Michael Manley, publisher 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 brainstorming:
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…
A recent email conversation with a Final Embrace blog reader has revealed the age old wisdom that some of us have forgotten: every business needs an attorney.
The article goes on to explain that the IP relay call goes from the caller to a TRS (Telecommunications Relay Service) which is staffed by communication assistants. These CA’s place a landline call to the phone number requested and act as the voice of the person typing into the computer.
I would like to add my two cents to this interesting subject. First of all I have had experience with GPOs with a previous medical business that I had owned. My business served as a primary vendor to over 8,000 nursing homes nationwide buy way of a vendor for a GPO. Our company changed the dynamics of how business was conducted with GPO members a contributed to the value of the organization.
