John McQueen
on
Hopefully, it is not your own client base at a discounted price.
One of the biggest trends in funeral service for the past 20 years or so has been the creation of “discounted” funeral operations. Some of these operations have been created as start-ups by entrepreneurs looking to find their place in funeral service. Many have been started by existing “traditional” brands that either recognized a need in their market, or often, felt pressure from other low-cost operations that were eroding their customer base. Yet, the most dangerous of the group are those that jumped onto the bandwagon of opening low-cost funerals because they heard a presentation at a convention or knew a colleague who did so and therefore felt they needed to do so. Low-Cost operations play a significant role in the world of funeral service nowadays, but entering this market needs to be done with great foresight, especially for the owner of a traditional funeral home.
Before we continue the topic of low-cost funeral alternatives, it is important that I address a major area of concern for all who are either involved in or considering such an operation. For some, you may feel my comment here is simply semantics. But, meaning plays a powerful role in the outcome of success or failure. As the old saying goes, “the pen is mightier than the sword” and in this case, the meaning behind the words can be mightier than the desired action. So, you will not hear me refer to the low-cost brand as the “value” brand. I will refer to it as a “low-cost” brand, a “discount” brand, or an “alternative” brand, but you will not hear me refer to it as a “value” brand. Why? Because every customer in the market has his or her perception of value, and every funeral home operation brings value to a certain segment of the customer base. Some customers value the high-end brands and the services they provide. Others value the low-price brands and their offerings in the marketplace. This is important because it is a key to avoiding intra-company cannibalization.
To understand successful integration of a discount brand within your existing traditional funeral operation, we must understand the mindset of the consumer. For the most part, the consumer of yesterday was satisfied with an average service or an average product. In a graphical illustration, it would appear as a traditional bell curve. In this model, a few consumers lie on either end of the curve desiring either the “least expensive” or the “most expensive” product or service, but most lie in the middle of the curve and just want to be “average” (See Figure 1). In fact, many of our sales presentations in the 1980’s focused on the average casket or average vault. However, today’s consumers have migrated to the two ends of the spectrum causing the middle to collapse. Graphically, it represents a two-hump camel with the dominate segments referred to as “price seekers” and the “solution seekers”.
Looking at it another way, in years past, we went to the large department stores, such as Macy’s, JC Penney, Sears, and others for most of our shopping needs. Occasionally we might visit a specialty store or a discount store, but those where infrequent visits. However, over the last couple of decades, consumer preference has shifted to lower cost brands such as Wal-Mart and Target, or the high-end specialists, such as Starbucks and the Ritz-Carlton. As such, the ones that have suffered the most are the department stores because they are stuck in a high cost, moderate consumer benefit middle. It is within this valley where traditional funeral service lies today. Because of this migration in value preference among consumers, it can make sense (but not always) to consider creating an “alternative brand” within your market.
One of the biggest concerns, and rightfully so, is the cannibalization of your existing funeral home business. To avoid such cannibalization, there are four distinct areas in which we must direct our focus – Planning, Management, Marketing, and Training. Let us a quick review of each category.
Planning – As you develop your low-cost brand, it is important that you focus on distinguishing this brand from your traditional brand. For example, consider all the things you do at your traditional brand that are included in your services for which you can charge additional at your low-cost brand. Such items might include pallbearers, cremation timing, nighttime visitations, and more. Also, since labor cost is a company’s biggest expense, you will want to consider office hours and service times. You will also need to consider staffing. Typically, utilizing the same staff for a traditional brand and a low-cost brand is not a good fit. Of course, you do not want to overstaff for a location whose revenues may be one-third those of your existing brand.
Management – To build a successful low-cost brand that does not “eat the lunch” of its parent company requires active management. The advantage is that you already have leadership in place with your existing brand. The disadvantage is your existing brand probably runs on autopilot, whereas your new low-cost brand requires more attention from senior leadership to ensure cannibalization does not occur. Also, the price-seeker customer can be as demanding, if not more demanding, than many of your solution seeking customers, which means your attention will be directed to dealing with the issues that arise frequently in the low-cost brand, pulling you away from your existing customers.
Marketing – The design and implementation of your marketing will depend on whether your low-cost brand is a stand-alone brand or an alternative to your traditional brand. Let us consider for this article that it is the latter. You need to have someone on staff who is responsible for all marketing for both brands, perhaps yourself or another designee. This individual must thoroughly understand the concept that although everyone within the company is a team, both brands are also competitors. Price Seekers will find the low-cost brand so do not market the brand in your own back yard. Also, any reputation marketing should be utilized only for your traditional brand.
Training – A positive customer experience is a must in every business today, regardless of the price. Beyond basic customer experience training, staff members need to be well-trained in explaining the value for the consumer that their brand delivers. Each brand should have their unique characteristics that bring value to the customer and know how to articulate it. This only comes through repetitive training of staff. As I always say, “you get what you inspect not what you expect.” So, do not expect positive results if you do not inspect the behaviors that are associated with obtaining results. Inadequate training will result in intra-company cannibalization creating a false sense of success in the low-cost brand while diluting the profits generated by your traditional brand.
Creating a low-cost alternative to your traditional brand can be a great way to increase market share. With over 20 years of experience successfully managing multiple brands in the same market, I can tell you that it is not a game for the faint at heart. If you are considering creating such a brand, I would encourage you to give me a call so we can work together to develop a comprehensive plan. Your learning curve will be diminished, and your success will be significant.