FNM 3 Merchandising

Define merchandising

the purchasing, display, and sales of merchandise.

Decision made by families in the merchandise they select are highly ____________

emotional

Families usually ____ impulsive with their decisions.

aren’t

What is the goal of merchandising?

The performance of activities which seek to accomplish an organizations objectives by

  1. Anticipating customer needs

  2. Directing that flow of needs

  from provider to consumer.

How is the goal of merchandising accomplished?

Through the sale of

1. goods

2. services

List some examples of funeral merchandise

• Caskets and other burial/transfer containers

• Outer burial containers and/or vaults

• Cremation containers and alternative containers

• Urns, temporary containers, scattering and/or keepsake urns and urn vaults

• Jewelry

• Monuments, memorials and other cemetery merchandise

• Burial clothing

• Personalization options

• Register books, memorial folders, flag cases, thank you’s and other sundry items

What is merchandise a trade off between?

profit and service

Profit + Service =

Relative Value

What is is the link between the 1^st and 2^nd goals of funeral service?

Merchandising of goods and services

Define relative value

The quality of anything that renders it desirable or useful.

What is relative value measured with regard to?

• Worth

• Excellence

• Usefulness

• Importance

Is value automatically perceived or is it created?

Created

What is perceived value based on?

• Education

• Information

• Comfort level

What is merchandising the ongoing process of?

selection, evaluation and most importantly education of the consumer in terms of funeral services and products that will produce both desired levels of profit and maximized consumer satisfaction.

What is the goal of the funeral director?

To get the family to see value in the funeral

What are the components of a “sound” merchandising program?

We render a service (product) and expect to make a profit.

  1. Present products/services to the buyer.

  2. Present products/services to the seller.

  3. Produce a profit adequate to maintain and promote growth.

The casket sale only represents __________ of the entire cost to the family.

20-40%

What merchandise you offer should be largely based on ___________________.

sales history

What is determined by analyzing sales?

sales frequency

Define sales frequency

The number of times sales in a given price bracket occur over a fixed period of time.

Define sales frequency chart

a chart on which all sales are listed showing the number of sales in any sales bracket

Define Average (mean)

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

Give an example of an average (mean)

Sales for the week:

$700                               $4,200/4 = $1,050

$1,500

$1,200

$800   

$4,200

Define 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

Give an example of a median

$700

$800

$900        ←

$1,000

$1,100

Define mode

The number that appears most frequently in a listing of numbers

• Shows the items most frequently sold.

• Very helpful for determining what merchandise should be displayed

Give an example of mode

$750

$925

$750

$1,175                          $925

$1,525

$925

$925

Give an example of quartiles

•1^st = 10%   Least expensive (low)

•2^nd= 27%

•3^rd = 40% 

•4^th = 23%  Most expensive (high)

How is range found?

By finding the sum of the items in the 2nd and 3rd quartiles

Give an example of range

1^st  10%

2^nd  27%

3^rd  40%

4^th  23%

Add 27% and 40%

67% of caskets are in the mid range

Where do funeral homes typically get their merchandise from?

Whole sellers

What should you consider when selecting a supplier?

• Do they supply quality goods

• Are the prices desirable

• Is the supplier reliable

• Do they provide good service

• Do they supply managerial and merchandising aids

• Are there representatives

• Are there discounts

Define cash discount

a reduction of the price given for payment of an account within the time limits established in the contract to sell

What is a contract to sell?

a conditional, legally binding agreement where a seller agrees to sell an asset, but retains legal ownership until buyer fulfills specific conditions, typically full payment

Define quantity discount

reduction in the amount of a bill when a minimum quantity of merchandise has been ordered

Define rebate

a return of a portion of a payment

Define consignment

the funeral director does not pay for the displayed merchandise until it is sold

List the seven steps for pricing

1. Determine total overhead – How much does it cost to run the funeral home

2. Allocate gross profit from merchandise – What is your gross profit on your merchandise? Gross profit is the profit prior to the subtraction of your cost of purchasing the goods

3. Determine case count – What is your call volume

4. Set service prices – Determine fair and profitable prices according to the overhead, your cost of purchasing merchandise and the net profit desired

5. Run a hypothetical revenue test – Run some purchase scenarios for a month of lower-than-average call volume to see how the money falls in practice.

  This way if you don’t get as many calls as you want, you are still earning the profit you want.

  Good rule of thumb – assume you’ll hit 90% of you call volume and build your profit based on that 90%

6. Create Packages

7. Test your consumers

Define CVI (Consumer value index)

The percentage derived by dividing the wholesale amount of the merchandise by the retail price

How do you get the CVI?

Wholesale Cost/Retail Price

What does the CVI measure?

Measures the value received for each dollar spent by the consumer

What does the CVI ensure?

Value Progression – this is the idea of “if buyers spend more, they get more.”

What is profit also called?

Margin

How is gross profit aka margin found?

by Subtracting the wholesale price from the retail price.

What is the retail price?

the price you sell the item for

What is the whole sale price?

the price you paid for the item

Define MVR (merchandise value ratio)

The relationship between the wholesale cost of the merchandise and the total cost of both service and merchandise to the consumer.

How do you find the MVR?

Wholesale cost/Service and merchandise cost

Give an example of finding the MVR

A family purchases a casket that costed the family $2,475.00, which was purchased by the funeral home for $619.00. Together with their service selections, the cost was $6,585.00. To find the MVR:

619÷6585=.09

MVR=9%

Give an example of finding the CVI

A casket cost a funeral home $965.00, and they sell the casket for $2,413.00.

CVI = 965 ÷ 2,413

CVI = .399 (Round up to .40)

Give an example of finding the gross profit aka margin

A funeral home purchases an Urn for $85.00 and sells the urn for $250.00.

$250-$85=$165

Gross profit= $165

What is the fixed multiple or times factor method of pricing merchandise?

a price determination method whereby the mark-up is multiplied by a constant factor.

• Wholesale price x Fixed multiple = Retail price

Give an example of the fixed multiple or times factor method of pricing merchandise

A funeral home uses the multiple 2.5 to mark-up their caskets.

They purchase a casket at wholesale for $925.00

Mark-up procedure:

925 x 2.5= 2,312.50

The retail price (price the funeral home sells the casket for) is $2,312.50.

What is the percentage method of pricing merchandise?

merchandise that is marked up by a specific percentage.

Give an example of the percentage method of pricing merchandise

A funeral home buys a casket for $845.00. They mark their caskets up by 50%. What is the retail cost of this casket?

Procedure: wholesale cost x percent mark-up = $ amount to be marked up

845 x .5 = 422.50

845 + 422.50 = 1,267.50

The retail cost of the casket is $1,267.50

What is the fixed dollar amount method of pricing merchandise?

The mark up of merchandise is based on a fixed dollar amount

Give an example of the fixed dollar amount method of pricing merchandise

A casket costs a funeral home $600.00. The funeral home marks each casket up $500.00

  500+600 = 1,100

                    $1,100.00 is the retail price.

What is the graduated recovery method of pricing merchandise?

a pricing method where the mark up varies.

• Higher priced caskets have a higher mark-up

What are the advantages of the graduated recovery method of pricing merchandise?

Makes for a lower cost to the funeral home

What are the disadvantages of the graduated recovery method of pricing merchandise?

• Lower CVI on higher priced funeral with low end merchandise

• Lower margin at the lower end

• Places the value on the lower-end caskets

What is the declining price structure method of pricing merchandise?

a pricing method where there is an inverse relationship between the mark up and the price of a casket.

• Higher priced casket, lower mark-up

What are the advantages of the declining price structure method of pricing merchandise?

• Improved CVI with higher priced caskets

• Win-Win situation

What are the disadvantages of the declining price structure method of pricing merchandise?

• Lower-end mark-up can be too aggressive for some areas

• Push consumer to buy better merchandise

What are the four basic pricing systems?

1. Itemization

2. Unit Pricing

3. Bi-Unit Pricing

4. Functional Pricing

Keeping the goals of funeral service in mind, what do you think the challenges with pricing are?

Finding the balance

Define itemization

The system by which every item is priced separately

• The “historical” method

• Required by the FTC

• Family can omit certain items

• Creates disadvantage to those that omit nothing

• Need to determine a profit on every item

• Families clearly understand their purchase

• Increased gross profit

Define unit pricing

Method of pricing which creates one total price for services and merchandise

• Exaggerates the casket, not the service

• Makes billing and accounting simpler, although you still must itemize

Define bi-unit pricing

Method of pricing that shows separately the price of the services and the price of the casket

• Allows for a better comparison of prices on caskets than does the unit pricing method.

• Establishes a fee for service.

Define functional pricing

Method of pricing by which the charges are broken into several component parts

Give an example of functional pricing

•Casket - $2,200

•Services – $3,800

•Facilities - $2,000

•Automobiles - $1,300

Define package pricing

Certain items of service and merchandise are grouped together and sold at a specific price.

• Must have the ability to be itemized

List pricing factors that exist regardless of pricing systems used

1. Competitors price

2. Legislation (FTC)

3. Product cost

4. Distribution cost

5. Economic fluctuations

6. Type of merchandise

7. Marketing strategy

8. Purchasing practices

9. Selling cost

Do you think that services need to be merchandised?

YES. It is much more important to place emphasis on services because people remember them the most

What are some services that also serve as merchandise?

•Funeral Service

•Memorial Service

•Graveside Service

•Visitation

•Direct Cremation

•Immediate Burial

•Package

•Hospitality

•Event Planning

•Green Offerings