Chapter 11 Merchandising

Consumerized Pricing

- Assigning retail priced that are more easily recognized, understood, and compared by the consumer. - Funeral Merchandise, when reasonably priced and displayed, will sell itself.

Funeral merchandise

- Casket - Vault - Alternative container/transfer case/air tray - Urn - Cremation keepsakes - Clothing - Register book, folders, acknowledgement cards. - Religious and fraternal paraphernalia - Monuments, markers - Miscellaneous goods

Funeral Merchandise

- Caskets - Vaults - Clothing - Urns - Register books, memorial cards, acknowledgement cards. - Religious and Fraternal items - Monuments and markers.

Accommodation cash advance items

- Cemetery fees - Flowers - Honorarium for church or clergy - Musicians - Certified copies of death certificate - Newspaper notices - Air fare, other transportation - Shipment of cremains

Factors Influencing Pricing

- Competition's price policies - Legislation fair trade laws - Production/distribution costs - Type of merchandise - Purchasing practices - Selling costs - Value

Pricing Modules

- Fixed multiple or straight line; also referred to as the times factor. - Graduated recovery - Declining price - Modified declining price - Hybrid Pricing

Overall Pricing Considerations

- Funeral home service fees, professional and staff services and facilities and equipment. - Merchandise - Cash advance items

Casket Display Room

- Location should be in same building - Should be on the main floor if possible. Many selection rooms are located on the lower or upper floors. - Make the selection room easily accessible and provide elevators if possible. - One larger room is preferable. - Utilize neutral colors; carpet colors should match wall decor.

Package Pricing

- Many firms will offer package pricing to simplify the buying process for consumers. - Packages include a casket along with the services and equipment necessary for a specific service and are priced at a flat fee. - A choice from a select group of caskets (three to five units) is offered to families. - Package pricing oftentimes notes a savings from the itemized expenses.

Catalog Selection Program

- May be desirable for some families - May be used for appointments in the family's home allowing for more comfort and security. - Places funeral director at a disadvantage with regard to making a presentation.

Disadvantages of the direct selection room procedure

- No privacy for the family - Presence of funeral director may influence the selection made by the family. - nonverbal communication which occurs can be negative and positive.

Professional and Staff Services

- Personal and professional services of funeral director and staff. -Transfer of remains to funeral home (locally). - Care and preparation of the deceased. - Attendants for visitation. - Consultation with family and clergy. - Arrangement and direction of funeral service. - Filing certificates, notices and claim forms. - Forwarding or receiving remains to another funeral home. - All other services as required.

Advantages of the indirect selection room procedure

- Privacy for the family - Eliminates the opportunity for the funeral director to influence the selection. - nonverbal communication do not occur - Written information about each casket may be more carefully analyzed by the family.

Horizontal Assortment

- Refers to the number of products offered to consumers at each specific price point. - The price point is typically defined as a $100 range. - Example: The $1200 price point may include a casket at $1250 and one at $1285.

Casket Pricing Guidelines

- Retail prices should be in the upper half of the $100 range. - The highest priced casket should be a round number easily divided in half. This supports the function of the top casket to set a mid-price point in the consumer's mind. - Use round numbers ending in 0 or 5

Pricing

- Should be based upon financial goals - Local competition and customs influence pricing - Pricing should be fair, allow for profit and be consistent. - Adjust casket costs to keep up with inflation. - Prices should be reviewed and/or adjusted quarterly or semi-annually.

Advantages of the direct selection room procedure

- Some families prefer the support - Funeral director is better able to meet the needs of family with immediate responses to questions

Disadvantages of the indirect selection room procedure

- Some families prefer the support of the funeral director - The funeral director is not present to answer any questions which may arise. - Written information may be ignored or misinterpreted.

Suppliers

- Suppliers can be an invaluable aid to merchandising. - Planning tools may be available. - Quality, price and product availability is strong consideration. - Return and exchange policies along with discounts should be considered.

Item to mention during arrangement conference

- The number of caskets on display - Price ranges of caskets - Reason for broad price ranges - Types of caskets available for selection - Required federal and state disclosures.

Pricing Systems

- Unit Pricing - Bi-unit pricing - Functional pricing - Itemized - Package pricing

Facilities and Equipment

- Use of facilities for visitation, viewing and/or funeral service (or moving service to another local facility). - Use of facilities for preparation and/or refrigeration. - Automotive equipment (transfer vehicle, funeral coach, limousines, motor escort), local transportation. - Materials utilized in the preparation or refrigeration of remains.

Horizontal Expansion

- When more than one product is offered at a certain price point. two-three units in a particular price point. - Horizontal expansion encourages the consumer to consider certain selections. - The more expansion or choice, at a given price point, the more encouragement for a consumer to purchase within that range.

Casket Rack

A device upon which two or three caskets are placed for display.

Quartile

A division of the total into four intervals, each one representing one fourth of the total.

Register books, religious or fraternal symbols, memorial cards, folders and acknowledgement cards

A full range of styles and prices should be available in either the selection room or arrangement office.

Demonstration of Educational Group

A group of three or four caskets utilized to introduce and educate the family with regard to price, construction, features and the general layout of the selection room.

Bi-unit Pricing

A method of pricing which shows separately the price of the casket and the price of the services.

Unit Pricing

A method which created one total price package for both service and merchandise.

Fixed multiple aka straight line aka times factor

A price determination method whereby the mark up is multiplied by a constant factor. Ex: 2 times the whole sale cost=the retail price. - Easy to use and provides quality control - There is no improvement in the CVI.

Declining price structure

A pricing method where there is an inverse relationship between the markup. Higher priced caskets are given a lower markup. - The CVI improves with higher priced caskets. - Encourages the consumer to purchase better merchandise. - The low end markup may be too aggressive in some markets.

Graduated Recovery

A pricing method whereby the markup varies. Higher priced caskets and given a higher markup. - Makes available lower cost funerals at the low end. - The CVI decreases with higher priced merchandise - Lower margin at lower end, best value at lower end.

Median

A value in an ordered set of values which represents the midpoint whereby there are an equal number of values above and below the midpoint value.

Church Truck

A wheeled, collapsible support for the casket, used in the funeral home or church whenever moving a casket. A church truck may also be used as a casket stand if necessary.

Suggestions for softening the entrance to room full of caskets

Advise the family as to what they will be doing next and to what room they are entering. Audio-visual aids may be helpful during a presentation. - The funeral director should enter first. - All lights should be turned on. - A furniture grouping should be in view. - The demonstration group should be near the entry door.

Item Pricing

All funeral related services, facilities, and equipment and merchandise fees are individually itemized.

Grouping Caskets by Style

All half couch caskets may be in one area and all full couch in another area, or they may be mixed.

Space Requirements

Allow 40 to 60 sq ft per unit. Again, the areas may differ depending upon the layout of the selection room. Allow ample room to offer and display a nicely arranged selection of funeral merchandise. Consider a separate room for cremation merchandise.

Kiosks

Allows for the electronic selection of a casket as well as perhaps some color and interior options.

Purpose of the price gap

Allows you to determine whether or not the increments meet your merchandising objectives. Depending upon the markup factors and pricing method utilized, the price gap also allows you to ascertain whether or not certain caskets or merchandise meets your marketing needs within a certain range, group or quartile.

Merchandise Selection Room

Although there may be differences of opinion, it is suggested that the minimum number of caskets for a selection room be 12 and the maximum number of caskets by 30. Many funeral homes use a blend of a few actual caskets, quarter panels, and end panels or sections.

Sales Objectives

Based on evaluation of sales history product availability, suppliers', recommendations and desired profits. - Consider cost of living increases, cost of goods increases and legitimate profit increase each year. - Merchandise line should be properly displayed and coordinated.

Discounts and other intensives

Cash Discount and Quantity discount.

Casket Stand

Casket standard. The stand upon which a casket rests in the selection room. This should be sturdy and attractive.

Grouping Caskets by Appearance

Caskets can be opened or closed.

Functional Pricing

Charges are broken down into component parts such as professional services, facilities, automobile, and merchandise.

Operational Cost Factors

Determine funeral home overhead - Salaries and other benefits - Owner compensation/dividends - Debt service - Taxes - Furniture, fixtures, supplies, equipment - Capital improvements - Utilities, maintenance and repairs - Rolling stock (motor vehicles, funeral coach, limousines) - Inventory - Insurance - Pre-need trust plans - Uncollectable accounts /discounts Case volume and types of services

Grouping Caskets by Alternate Pricing

Each group will have a low, medium and high cost casket.

Traditional Display Room

Features a selection of full size caskets.

Fractional Display Room

Features sections of a casket such as quarter panels or end sections on a wall display.

Merchandise

Goods that are bought and sold.

Balanced Line

Having the correct number of caskets in each pricing quartile.

Structuring Fees

How are they determined? - Based on overhead and case volume. What are the variable factors? - Earlier concepts reflected service fees to be equal to the overhead of the funeral home and profits were reflected by the markup in merchandise sales. - Due to increased cremation trends, nominal profit factors should be considered in service fees as well.

Burial Vaults

If the room allows, consider incorporating a blend of full size vaults, model displays and photographs.

Direct Lighting Option

Illumination directly shining on an object.

Hybrid Pricing

Integrating any of the pricing modules within a certain range or quartile. For example, a graduated recovery markup may be applied to the middle third of the inventory within a fixed multiple pricing module.

Product Knowledge

It is imperative that a funeral director has thorough product knowledge in order to have a good merchandising plan. A family can quickly distinguish a knowledge director by the presentation given along with how the questions are answered.

Furniture

Offers the family a palace to sit and can also relieve tension by having something familiar to relate to.

Consumer Value Index (CVI)

Percentage derived by dividing the wholesale cost by the retail price. - Measures value received for each dollar spent by the consumer. - Ensures value progression if a buyer spends more, they should get more.

Fluorescent Lighting Option

Produced by tubular electric discharge lamp; fluorescence of phosphors coating the inside of a tube.

Incandescent Lighting Option

Produced from the glowing of a heated filament.

Urns

Prominently and attractively display the urns either in the selection room or a separate room which encompasses strictly cremation services.

Cash Discount

Reduction for payment of invoice within certain time; Ex: 2/10 or 2% discount if paid within 10 days of invoice.

Quantity Discount

Reduction when a minimum quantity of a product is ordered; Ex: One unit is $200; three or more units are $175 each.

Indirect Lighting Option

Reflected illumination of an object.

Direct Method of Presentation

Selection room procedure: method of selling caskets whereby the funeral director is present in the selection room during the selection process by the family.

Indirect Method of Presentation

Selection room procedure: the method of selling caskets whereby the funeral director leaves after the introductory presentation and is not present during the selection process.

Modified Declining Price

Similar to the declining method except the lowest priced casket is further reduced with a lower markup and is less expensive. - CVI improves with higher priced caskets. - Provides for families who require lower-priced caskets. - A low margin on low-end caskets. - An attractive option for families who can afford, but prefer not to spend.

Methods of selection room layout

Some directors will use the consecutive method by arranging the caskets in order of their price. - Others will arrange caskets in groups. - The casket display is usually arranged in such a way that a family moves through the room in a manner that makes it obvious to them the differences in the quality of the caskets.

Merchandise pricing

Take note that there are a number of different methods funeral directors use to determine the selling price of caskets, vaults, urns, and other funeral merchandise. Each product may be uniquely priced according to cost, sales, volume, and consumer demand.

FTC Pricing Requirements

The FTC requires that funeral directors use an itemized pricing system. This does not forbid the funeral director from offering special packages that may use the unit, bi-unit, or functional pricing systems as long as the family receives a general price list and a statement of goods and services that has everything itemized on it.

Range

The caskets sold in the second and third quartile (mid-range).

Inventory Turnover

The number of times the average inventory has been sold or used up during a period.

Mode

The number that appears most frequently in a listing of numbers.

Price Gap

The price gap is the retail price difference between one casket and the next higher or lower priced unit. For Example, if the lowest priced casket starts at $500, and the next three caskets retail at $1050, $1638 and $2290, the price gaps would be $550, $588 and $652 respectively.

Merchandising

The purchase display and sales of goods.

Economic Order Quantity EOQ:

The quantity to be purchased which minimizes total costs. Ordering frequently sold items in larger quantities to reduce costs and increase profits.

Merchandise Value Ratio (MVR)

The relationship between the wholesale cost of merchandise and the total cost of both service and merchandise to the consumer. This accounts for the percentage that represents merchandise. - The wholesale cost divided by the total of the service and merchandise=MVR

Gross Profit Margin

The retail price less the wholesale cost is equal to the margin. Measures the profit of merchandise to the funeral director/firm.

Average (Mean)

The sum of a group of numbers divided by the number of units.

Inventory

Those goods which are held for resale.

Clothing

Try to display on a stand or in a case not standing next to a casket.

Grouping Caskets by Materials

Wood, steel, bronze, copper.