SizeMatters_pt4Live 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 4 – Thinking Outside the Bun

Why a Broader Offer Can Make a Bigger Business

In funeral service we all have to deal with a business where demand is absolutely finite – there was, is and always will be just one death per customer, no matter how well we do our jobs. This drives an obvious priority for death care businesses: it’s essential to grow revenue per case. Most funeral homes have known this for years, so the low-hanging fruit has already been taken – the quick easy fixes like flowers and prayer cards that don’t require real strategy or investment.

Today, real growth is harder to achieve, but potentially more valuable when you do. It takes deliberate planning and investment to reach beyond the low-hanging fruit, and not all of your competitors are willing or able to try. Expanding your offer can give you access to markets, customers and revenue that your competitors can’t touch.

The Missing Events

Where funeral homes and churches once enjoyed a near monopoly on funeral-related events, the market has begun turning to other sources. According to a 2010 study by the Funeral and Memorial Information Council, (FAMIC) the top two places to hold a funeral or memorial event were “park/theater” and “hotel/event place.” Churches and funeral homes, which had placed 1st and 2nd as recently as the 2004 FAMIC study, were ranked 4th and 5th by 2010. Even if we debate the individual numbers, we can’t miss one unavoidable conclusion to be drawn from this research: a big segment of the market is looking for something besides the traditional funeral home experience. If they can’t get that experience from the traditional providers, they’re perfectly willing to look somewhere else.

For innovative funeral directors, this news points to an interesting opportunity. If consumers are willing – even eager – to embrace non-traditional funeral venues, why not build or buy one. It could share the funeral home’s name and brand, but it wouldn’t have to. It could be physically connected to the funeral home, or it could be in another part of town, in markets the firm otherwise couldn’t reach. It could be equipped to handle traditional services, but could also be designed to handle events that are completely different – happy, noisy events that families now take to other providers.

Building or buying an event facility is a big investment. It’s not the right approach for every funeral home, but for those with access to the needed capital, it could be a great opportunity to grow beyond the limits of traditional funeral service.

Making Memories

Like weddings, funeral and memorial services are once-in-a-lifetime events that can often bring distant family and friends together. Unlike weddings, funerals and memorials have an immediacy that makes them unique. Where weddings are planned months or even years ahead, funerals and memories are put together on a few days notice. Where wedding guest lists are the subject of endless preparation and debate, the attendance at funerals is spontaneous and even surprising. In many families this funeral is the last time this particular group of people will ever be together.

All of this immediacy make another contrast even more glaring: unlike weddings, funerals usually have no organized effort to preserve the memories of this special gathering, or any of the other gatherings that accompany it. We’ve created an impromptu family reunion on 72 hours notice, and then we don’t do anything to record the results. As an industry, the closest we get is an old-fashioned guest register book that capture the basic facts without much context or meaning – just names and dates.

There is a powerful opportunity to do a better job capturing memories of this special event – the names, faces, stories, toasts, and tears that the hosts and guests share with each other. Some of the possibilities include:

  • Assign a staff member to take pictures during the informal events, or hire a professional photographer to capture stills and video from beginning to end.
  • Invite and encourage guests to record stories about the deceased as the arrive and sign in.
  • Create a highlights video for the service, featuring biography the tribute video, event photos, videos of the eulogies, and memories shared by the guests, to be given to the family as a gift, and available to the other guests for a fee.

It’s worth mentioning a key requirement for success with any of these ideas: you need people with the skills to do these things. It’s not that these skills are hard to find. It’s just that mortuary schools seldom teach them, and licensed embalmers rarely have them. If you haven’t done it already, you may need to adjust who and how you hire to make sure you have these skills on your team.

If experience in the wedding industry is any indication, capturing and delivering these memories should be a solid revenue opportunity, potentially worth hundreds of dollars per case to a provider’s bottom line.

Dog People and Cat People

Another obvious way to expand the funeral home’s offer is to add cemetery products and services to the at-need arrangement. It’s so obvious, in fact, that it’s tempting to wonder why everyone isn’t doing it. The sad reality is that funeral homes and cemeteries are like dog people and cat people – nice enough on their own, but grumpy and competitive whenever they’re together. In some states there are regulatory barriers, but most of the time it’s just temperamental differences and smoldering rivalries.

For funeral homes the result is an add-on sales opportunity going to waste. For cemeteries the result is even worse. Consumer research shows that many cremation families (about 40% in some studies) go through their entire death care transaction without ever being presented with a cemetery offer. They take the cremated remains home in a box and do nothing, because that’s all they know.

One simple solution would be for the funeral home to form a marketing partnership with a local cemetery to present its property – especially cremation property – during the at-need arrangement conference. The cemetery could manage the funeral directors much like contract salespeople, providing marketing materials and training. The usual sales commission could go to the funeral home or funeral director and
everyone’s bottom line would benefit. There would certainly be issues to resolve with contracts and inventory, but nothing that can’t be pretty easily overcome.

Another, more interesting solution would involve the funeral home making a bulk purchase of property, especially mausoleum or columbarium spaces, from the cemetery. Under this scenario, the funeral home would buy at a deep volume discount and be free to set its own selling prices. This could potentially be more profitable for the funeral home, and open the door for some creative solutions, including “complete” burial and cremation packages.

The bulk purchase approach would have its own set of hurdles to overcome, including raising the capital required to make the purchase in the first place. There also might be cemeteries that don’t want to sell in bulk, but compared to having 40% of the cremation families miss the cemetery offer altogether, it seems like there will be room for compromise. Once the agreements are in place, there will also be legal and administrative issues to be worked out, since the funeral home would actually purchase and resell the properties to consumers.

Competing with Yourself

Sometimes when you’re trying to expand your funeral home’s offer, an added product or service just doesn’t fit well under the flag of your primary brand. It can be in conflict with your positioning, your price points, or even your target customers. One way to deal with the conflict is the creation of a “flanker” brand to cater to that specific market segment. The flanker brand has its own name and market positioning, but shares resources and fixed costs with the primary brand. It operates in the market right beside the primary brand, which is how it gets its “flanker” name.

This is an increasingly common strategy to deal with low-cost cremation competitors without cannibalizing your core business, but that’s not the only way it can be used. Your flanker brand could also be aimed at the upscale market, or at non-funeral event business. It could target an ethnic minority in the community or promote a new technology like Alkaline Hydrolysis. The flanker brand builds its own brand visibility, and effectively gives you two shots at serving the same family.

A flanker brand is a great way to tap new markets while leveraging your existing infrastructure at the main location. The possibilities are huge, and the advantages are to the early adopters who can access the capital they need to get started sooner.

The Common Ingredient

All of these strategies require one common ingredient: investment. As a business owner you’ve invested a lot of time and money to create your successful business. Expanding your offer in the marketplace will take more of both. At Live Oak Bank, it’s our job to get you the capital you need to make those investments and grow your business.

 

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: Making the Case for Growth