbalize your funeral home’s assets in consumer terms. For example, most consumers would not immediately appreciate why it is important for a funeral home to operate its own crematory. Although some people are aware of the abuses committed by some commercial crematories, most consumers are not. For consumers to appreciate the difference, your advertising must effectively communicate the funeral home’s high standard of service and professionalism. Over time through effective communication, families preferring cremation will willingly pay a premium for the perceived value of having the cremation performed locally by concerned professionals as opposed to transferring the deceased to another company, often located in another city or county.
The Challenge of Discounting
It is impossible for many funeral facilities to attain the position of quality leader. Reputation, location or the physical structure can preclude the consumer from ever perceiving some funeral homes as quality leaders; nonetheless, these facilities can still be profitable. The second most desirable position is the low-price leader. Low-cost leaders can be very profitable, but again the strategy demands much more than just lower prices. A significant number of discount retail concepts have failed during the 1980s and 1990s. A recent article in The Wall Street Journal chronicled the rise and fall of category killers- retail stores that make it impossible for other retailers to compete in entire categories of consumer goods through high volume and low prices. For example, Home Depot has captured the market for Hunter ceiling fans, Weber Grills, quality brand hand tools and other products. Conceptually, the casket retail store would be considered a “category killer” because its objective is to undercut traditional casket prices so much as to preclude funeral home casket sales (just for the record, this isn’t going to happen). As history will attest, discounting is a very tough business. It is particularly difficult for a funeral home with an established clientele to begin offering discount pricing and still realize a profit. Do the math: A 100-call funeral home with an average sale of 34,000 grosses $ 430,000. A $1,000 discount reduces gross revenue by $100,000. Net sales after discount are $330,000. To regain the lost revenue, this firm must serve an additional 30 cases at the discounted price just to break even. Increasing volume also increases overhead, however, and unless the volume increases significantly, the firm could very well conduct more funerals and generate less revenue, thereby reducing their profits. Many funeral homes fail in the low price position simply because their cost of doing business is much greater than their prices. As such, the first challenge in capturing the low-price position is to determine how the firm will profitably operate with lower prices. It isn’t easy and demands the owner/operator make hard decisions and maintains strict discipline. Ironically, operating successfully as a low-price leader demands even more advertising than does the quality leader. The challenge is even greater in funeral service than in other industries because a funeral is a tribute. The target audiences for discounted funeral services are people who really want a quality funeral, but can’t afford the quality leader. As such, those families most likely to have a traditional funeral are unlikely to patronize a funeral home that has aggressively advertised low price. That is why most discount funeral concepts have a product mix of 80% minimal cremation. For the tribute to be meaningful, it must be dignified. The wrong kind of advertising can position the lower-priced funeral home as cheap and crass.
Competing with Discounters
The best and only, defense against a price discounter is to establish the value perspective in the consumer’s mind. The American consumer is well educated and sensitive to value, so the challenge is to educate consumers to your firm’s advantages. When one company advertises service and value while another advertises lower prices, consumers “position” the two in their minds. They conclude that “one firm is good, the other is cheap.” Admittedly, some people will consider price as the only priority and will select the low-cost firm. Often, in funeral service, this group represents the “no pays and slow pays.” Families of means, special needs, a discerning sense of value or sensitivity to the purpose of a funeral will select the “service-oriented” firm. Over time, the value-based firm will build a clientele of quality business.
A funeral home staff member participating in an in-house training program once asked the trainer: “At what point do we refer a family to the lower-priced funeral home? I mean, at what price do we not want their business?” the funeral home owner was stunned; the firm offered price packages competitive with any firm in its market and, like most funeral homes, contributed its services to the truly needy. Nonetheless, from the associate’s perspective there had to be a price point at which the firm would not want the business. The question is-who is at fault for this type of thinking? The staff associate? The owner? Obviously, in this case the associate had not received adequate training to accomplish the job. Success in a service business, regardless of the nature of the competition, demands a well-managed organization, and training is an important management function. When asked a question, associates will respond with an answer that seems reasonable to them at the time. It is management’s responsibility to provide the answer that best reflects the company’s policy.
Increase Your Visibility
Based upon research studies conducted throughout the United States and Canada, approximately 25 percent of consumers aged 35 and older expect a funeral to cost in excess of $7,500. Another 22 percent have no idea at all about the cost of a funeral. Ignorance of funeral costs and fees encourages consumers to consider purchasing the lower-price alternatives they see advertised. People today want to be informed-more so than in the past. That is why they respond to preneed promotion, shop prices, and attend informative public seminars and other outreach efforts. Facilitating communication between customers and businesses has been one of the driving forces of technological advancement throughout American industry for the past two decades, resulting in the development of the Internet, cable advertising, infomercials and toll-free telephone numbers in addition to the traditional advertising media of broadcast television, radio, direct mail and billboards. Because funeral homes are considered “somber,” the public is more reluctant to contact a funeral home than other types of businesses. Consequently, funeral homes should invest even more aggressively in their promotion than other types of businesses.