Business

The Pricing Conundrum

Foundation Partners why I partnered

There is no doubt that in any business the pricing of the product or service must work on at least two levels.  The first level being that the price is appropriate enough to draw the customer to – or at least not drive the customer away – from the business.  This would be known as having a “competitive” price for your service.

The second level of the price point set for the product or service is that the price needs to be adequate enough so that the business can bring in enough money to cover expenses, make a profit, and allow the business to be a going concern.

Sounds pretty simple — a fair price to the consumer and an adequate return for the business.  However, it is not quite as easy as it seems.  As a matter of fact, I think it is getting downright difficult in funeral service to set the right price points that can draw the consumer and yet produce that going concern business.  Furthermore, the smaller the funeral service that you operate, the more difficult it can be.

There is a lot of assurance for the consumer when he knows the “final price” of a product before he contracts for it.  That is one of the biggest hurdles facing funeral service — how do we provide that final number before we know everything that the consumer wants?  Think of that family that contacts your mortuary and then is disappointed in the price of caskets or knowing that a Saturday service will cost $500 extra.  In today’s world, people want to know those issues when they make the decision for you to take care of their loved one.

As a consumer, I’m no different.  My wife and I love to travel.  One of the things where we have absolutely changed our consumer habits is that of ground transportation in other cities.  We used to call a taxi cab and I would get anxious about the price as the meter just seemed to keep running and running.  We are now happy Uber users and one of the consumer reasons is that the trip is priced totally before we ever step in the car.  If we get stuck in traffic or have to use a detour there is no stress on my part about having a meter running – the total cost of the trip has been already agreed upon.  Taxi cabs have been running in American cities for over 75 years and the new Uber system is bringing them to their knees.

I think the funeral and cremation consumer is no different than that Uber customer.    They want to know the final bill.  They don’t want to sit in an arrangement office and have $500 added for a Saturday funeral or $300 added for an “expedited” cremation.  Funeral service has had it good for a long time and have been able to draw in client families by reputation, facilities, and location.  However, the consumer is becoming more sophisticated and I am of the opinion that a clear profit point in pricing is going to be tougher and tougher to reach as consumers continue to look for a total price prior to provider choice.

Here are a couple of things that have been in the news recently that point to this:

  • Dignity, PLC, the only publicly traded funeral firm in the United Kingdom and that country’s number one provider of services, has announced that they will be slashing their simple funeral prices by 25-30%.  They cite increased pressure as consumers are shopping online and have warned investors that “Customers are shopping around more in an increasingly price-conscious and over supplied industry.”  They expect the average simple funeral price in England and Wales will be about US$ 2,776 this year as compared to US$ 3,753 a year ago – a drop of almost 30%.  You can read more about this here.
  • The Federal Trade Commission (FTC) Funeral Rule is schedule for review in the United States in 2019.  Groups such as the Funeral Consumers Alliance and the Consumer Federation of America are pressuring Congress to review it and bring it into the digital age.  They argue that it should not be burdensome as funeral homes already have price lists which should be required to be posted on-line.  You can read more about this here.
  • Increasingly, I am hearing about companies or consumer groups that are trying to figure out that widget or mobile app that will allow consumers to bid for funeral or cremation services at need.  It is just a matter of time before someone comes up with the right widget – like Uber did – that will disjoint an industry.

So, what do funeral service firms do in the meantime.  I believe that you have to be always adapting your cost of business basis.  It is my opinion, that those firms with large fixed cost structures will be most vulnerable to a new way of consumer choice.

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