Nicole Vullo
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One topic we continue to be asked for insight and guidance on is Pricing. For this month’s column, we combined all of the most popular pricing questions into one comprehensive article. Continue reading below as Doug Gober, Partner provides information on setting prices, when an how often should we change prices, and more!
Question: How should I set my prices?
Doug Gober: Historically, Funeral Directors were notorious for comparing their prices to their competitor’s prices or they would take their best guess at what they are worth. Legitimately a firm should evaluate what it costs them to operate their entity. Every enterprise has different cost structures to operate
One firm may be paying off debt while the other has been paid off for 20 years. Just that one item alone could alter how retail prices should be set for each of those businesses.
Generally speaking, service and merchandise pricing should be set on the basis of overhead cost and merchandise cost so that a profit is being made on both sides of the equation.
In my years of experience, it is remarkable to me that historically the highest priced Funeral Home in town also tends to be the one with the most business. There are exceptions to this rule but if you ask consumers what their driving motivation is for choosing a Funeral Home, price will normally be number four or five on the list.
Question: How often should I be changing my prices?
Doug Gober: Again, I would say that this is a market driven decision. I have known Funeral Homes who did not change prices for years and I have known of others who change them every six months. The longest time in between price adjustments should be no longer than a year. This is simply because the major costs of operating a Funeral Home; facilities, personnel, and merchandise, all tend to have associated annual increases.
Question: When do I change my prices?
Doug Gober: These price adjustments should occur in as close a proximity as possible to the increases that occur from the related costs. For instance, if you give annual salary increases at a defined time, you should consider altering your retail prices to the consumer around the same time. As it relates to personnel, the timing can also help them to understand that their raise was directly related to the retail price increase. The retail price increase is easy to justify as it coincides with the increased salary of your staff.
Question: How much should I be marking up my merchandise?
Doug Gober: Let me start by saying, merchandise markups, like service price markups, are all over the board. They can be sometimes driven by a competitor’s pricing and other times driven by non-funeral home merchandise sellers. This can be a market driven decision. If you are in an area where retail funeral merchandise stores are prevalent, you may choose to mark up less to compete on that level.
However, our experience tells us that most consumers prefer one stop shopping and would therefore prefer to buy from the same retailer that is also offering their services. There are always going to be exceptions. When you consider the national cremation rate is now approaching 55% in the US, merchandise has become somewhat less important. However, I must caution you to make certain that we do not ignore the opportunity that exists with cremation merchandise. This is especially true as it relates to cremation permanent memorialization. Cemeteries that have embraced the idea of permanent memorialization offers for cremation consumers have proved that the consumer will respond positively when properly presented with appropriate choices.
Do you have a question for us? Email info@theforesightcompanies.com today for a chance to have your question spotlighted in our next blog!