P R E N E E D

PERSPECTIVE

BY QUINN EAGAN

ADAPTING TO CREMATION

VALUABLE LESSONS LEARNED

    More than two decades ago, I began noticing some declines in the balance sheet at our family-owned funeral practice. We weren’t doing fewer funerals: in fact, by the standards of the time, our business was booming. But at the end of each year, both revenues and profits were lower than the year before.

    No problem, I assumed. Our expenditures must have increased. I’ll just find out where the increase is coming from. But that wasn’t the problem either.

     I took almost a week to figure out the change: cremation. Each year, clients were requesting more and more cremations. In some cases, I noted depressingly, families also were dispensing with visitations, cutting most down to a half-day.

      As we did more cremations, profit margins thinned. While in some regions cremations may actually generate wider margins than conventional funerals, that isn’t true in New Orleans. And no matter what, cremations generated lower revenues overall – starting below $1,500 total compared with $6,000 for a conventional funeral.

      The trend has only continued since we first observed it as early as the 1980s. Back then, cremation represented less than 3 percent of overall funeral services. According to the Cremation Association of America, last year, it exceeded 25 percent overall. And the growth has accelerated over time, climbing five percentage points between 1997 and 2002 alone. By 2010, their forecasters predict one-third of all funerals will be cremations.

      At the same time, the accounting firm Federated Funeral Directors of America says their clients’ profit margins declined 1.9 percent over a single five year period. Two-day mourning periods have started to become half-day visitations trends as well. I recently went back and worked four funerals and was shocked that three were half-day visitations with burial the same day.

    Obviously, those aren’t good indicators for funeral directors – those numbers are telling us something, but are we listening?

      When we looked closer at the numbers in our family business as well in the other firms we counsel with on preneed around North America, we found they actually presented opportunities in many places. Learning to better accommodate cremation can be much easier than fighting it. Studying it will allow you to reassess what families are looking for. New value for families can be found.

      Here’s what we figured out. All our research indicates that many families want to avoid assembly-line funerals. Many are uncomfortable with death and want to get it behind them quickly. For others, cost is a primary issue. But the cathartic tears once unique to funerals have slowly dried up: all are good reasons that cremation appeals to these families. Funeral directors may start shedding tears themselves as their bottom line continues a downward slide, because families are beginning to search for something else.

    The industry has tried to respond by increasing personalization– trying to provide the opportunity to ensure that the funeral matches their loved one’s personality. They started to offer new products, such as memory drawers, cap panels, stick-on corners, funeral motifs, and so on. But, as several experts have noted, such additions still focus on products, not experiences.      

         Some progressive directors have started trying to offer more personalization for mourners, almost becoming event planners. I’ve seen a funeral conducted courtside at a beach volleyball game and another at the local yacht club, where mourners fired the gun traditionally used to end races. Some get even more complicated, with candlelight visitations and dove releases. One family released more than 100 butterflies at the gravesite.

      Most funeral directors, though, won't become event planners and most families won't think up personalizing details themselves. The challenge for us is learning to provide unique experiences within current business practice… finding the least common denominator that works well in almost every service. We found our answer through our preneed marketing across the country.

1.    Shift toward creating experiences, not offering products.

     You can’t fight it: cremation now represents a permanent sector of the market.  Believe me, I know. When I started out more than two decades ago, it was a non-entity in the marketplace. Today, cremations now make up almost half of many funeral homes’ calls.  

      Why did that happen? Do families actually prefer incinerating decedents over burying them? Or does cremation provide an alternative to something that has diminished in value in those 20-odd years? Something like the conventional funeral.   

       Let’s think about that for a few paragraphs. As the big three conglomerates have risen to dominate the industry, they often paid enormous premiums while buying up small funeral homes. Then they made up the difference by raising prices. One theory is, some consumers eventually got tired of paying huge mark-ups on items such as caskets.

     The end result is a lingering impression that funerals cost even more than they actually do and consumers still spending thousands on services they deem of low value.  

       At the same time, religious and cultural values began to shift. A recent trade article noted that when President Kennedy, a Catholic, was buried in 1963, the Catholic Church was still discouraging cremation. When John F. Kennedy Jr. died several years ago, however, he was cremated – and granted full Catholic honors in church.

     We need to convince customers that whatever disposition process they chose, we will provide a meaningful and valuable service, not just an expensive casket. Strive NOW to sell as many of the lingering traditional services s preneed services, before cremation becomes the new tradition. But at the same time, start

offering new services - and think about butterflies and the other stuff.  Don't assume families who ask for cremation want direct cremation; develop different options that create an experience beneficial to families and then ask them about what “package” they prefer. 

    Begin to adapt your cremation services (and all your other services), keeping in mind an aphorism an entrepreneur named Frank Stewart told me 15 years ago: Everyone wants to be remembered. No one wants to be forgotten. Our very successful efforts have been focused on that theme…preserving memories, and building the preneed effort around it…the effort has paid off with the Memory seminars which are thriving and generating huge preneed sales giving new families the value they want. And families are willing to change their funeral home preference to get it.

2.    Implement an effective preneed marketing program.

     Those services, of course, are easier to sell preneed than atneed. Why does that matter? Well, funeral directors often use preneed sales as an indicator of future corporate performance, just as Wall Street forecasters use order backlogs to indicate trends. The analysist and strategist in New York that are assigned to watching the Funeral Home Conglomerates now place a huge importance on the backlog of preneeds, yet many independents have never taken the time to examine their own programs to determine if they're effective, mediocre, or downright poor.  

     Let me  first explain what I think makes a program successful:

   Effective preneed programs have funded prearrangements. Or you can think about it this way, programs that primarily have unfunded prearrangements aren’t as effective. Families, who have a financial commitment to a preneed plan (regardless of a preference) are much more likely to actually utilize your services. Unfunded prearrangements do not have the same sense of commitment.

     Another basic: Good preneeds require families with whom you have never done business, families new to the area or those who previously used a competitor. A new family can start a loyalty chain extending through generations- that can mean multiple funerals from the same family (and their friends) into the future. It is critical to a funeral home's success that it generate a mixture of positive reactions - what marketing people sometimes like to call "buzz."   

     A third requirement for a successful preneed program is building sales that exceed current atneed averages. You have to be sure, when you compare the two, to subdivide your atneed averages, separating cremation and traditional service revenues. Try this with your preneed revenues before you do the comparison. These percentages may vary in some areas, but generally, good preneed plans get written in customers' homes, not in funeral homes, and there should be an equal amount of installment plans and single cash payments. If a large percentage of your plans are paid for with cash and/or written at the funeral home, than you are probably using a mediocre preneed system.

     Most often, that means you need to assign someone (it could be yourself) to make sure the plan gets implemented. Preneed sales must become as important as atneed sales. That person needs preneed training, to build the proper skills for selling the product (Training is key!). If you’re concentrating on walk-in families, or those with a fresh Medicaid payout, you'll never see the benefits of healthy, company-building preneed sales.

    The benefits are numerous. In my family's funeral business, which dates back to 1854, I was taught that for every preneed sale, we got three atneed services....so an increase in preneed sales would translate into an increase in atneed calls. In consulting for - and working with - funeral homes around North America, I've seen the numbers back up family lore again and again.     

     In conclusion, as one looks at what is happening in the industry, it becomes more and more obvious that our families are changing…and so are our financials. We need to change as well. Focus your efforts on the experience, whether or not you are recreating your offerings for a traditional funeral or a cremation. One of the primary parts of a worthwhile service is to pay tribute to the life of the deceased -remembering the high points of the life lived and creating a moving experience at your funeral home that makes family members and visitors alike say "WoW…that was a nice tribute". It may be the value many families are looking for. The results we’ve gotten from preneeding those Ideas indicate it is. 

      If you have questions or comments, you can e-mail me at quinn@preneed.net or send me a fax at 504-837-4983 or call 504-837-8868.