SizeMatters_pt1Live Oak Bank specializes in helping funeral homes and cemeteries invest in their futures, offering  both capital and strategy to customers to help them grow. Each of the articles in this series deals with a growth opportunity that owners and managers sometimes miss.

Part 1- The Experience Economy:
Why bigger is better when it comes to creating memorable experiences Look at any successful service business, whether it’s a hospital, a hotel, a restaurant or even a funeral home, and you’re bound to come away with one undeniable message: the experience you create for your customers and guests is crucial to the future of your business. It’s what they remember and talk about, long after they’ve forgotten the price or the products. The next time they’re in a position to buy your service, what they remember is what guides their choice. It’s why you see the leaders in all kinds of service industries making big investments in designing a better customer experience. They’re also making big investments in facilities, technology and training to ensure that the key elements of the experience are delivered consistently – every element, every customer, every time.

And Your Wait For A Table Is…

For example, At Darden restaurants (parent of Olive Garden, Red Lobster, Long horn Steak house, among others) the company recognized that success was creating problems of its own, where growing demand produced wait times that might undermine brand loyalty. In response, the company invested in developing a “Meal Pacing” computer system designed to speed up the entire process. It helps organize workflow in busy kitchens so that orders move in and out with mathematical precision, making sure that, say, all the entrees for that party of 8 are ready faster, and just as important, ready together. Darden’s Meal Pacing system shortens the customer’s wait for a table in peak times, and improves the way orders are served. It also lets busy restaurants turn over more tables in a given night, improving profitability overall.

Making Memories

Another example comes from Walt Disney World, where the entertainment giant realized that happy family memories were one of the most important “deliverables” that Disney could provide. In response, the company invested in rethinking on-site photography to literally make happy memories a saleable product. Digital photos have long been an amusement park staple – think of those automatic cameras at the top of the roller coaster that capture full-grown adults screaming in zero-g like little girls. Disney took that opportunity to a whole new level, staffing the park with roving photographers who carry top-notch equipment. They’re stationed near every scenic point in the park and trained to reliably take beautiful, memorable family photos, without that awkward moment where you hand your camera or phone to a total stranger and hope for the best.

An important ingredient in Disney’s program is a wireless system where families carry a bar-coded “PhotoPass” that can be scanned by any photographer throughout the vast resort network. That system tags every photo as it’s taken and automatically uploads it to a website where it’s available for purchase by the family, even weeks after they’ve gone back home. A short vacation can produce dozens or even hundreds of high-quality photos, and an average add-on sale of nearly $100 per family.

Funeral Service Opportunities 

In funeral service the situation is even more critical, because most people actually or arrange funerals just once or twice in their lives. Like any other event business, marketing in funeral service depends on the impression you make on the guests. When they attend services (at your firm and at your competition), they’re unconsciously comparison shopping. As funeral guests they’re getting a free sample of your service that will guide them when it’s their turn to be funeral hosts. The unhappy reality for most funeral providers is that the free sample isn’t very inspiring. Having spent a lifetime attending traditional funerals, about 40% of the country has opted out of traditional burial services, choosing cremation instead. In market research, when consumers explain why they choose cremation they often complain about outdated traditions, outdated
facilities and outdated content in traditional funeral homes. Since most consumers have never actually purchased or arranged a funeral before, their complaints must be based on your free sample – their experiences as guests.

Why Are We Still Talking About This?

The formula for success in the experience economy isn’t a secret – some magical mystery that only the select few may know. It’s a straightforward matter of investing, first in designing an experience that sets you apart, and then in the People, Place and Process to deliver
it consistently. Businesses around the world have mastered it to create a competitive advantage they can count on to help them grow.

If the answer is that simple, then why are funeral businesses so slow to embrace it? Of course, tradition is part of the answer. Funeral homes have a long tradition of outsourcing the job of creating event “content” to one of the least predicable partners – the clergy. Driven by the rules of their own denominations and their unique styles as individual ministers, the clergy keep funeral directors guessing about the quality and content of every service right up to the end. Some funeral directors have begun to take over the content-creation themselves, but this usually requires an investment in people and technology. They need celebrants, digital media wizards and audio visual hardware to build a better service.

Another obstacle to change is the fact that funeral and memorial services are a once­-in-a-lifetime event in another sense. For each family, this is a never-to-be-repeated, last-ever chance to say good-bye to someone they love. For funeral homes there are no do-overs – just one (and only one) chance to get everything right. There are dozens of details to be managed, and just a day or two to pull everything together. Since most funeral directors work from handwritten notes on the back of the case folder, consistency and reliability are always issues. The fear of getting
something wrong can make funeral directors even more conservative and undercut creativity before it starts. The quality of the experience is usually what suffers.

Information systems have real promise as a way to make execution more consistent and reliable in funeral homes. By coupling automatic task lists with mobile web access via smartphones and tablets, we can do a lot to make execution idiot proof. Staff can be reminded wherever they go, and managers can keep tabs on everything that is due (or overdue). Systems are beginning to emerge with these kinds of capabilities, but funeral homes have been slow to adopt them.

The Real Issue

The biggest reason that funeral homes haven’t joined the Experience Economy is alsothe simplest – economics. Most funeral homes are just too small to afford the tools they need – better facilities, better technology and better people – to consistently create a better experience and grow the business. A business doing 1 50 funerals a year can only use its tools about 3 times a week. It’s not going to throw off enough cash to self-finance the improvements that it takes to stay competitive. Fortunately, better access to working capital can help overcome those limitations. A $200,000 SBA loan at 5% can have payments as low as $1 , 100 per month. This opens the door to a couple of interesting possibilities.

First and simplest is to invest in those facility and technology improvements now, while they can still create a competitive advantage instead of just helping you catch up with your competitors. Using the industry average funeral of $6,560 and a 20% dynamic profit margin on new cases, it would take just one or two new families per month to fund that investment. To look at it another way, if your New and Improved experience lets you generate a 4% average upsell on your services, you would fund the investment with room to spare.

A final opportunity is the tried and true approach – buying out one of your less­ capable competitors. Assuming you can negotiate a realistic purchase price (always a big ‘if’ with funeral directors) the economic advantages can be huge. You grow your market share immediately and have
more case volume to absorb (and profit from) that New and Improved Funeral Experience you worked so hard to create. The savings from consolidating back-office functions like accounting, transportation and the prep-room will often fund the financing cost and leave profit to spare.

The Common Ingredients

All these strategies have two common ingredients: Vision and Leverage. As a business owner you have a vision of what you want your business to be – a powerful vision of a compelling experience for customers that will give you a lasting competitive advantage. At Live Oak Bank, it’s our job to help provide the final ingredient – the leverage you need to grow your business and make your vision a reality now.

 

About the Authors

Doug Gober is a Senior Loan Officer with Live Oak Bank. A CPA by training, Doug joined Live Oak after working with some of the leading companies in the funeral industry for more than 30 years, including Batesville, York Casket, Matthews International and Carriage Services. 

Paul Seyler is President of Competitive Resources, Inc., a New Orleans-based firm providing research, strategy and execution support to companies both inside and outside the funeral.

To download a copy of this article, click here: Size Matters Part: 1