One of our readers from New York emailed me with a pressing question: “How can I, as an independent funeral home owner, negotiate a better casket price, like SCI does?”
She wanted to know if I thought she could be successful building a coalition or “buying collective” of independent funeral homes to negotiate a lower price from a casket manufacturer.
I’ve condensed our conversation here:
Michelle:
First, any outside-the-box thinking should be applauded, not scoffed at.
Secondly, you might be reinventing the wheel.
When I think of a great idea, I usually do a little research and find that someone else has already thought of it.
In this case, I think you might consider looking at some of the national organizations like Order of the Golden Rule, Selected Independent Funeral Directors and others to see what type of discounts they may have already collectively bargained for.
Yes, SCI gets a big discount from Batesville on caskets, but they also bring the buying power of many, many firms with them. Batesville or any other maker is willing to offer discounts to a large corporate group because they know that once they do the hard work of getting the person in charge to say “yes, we’ll use your caskets exclusively” they’ll have the account (for thousands of caskets a year) for a long time.
And while you might be able to organize a group of independents to collectively negotiate, any one of them could decide next month to go back to Milso/York or to use the local guy because he’s ticked off at the manufacturer with whom you secured a collective deal.
A manager for SCI cannot just cut and run. Well, she can’t if she wants to keep her job.
So there lies your problem.
Having run a 160 call funeral home for a few years, I know how much a casket costs, even wholesale. But I’d suggest that the best bet isn’t trying to get the big guys to come down on price, but finding the casket line that will provide you with the best options for your clients and the best possible margin for your firm.
Because, at the end of the day, most families can’t tell the difference between a Batesville, a York/Milso or one from another maker.
No one says “it was a beautiful Stainless steel Primrose by Batesville.”
They say “It was pink and white with pretty flowers embroidered on it.”
I’d suggest looking for the most reliable casket seller (you can’t sell a casket unless someone can deliver it on time!) and one who has a modular sales system (but don’t pay for it – make sure they’re “hungry” enough to give it to you) and a real desire to break into your territory.
Does that mean Aurora? I don’t know if they’re available in your area, but I know they’ve started giving away showrooms to new clients.
Of course, I have no allegiance to any casket maker. When I took over the funeral home the owner was installing a York display room (for which he paid $20,000). It allowed him to cut his display room in half, but get 30 more caskets in because it used corner cuts.
The first year, he saw average casket sale go up $200 because clients had more midrange options. They didn’t have to choose between one cheap, one reasonable and one expensive any longer. They had one cheap, ten reasonable, three upscale and two ridiculously expensive. They almost always chose one of the higher priced reasonable caskets.
Some funeral professionals complain that “my clients won’t like corner cuts.”
In my experience, that wasn’t a concern. While one or two clients a year might ask to see a full-sized unit, far more (about 50%) are relieved to walk into a room and not have to look at a full-size casket.
In fact, the most common thing I heard walking into the selection room was “I’ve been dreading walking in here because I didn’t want to see a casket, but this is so much better.”
Interestly, I think most consumers expect that the casket you show them won’t be the one they actually get. Which means they believe that caskets in a specific model are interchangeable.
Much like home electronics (televisions, iPods, brand-new computers) caskets don’t take on special characteristics until the body is placed inside.
Of course, you might occasionally have that client who wants to touch all parts of the casket and “kick the tires” but I’ve met few of them.
I do, however, suggest that funeral homes keep a casket or two on hand (preferably from the middle of the price range) to appease these families and in cases of emergency. And it never hurts to have an example that you can show clients who want to examine the quality of the manufacturer’s work.
One more thing to consider: Suppose you did negotiate a great deal with one company and all the independents in New York got a 10% discount. Where would all the other casket sellers go?
They’re not going to close up shop and leave without a fight. Which means they might start picking off members of your buying consortium by offering sweet deals. At the end of the process, you’d be right back where you started.
Yes, you might have a nice discount, but 10% of even 100 $1000 caskets is still only $10,000 a year for your troubles.
Is that a lot of money? Maybe.
But is it worth all the time it’d take to get it?
August 16, 2007 at 4:45 pm
K, Tim, the professional details as always, quite enlightening from someone who knows little or nothing about the funeral industry. But I just have to say:
KEWL photograph.
Your photographer friend,
Candace
August 18, 2007 at 6:52 pm
Tim— This was an interesting post. I found it especially interesting because it won’t be long until I will make this very concept a reality, by forming a BUYING GROUP. Having been a “sales director” in a previous career with a large manufacturer in a 150 billion dollar/yr industry, I do believe this concept will work. The industry I previous worked was comprised of about 20% corporate owned business, and 80% independent.
In that industry, the independents had very little purchasing power, but in 2001 a “cooperative” formed, a Buying Group created, and it created an “equal playing field.” Maybe not 100% equal, but it was a big step in the right direction to give the little guy something they lacked- a collective voice and strength in numbers.
You mentioned that it may not be beneficial to the manufacturer, because they have no assurance that a member of the group won’t defect and go to another supplier. Two things on that point; first, the appeal or allure for a manufacturer is not to ensure that every member uses their product, it is to ensure that they have the ability to mass market to a large group of buyers (funeral directors) at one time. Also, a true buying group actually facilitates the transaction on behalf of the manufacturer, thus providing them a savings by streamlining the entire transactions. Most buying groups solicit, market, advertise, take orders, and invoice for the vendor. This streamlining of the sales process is the allure to the manufacturer, not the assurance that like SCI that once a deal is signed, it guarantees a certain amount of business. Not all buying groups operate exactly like this, but the opportunity and the advantages are numerous.
Now, you are right, it can be a daunting task to think of beginning a buying group. After all, how do you solicit both Manufacturer’s as members, and funeral director’s alike? How do you promote the group, and ensure that everyone has an equal opportunity to participate? In fact, you mentioned (IOGR). I have actually discussed this same concept with George Darte. The disadvantage they have, like any organization, is the marketing of the group to the entire industry, both supplier and funeral homes. They have members, but they ONLY have access to their members, unless they wanted to go outside of their members and promote the group.
Well guess what? I am actually deep into the process of beginning just such an opportunity. It won’t be long until you see, for lack of a better term, the FBA Buying Group. This whole idea was born out of something I realized a long time that FBA has given me; a distribution network of 17,500 funeral homes, crematories, and vendors. Unlike IOGR or NFDA, I don’t have an allegiance to just my members. Every independent funeral home and crematory gets my publication, so I can mass market the concept better than them.
I refer to this concept as the”Starbuck’s” principle. They didn’t invent this next concept, but they have done it as well as anyone. What is this principle? Not too long ago, Starbucks realized that they have 22 million individuals walking through their doors to purchase coffee or beverages each and every day. Twenty-Two Million consumers that they could sell anything to. It didn’t take them long with that market to realize that selling coffee may not provide them with the only opportunity to exploit this group. They soon began to moonlight as a CD retailer. They began selling pictures, cups, mugs, etc. CEO Howard Schultz has now gone and is doing what McDonalds and Burger King has done successfully for years. You soon will begin to see movies promoted on sleeves of Starbucks cups and on the Wi-Fi network.
Another example; I worked 10 years with UPS, my last 5 as a National Account Manager. So I have a fairly detailed working knowledge of UPS, and most probably don’t know that UPS business plan says that by 2012, over 50% of their revenue will come from their Logistics business (they set up distribtion channels for companies, handling everything from receipt of orders, order entry, warehousing, packaging, shipping, tracking, and reconciling statements for companies). They allow companies to outsource rather than do it themselves.
Point is, Funeral Business Advisor affords me very much the same opportunity. We have a captive audience of virtually every independent funeral home and crematory in the United States. We have relationships with over 100 vendors through the magazine. So with the distribution network in place, the next step is to organize my “cooperative.” It will be as simple as providing 2 very inexpensive products. One for the vendor, and one for the funeral director. Then for a very nominal fee ($99 per month for Vendor, and $19 per month for funeral director), we will do what we do best. Bring BUYERS and SELLERS together. The vendor package will include FBA advertising the Buying Group in each issue, forming the website with individual vendor pages that we will build and maintain for the vendor, being included in a twice annual “buying group” catalog, market them to over 17,500 readers, and numerous other benefits I can’t mention yet, all for less that $1200 per year. That is the cost of a 1/2 page color ad (1X) in most industry publications. The funeral home will receive a simple, but yet, important benefit. A minimum discount that each vendor will agree to offer the group. The will get a free annual subscription to Funeral Business Advisor, a free “buying group” catalog twice a year, private access to the website, full access to participating vendors, and a simple one-stop shopping mechanism for all of their purchasing needs. All for less that $120 per year, or amount they would save if they bought just one casket from our vendors.
Now, I agree this may not be on par to what SCI can bring to the table when they negotiate with Batesville, but interesting enough, I have a very good relationship with Joe Weigel, communications director with Batesville. And I have discussed this concept, and although he didn’t do back flips, he did say it was interesting concept and feels if done properly, would have a strong appeal.
Anyway, I am not an expert on buying groups, and i would be interested in your thoughts. Even though there may be challenges, I can’t help but believe our distribution network is our biggest asset. I value your advice, and we have always managed to have good conversation and exchanging of ideas. Waiting for feedback…
August 18, 2007 at 10:25 pm
[...] extraordinaire and frequent Final Embrace contributor responds to the recent question Can You Negotiate SCI-Level Casket Discounts? by describing a buying collective he’s already begun [...]
August 20, 2007 at 1:55 pm
[...] you’ve got no clue what I’m talking about, read Can You Negotiate SCI-Level Casket Discounts?, where I answer a reader’s question about creating a collective, and then check out Michael [...]
January 2, 2008 at 6:26 am
I had to keep from laughing at a couple of these posts,Todays consumer-has had enough of the big,bad S.C.I.;to the point of where they will go to another town to avoid the Co,who to them-you`re just a entry on a audit sheet..
If you want to be competitive,& have a future in the business,continue to put the families needs first in everything you do for them,& your business will remain strong,Plus you`ll still be able to look in the mirror,& not be ashamed at what you see…….
March 5, 2008 at 5:58 pm
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November 20, 2008 at 1:39 pm
I am new to the funeral industry and would like to hear from anyone wth experience as to what the funeral directors usually pay for hardwood caskets made of Poplar, Mahogany, Ash, Maple, and Cherry.
Any help would be appreciated.
You can e-mail me at ghcaskets@hotmail.com