Math Fail

FCA’s article with the above title is probably the most idealistic and most unrealistic view on funeral service which I have ever read. The argument to justify, or shall I say blame, the number of funeral homes on high markups is just as ludicrous. FCA took numbers they did not understand, and spins them in a way that gives the opposite effect of what they propose.

Really? The absolute most unrealistic you’ve ever read in your whole life?

The notion, that in rural areas a funeral home does not expect the business to be full time, is untrue. Let‘s take Iowa, (a state you suggest to be way out of line) a rural state-packed with small towns, most firms in the state of Iowa already cover multiple cities so that the business is full time. I would venture an educated guess that the number of firms operating in Iowa is a lot closer to the number of FCA suggested funeral homes “needed” , than the number of funeral home “locations” (many of which are simply “viewing” chapels) in Iowa.

Mr. Burke, it doesn’t matter as much whether a state is “rural” or not, it matters how many mortuaries there are per capita. The fewer deaths spread out among many funeral homes, the lower the volume. This is simple, indisputable fact. Yes, in rural states, geography is a concern to a greater or lesser degree, as we pointed out in the article. And if, as you suggest, most Iowa funeral homes cover multiple cities, that still doesn’t make them “full-time.” Iowa had 31,480 deaths in 2003. Dividing that among the 476 funeral homes that year, that’s 66 funerals per year – barely more than one call per week. Do you call that “full time?” Even if half those locations were just branches — viewing chapels — that’s still only 124 funerals per year, per location. That’s 2.3 funerals per week. Is that “full time?” If you have evidence that a substantial number of the funeral homes listed in Iowa by the Red Book are actually just branches or viewing chapels of one business, please present it and we’ll gladly take that into account.

Firms are able to do this because they have consolidated staff, prep facilities and vehicles, so that grieving families and friends can be served in the comfort of their own community . . . In any rural area of the country, the funeral is a community event and will be entrusted to the local funeral director who has invested in that community. To suggest that we should have less funeral homes, forces the consumer to travel to get funeral service, sends their money out of the local economy and forces funeral and visitation goers to travel as well. Suddenly, the funeral is no longer a community event and the consumer becomes a number.

Yes, some consumers want a funeral home that’s very close to home, and some of that consumer demand will influence the number of locations. But the economics are still the same: fewer calls per funeral home means higher bills, on average, for each call. It doesn’t matter why the number of funeral homes is what it is, the numbers are still the same. What you’re not taking into account is the growing number of consumers who are not interested in using the funeral home as a physical location for a memorial gathering. As cremation rates rise, and as families choose non-conventional memorials, such as those at church or at home with no funeral involvement, many funeral homes are going to find themselves having to combine with competitors or close down. It’s already happening in some parts of the country.

What does this invite? Pricing abuse? Not at all. It invites competition, keeping prices in check.

Mr. Burke, you just contradicted yourself. Earlier you wrote, “the funeral is a community event and will be entrusted to the local funeral director who has invested in that community.” Now you’re claiming that consumers are shopping around shrewdly among funeral homes – not necessarily using the one “in the community/” Which is it? It can’t be both. Oh, and I think it’s more accurate to say the community has invested in the funeral home. It is after all, the citizens’ dollars flowing to your mortuary, not the other way around. You know as well as I do that most consumers simply return to the same funeral home over and over, generation after generation (although, thankfully, that’s beginning to change). They don’t shop around nearly as much as they do for other important purchases. That’s what allows some funeral homes to charge, say, $3,000 for a direct cremation, while another firm 30 miles away charges $1,000. Since your customers don’t shop around, they don’t know about it, and the high-priced firms can get away with it.

When the consumer has a choice of funeral homes, the consumer then dictates what takes place. If funeral homes operated with the formula suggested by FCA, competition would be virtually nonexistent and the funeral homes could then dictate what takes place; Herein would lie the invitation to pricing abuse? FCA’s suggestion of efficiency certainly does not equate with effectiveness.

You’re correct that when consumers have a choice, they can bring pressure onto the market. But unless they shop around and compare wisely, they’re likely to pay whatever the local funeral home charges. Most folks don’t realize the price for comparable goods and services can vary by thousands of dollars just in a 30-mile radius (but you already knew that about funeral consumers – I’ll bet you count on the Smiths coming to you death after death). You make a good point that if there were too few funeral homes, there would be much less pressure on funeral homes to keep their prices in check. But, there’s a balance to be struck between these extremes. A good example of this is the privately owned chain of funeral homes called Newcomer. Visit them here. They offer everything from direct cremation to the full service, but they offer it at a price that almost always beats their local competition. How? Through volume. The Newcomer funeral homes advertise heavily on price and value for the money, and as a result, their numbers are beating the pants off the good old boys in many locations.

Josh Slocum’s response to Don also is only correct in the shoe store comparison when he suggests that with more funeral homes, each has less volume.

How’s that, Mr. Burke? That’s just a plain fact. There is a fixed number of deaths in any geographical area. That’s all there is to divide up among the funeral homes in that area. The more funeral homes, the fewer each gets, on average. How can you misunderstand that?

Josh gets two strikes on the rest of his response. He says you can only sell one funeral to each customer. When we conduct a funeral, we don’t serve the deceased-we serve the whole family. If Jane and Bill are a couple, I can sell a funeral to Jane for herself, her husband, her parents, her in laws, her siblings, her children, etc. You get the point. Funeral homes can and do induce the same person/family to come back.

Oh my word. This is so obvious I’m having a hard time figuring out why you can’t see it. Let me try again. You can only sell one funeral to each customer – because each customer only dies once . If you’ve figured out a way around this, then patent it before SCI does. If I’m a shoe store, or a restaurant, I can sell multiple pairs of shoes, and multiple meals, to Jane Doe and the rest of her family, week after week, year after year. But as a funeral home, even if I do all the funerals in Doe’s family of 16, I’ll never sell more than 16 funerals to the Doe family because they have but 16 lives to give. You see the difference, right? It’s a zero-sum game, Mr. Burke. The only way for you or any funeral director to increase volume is to take volume away from a competitor. You’ can’t “grow” the funeral market the way Apple can grow the ipod market by selling multiple, upgraded versions of the ipod to the same customer year after year.

The only way to pay the bills is to provide better service and win over each consumer and the community. Funeral consumers aren’t stupid. When a funeral director serves the community in a manner that gives value to the funeral, funeral consumers are willing to pay for that service they value. The bills get paid by providing effective funeral service and being competitive. Effectiveness will win over efficiency anytime.

Just as I said above, if you win over every consumer, you’ll be taking volume from your competitor. I agree, and I wish you luck. But I wouldn’t be on mantras like “quality” and “effectiveness”saving you or the excess operators in funeral service. As more people wake up to the fact that a $3,000 direct cremation isn’t “higher quality” than a $1,000 service, they’re going to turn away from the needlessly overpriced. Maybe things change more slowly in Iowa, but they will change. Smart funeral directors will get ahead of the curve by copying the strategies of businesses like Newcomer, and by embracing growing demand for new services, such as green burial.

My suggestion to FCA is therefore to remove the “An Over-saturated Market” article from your website. It doesn’t hold water.

Nah. Then we wouldn’t have these fun back-and-forths. Josh Slocum Exec. Director, FCA

About the author

Author description olor sit amet, consectetur adipiscing elit. Sed pulvinar ligula augue, quis bibendum tellus scelerisque venenatis. Pellentesque porta nisi mi. In hac habitasse platea dictumst. Etiam risus elit, molestie