Producer Price Index just rose 10.8%. . how’s your business handling it?
Unless you have been living on the Space Station you’ve noticed prices in almost all things are moving up. Housing prices, gasoline, groceries, service work, and even that cup of coffee or latte that you buy at Starbucks. I’m old enough to have lived through this before in the 1970’s and early 1980’s. . . life will get back to normal, but just like in those days during the inflationary period there will be some businesses who fall victim and close their doors because they could not adapt to upward trends in costs.
So, as you can see here, the Producer Price Index (PPI), as announced on Tuesday, rose 0.8% in May bringing the trailing 12-month rate to 10.8%. What that really means is that costs to produce and deliver products and goods rose, on average, 10.8% over the last year. If that is true, then the costs of operating your funeral home, on average, went up 10.8% over the past 12 months. . . so if you didn’t raise prices, or increase your volume, you are getting less margin than last year.
To be honest, the 10.8% number is better than the 10.9% number in April or the 11.5% number in March. . . but it is still much higher than the 2-3% numbers we had been seeing for the past 20 or so years. And, it is my opinion that the higher number will cause challenges in the death care profession and industry.
What will some of those price challenges be? Think of utility charges, labor – not only of your staff but staff of your suppliers who will build the increase into prices, steel costs for caskets, concrete costs for vaults, transportation costs for delivering the caskets and vaults. You get my point.
Good operators in the death care business know it is not as easy as just raising your prices 10.8% to keep your margins. It’s much more nuanced than that. . . . .because if you just raise your prices you have potential clients who may look for another provider or another less expensive disposition method. The end result of losing that customer or higher priced disposition method is lost revenue.
Operators have decisions to make. One easy option that I have seen, but I don’t think is a good idea, is that some funeral homes have already started adding a “Temporary Inflation Charge” to their services. While this can bring in some revenue to keep up with costs and does let client families know it is a “temporary charge”, I see consumers looking at the idea who may find it difficult to swallow. . . since their costs for their lives are going up also and they have nowhere to get a “temporary relief” from those costs — they may look at your business model as greedy. My opinion is that if you decide to raise prices, then just raise prices without any temporary or permanent surcharge being noted.
Another idea on the other end of the spectrum is to ride out the storm in a consumer friendly way. Just use your normal pricing procedures and know that you will take a hit for a specific period of time in the hopes that it builds brand loyalty and possibly increases market share . . . .taking some share from those that are raising prices at a larger than normal manner. Because there are few, in comparison to other professions, price shoppers this is somewhat difficult to do in the death care environment. . . but it is one suggestion.
At the end of the day keeping customer loyalty and adding clientele will in the long run be very beneficial. Funeral homes are generational businesses. . . . maybe it is best to play the long game and if you do increase prices do so in a sympathetic manner with clientele interests in mind. . . . The profit you may get over the long term could very well be multiples of what you will lose in the short period and could set you up well for the future.
More news from the world of Death Care:
- Community members frustrated over cemetery upkeep. Morrison County Record (MN)
- Tow truck procession honors Greg’s Towing owner, Greg Prunty, who died at 68. Akron Beacon Journal (OH)
- 1970s cold case remains open after investigators exhume wrong body at cemetery. Video story and print article. WFSB TV (Connecticut)
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