How your funeral home can remain competitive as cremation popularity increases
By Mike Iles
Recent studies of consumer attitude suggest that with the exception of just 10 states in the continental United States where cremation is already dominant, cremation will continue to significantly grow. Will your state end up like Canada or some of our states where cremation is already the dominant disposition choice?
For our state, Iowa, we’re expecting the answer to be yes. If this comes to pass, many current providers may not survive. Why? Compared to the number of rooftops per capita presently in Canada, industry consultant David Nixon found that the US has 25% more. So if the US approaches more than 70% cremation, such as is currently the case in Canada, it is plausible that we will experience a significant contraction in rooftops.
Industry research suggests that the average US funeral home achieves average cremation net revenue equal to 42% of its burial average. While it is true that cremation is often less costly to provide, particularly in the cost of goods, the savings certainly don’t equal the revenue difference. As a result, each percentage point of move from burial to cremation translates to less profit, potentially leading to business failure. How will we survive?
Our strategy at lles Funeral Homes is to remain relevant by offering cremation services people want and will spend money to have. By carefully executing this strategy, we have been able to achieve cremation average net revenue per call that equals about 55% of our burial average. Will this alone protect our profit? The answer is no, so we’ve had to reorganize how we deliver our service in order to increase productivity. We’ve also had to fight harder and smarter for market share. Only as a result of all these combined do we find ourselves achieving our profitability goal.
Looking back, we achieved our goal only as a result of the successful implementation of several strategies. Among them, we provided our directors with tools to help them with cremation arranging and then held them accountable through measuring results and rewarding attitude and aptitude through incentive bonus income. In a few cases, we had to threaten their employment to motivate meaningful change, which some found difficult.
We worked hard to sell more preneed, knowing by experience that a healthy preneed backlog preserves memorialization preference and increases market share, both of which reward our efforts. We worked to increase how we promoted ourselves, aiming to educate our market that there is a difference between funeral providers. We invested heavily in our facilities with the goal of offering increased options in which our families can memorialize their loved ones.
It was difficult, it was sometimes messy, but we often reminded ourselves: When your very
existence is at stake, failure is not an option. What is interesting in the statistics of our results is that as we made progress toward our financial goal, our customers generally became more satisfied and felt they were receiving better value, leading to the best of all outcomes, a win-win result.
Don’t miss out on serving more families.
Work with PreNeed Systems to grow your preneed arrangements for years to come.