(1) Funeral Service Merchandising

L1

What is merchandising?

the purchasing, display and sales of merchandise

What are the goals of merchandising?

1: Anticipating customer needs
2: Directing that flow of needs from provider to consumer

The goals of merchandise are accomplished through the sale of…

A: Goods
B: Services

Examples of funeral merchandise…

-Caskets and outer burial containers
-Cremation containers and or vaults
-Cremation containers and alternative containers
-Urns, temp containers, scattering and/or keepsake urns and urn vaults
-Jewelry
-Monuments, memorials and other cemetery merchandise
-Burial clothing
-personalization
-Register books, memorial folders, glag cases, etc

Merchandising is a trade off between:

profit and service

What is the relative value formula?

profit + service = relative value

Relative value is defined as…

the quality of anything that renders it desirable or useful

What is relative value measured by?

-Worth
-Excellence
-Usefullness
-Importance

Perceived value must be…

created (education, information, comfort level)

Merchandising is 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

The goal of a funeral director:

get the family to see the value in funeral

We render a service (product) and expect…

to make a profit. Present products and services to the buyer and seller and produce a profit adequate to maintain and promote

What merchandise you offer should be largely based on…

Sales history

Sales Frequency

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

Sales Frequency Chart

A chart on which all sales are listed shwoing the number of sales in any sales bracket

What is the mode?

Number that appears the most- very helpful for determining what merchandise should be displayed

What are quartiles?

Percentages that divide the costliness of products
-1st= 10%, least expensive
-2nd: 27%
-3rd= 40%
-4th: 23% (most expensive)

What is range?

Sum of the caskets within the 2nd and 3rd quartiles
-EX: add the 2nd and 3rd, 27 + 40 = 67; 67% of caskets are in the mid range

What are some things to keep in mind when choosing 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

What is a 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 quantitiy discount?

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

Rebate

a return of a portion of a payment

What is a consignment?

The funeral director displays merchandise, but does not pay for it until it is sold

What is the first step of pricing?

Determine total overhead (how much it costs to run the funeral home)

What is the second step of pricing?

Allocate gross profit from merchandise

What is the third step of pricing?

Determine case count (call volume)

What is the fourth step of pricing?

Set service prices (determine fair and profitable prices according to the overhead, your cost of purchasing merch and net profit desired)

What is the fifth step of pricing?

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)(assume you will hit 90% of call volume and build your profit based on that)

What is the sixth step of pricing?

Create packages

What is the seventh step of pricing?

Test your consumers

What is CVI?

Consumer Value Index- the percentage derived by dividing the wholesale amount of merch by the retail price
Wholesale cost / Retail Price = CVI
-Ensures value progression; this is the idea of if buyers spend more, they get more

A casket costs a funeral home $965 and they sell the casket for $2,413. What is the CVI?

965 / 2,413 = .399 (rounded up to .40)
The consumer received .40 of value for every dollar spent

What is the profit margin?

The profit made
-Found by subtracting the wholesale price from the retail price
Retail price - Wholesale price
-EX: A funeral home purchases an urn for 85 and sells the urn for 250. the profit is 165

Retail Price

The price you sell an item for

Wholesale cost

the price you paid for an item

MVR

Merchandise Value Ratio- the relationship between the wholesale cost of the merch and the total cost of both service and merchandise to the consumer.

Wholesale Cost / Total cost of service and merch to consumer

Allows us to analyze the ratio between the two in a solid way and the value of the merch the family selected. This usually has a low number

A family purhcases a casket that costed the family $2,475 which was purchased by the funeral home for $619. Along with their service selections, the cost was $6,585. What is the MVR?

619 / 6585 = 0.09 = 9% = MVR

What is Fixed Multiple / Times Factor?

A price determination method whereby the mark up is multiplied by a constant factor. This same mark up would be applied to all caskets.

Wholesale price x Fixed Multiple = retail

A funeral home uses the multiple 2.5 to mark up their caskets. They purchase a casket at wholesale for $925. What is the retail price?

925 × 2.5 = 2,312.50

Percentage

This is merchandise marked up by a specific percentage.
(Wholesale cost x mark up) + wholesale cost

A funeral home buys a casket for $845 and they mark it up by 50%. What is the retail cost?

845 x .5 = 422.50
422.50 + 845 = $1,267.50

Fixed dollar amount

The mark up of merchandise is based on a fixed dollar amount. This is just adding whatever the casket costs the funeral home plus the fixed dollar amount for the retail price

What is graduated recovery?

A pricing method where the mark up varies. On one hand, it makes for a lower cost to the funeral home. On the over, it has a lower CVI on a higher priced funeral with low end merch, lower margin at the lower end and places the value on the lower end caskets

What is the declining price structure?

A pricing method where there is an inverse relationship between the mark up and the price of the casket. (higher priced casket, lower mark up

What are the advantages and disadvantages of declining price structure?

-Advantages: improved cvi with higher priced caskets; win win situation
-Disadvantages: Lower end mark up can be too aggressive and it may push consumer to buy better merch

What is itemization?

A pricing system in which every item is priced separately. The historical method thawt is required by the FTC. Allows the family to omit certain items, though it can create a disadvantage to those who omit nothing. Need to determine a profit on every item. Families clearly understand their purchase, increased gross profit

What is unit pricing?

A pricing system which creates one total price for services and merch. Exaggerates the casket, not the service. Makes the billing and accounting simpler, but you still need to itemize

What is bi unit pricing?

A pricing system which shows the price of the services and casket separately. Allows for a better comparison of prices on caskets than unit pricing. Establishes a fee for service.

What is functional pricing?

A pricing system by which the charges are broken into several component parts- categorizes them (ex: casket, services, facilities, etc)

What is package pricing?

Certain items of service and merchandise are grouped together and sold at a specific price. MUST have the ability to be itemized

Do services need to be merchandised?

YES, it is MUCH more important to place emphasis on service- they’re the profit earners!

What other factors may impact pricing regardless of the system used?

-Competition’s price, legislation (FTC), product cost, distribution cost, economic fluctuations, type of merchandise, marketing strategy, purchasing practices, selling cost

What services can be merchandised?

Funeral, memorial, graveside, visitation, direct cremation, immediate burial, package, hospitality, event planning and green offerings