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An Oversaturated Market

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An Invitation to Funeral Pricing Abuse

If we were to die Monday through Friday — with one funeral a day — and two weeks off for the mortician's vacation, the following chart shows the number of funeral homes that would be needed in each state, compared to the actual number. There are undoubtedly some funeral homes that can handle more than one funeral a day, which reduces the "needed" number accordingly and probably explains the figures for California, Hawaii, and Nevada.

Certainly in rural areas with sparse population, a funeral home does not expect the dying business to be a full-time one, and more establishments will be needed to cover the geographic area than the number generated by a simple death-rate formula. In most other states, however, the number of funeral homes far exceeds that which can be reasonably supported by the death-rate. (In Kansas, Nebraska, Pennsylvania, and Vermont, there are almost four times the needed mortuaries; in Iowa there are five times too many!)

Why are so many funeral homes still in business? Because of high mark-ups that consumers pay — either willingly or because they just don't know what their other options are. It's a situation that invites pricing abuse!
State Needed Existing
Alabama 188 460
Alaska 14 26
Arizona 180 161
Arkansas 114 349
California 919 960
Colorado 124 186
Connecticut 114 296
Delaware 31 70
DC 19 40
Florida 677 852
Georgia 267 703
Hawaii 39 18
Idaho 44 85
Illinois 395 1232
Indiana 222 649
Iowa 110 600
Kansas 94 383
Kentucky 162 497
Louisiana 160 400
Maine 50 151
Maryland 174 294
Massachusetts 207 644
Michigan 343 729
Minnesota 152 559
Mississippi 112 450
Missouri 218 681
Montana 35 74
Nebraska 59 287
Nevada 78 59
New Hampshire 41 105
New Jersey 270 724
New Mexico 61 76
New York 582 1878
North Carolina 308 751
North Dakota 24 109
Ohio 427 1167
Oklahoma 142 414
Oregon 125 193
Pennsylvania 495 1664
Rhode Island 38 93
South Carolina 151 557
South Dakota 28 101
Tennessee 231 548
Texas 645 1339
Utah 57 98
Vermont 20 70
Virginia 234 488
Washington 192 237
West Virginia 84 309
Wisconsin 181 549
Wyoming 17 35

Supplied courtesy Lisa Carlson. Funeral home numbers were obtained from state regulatory boards for year 2010. Mortality rates used to calculate the number of "needed" funeral homes were taken from CDC death statistics from year 2009.

Last Updated ( Friday, 30 July 2010 09:26 )  
Comments (15)
1 Tuesday, 29 July 2008 17:23
I certainly appreciate the information that I am learning from your web-site. Just to let you know; I will be returning to School at the age of 42. I have been laid off from my current job, but I have always inspired to be a Funeral Director. I believe that these numbers, as they have been researched, have as much merit as having two shoe stores in the same strip center. However, I also agree that Funeral homes do profite too much on the one product they have to sell, Caskets, rather than the services they offer.
2 Saturday, 02 August 2008 11:09
Hi Don,

Thanks for commenting. Let me clarify a point. You said,

"I believe that these numbers, as they have been researched, have as much merit as having two shoe stores in the same strip center."

That misses the point. Funeral competition is not the same as shoe sales competition. There's *only one funeral* you can sell to every customer. But with shoes (or clothes, or anything), you can induce the same person to come back and buy more and more products. You can't do that with funerals - there are a fixed number of deaths to go around. That means the more funeral homes there are in one area, the higher the prices are going to be. With more funeral homes, each has less volume - the only way to pay the bills is to jack up the prices. That's just not the same as retail operations that can make a repeat customer out of the same person with special discount sales, promotions, etc.

Josh Slocum
Exec. Director
FCA
3 Thursday, 11 December 2008 01:23
J
Being a mortician myself, our business is just like any other one - there are the bad eggs and then the good ones. I hate to say it, but a lot of how a mortician conducts himself over the span of his/her career originates from who he/she apprenticed under. Monkey-see, monkey-do. We don't have the easiest job in the world, and I like to believe that our job is one of the most important ones in our society. It comes down to the mentality of "wow, I'm the last person to care for the deceased before they are gone." I find the job very rewarding indeed.
4 Tuesday, 16 December 2008 16:12
Burke Johnson
FCA’s article with the above title is probably the most idealistic and most unrealistic view on funeral service which I have ever read. The argument to justify, or shall I say blame, the number of funeral homes on high markups is just as ludicrous. FCA took numbers they did not understand, and spins them in a way that gives the opposite effect of what they propose.

The notion, that in rural areas a funeral home does not expect the business to be full time, is untrue. Let‘s take Iowa, (a state you suggest to be way out of line) a rural state-packed with small towns, most firms in the state of Iowa already cover multiple cities so that the business is full time. I would venture an educated guess that the number of firms operating in Iowa is a lot closer to the number of FCA suggested funeral homes “needed” , than the number of funeral home “locations” (many of which are simply “viewing” chapels) in Iowa. Firms are able to do this because they have consolidated staff, prep facilities and vehicles, so that grieving families and friends can be served in the comfort of their own community. FCA’s ideal number of funeral homes suggests that, in an ideal world, the consumer must cover the funeral director-that’s the unrealistic part. The consumer isn’t here to cover us; the funeral home must serve the consumer. In any rural area of the country, the funeral is a community event and will be entrusted to the local funeral director who has invested in that community. To suggest that we should have less funeral homes, forces the consumer to travel to get funeral service, sends their money out of the local economy and forces funeral and visitation goers to travel as well. Suddenly, the funeral is no longer a community event and the consumer becomes a number. What does this invite? Pricing abuse? Not at all. It invites competition, keeping prices in check. When the consumer has a choice of funeral homes, the consumer then dictates what takes place. If funeral homes operated with the formula suggested by FCA, competition would be virtually nonexistent and the funeral homes could then dictate what takes place; Herein would lie the invitation to pricing abuse? FCA’s suggestion of efficiency certainly does not equate with effectiveness.


Josh Slocum’s response to Don also is only correct in the shoe store comparison when he suggests that with more funeral homes, each has less volume. Josh gets two strikes on the rest of his response. He says you can only sell one funeral to each customer. When we conduct a funeral, we don’t serve the deceased-we serve the whole family. If Jane and Bill are a couple, I can sell a funeral to Jane for herself, her husband, her parents, her in laws, her siblings, her children, etc. You get the point. Funeral homes can and do induce the same person/family to come back. The only way to pay the bills is to provide better service and win over each consumer and the community. Funeral consumers aren’t stupid. When a funeral director serves the community in a manner that gives value to the funeral, funeral consumers are willing to pay for that service they value. The bills get paid by providing effective funeral service and being competitive. Effectiveness will win over efficiency anytime.

My suggestion to FCA is therefore to remove the “An Oversaturated Market” article from your website. It doesn’t hold water.

Burke Johnson
5 Tuesday, 16 December 2008 21:23
Joshua Slocum
FCA’s article with the above title is probably the most idealistic and most unrealistic view on funeral service which I have ever read. The argument to justify, or shall I say blame, the number of funeral homes on high markups is just as ludicrous. FCA took numbers they did not understand, and spins them in a way that gives the opposite effect of what they propose.


Really? The absolute most unrealistic you’ve ever read in your whole life?

The notion, that in rural areas a funeral home does not expect the business to be full time, is untrue. Let‘s take Iowa, (a state you suggest to be way out of line) a rural state-packed with small towns, most firms in the state of Iowa already cover multiple cities so that the business is full time. I would venture an educated guess that the number of firms operating in Iowa is a lot closer to the number of FCA suggested funeral homes “needed” , than the number of funeral home “locations” (many of which are simply “viewing” chapels) in Iowa.


Mr. Burke, it doesn’t matter as much whether a state is “rural” or not, it matters how many mortuaries there are per capita. The fewer deaths spread out among many funeral homes, the lower the volume. This is simple, indisputable fact. Yes, in rural states, geography is a concern to a greater or lesser degree, as we pointed out in the article. And if, as you suggest, most Iowa funeral homes cover multiple cities, that still doesn’t make them “full-time.” Iowa had 31,480 deaths in 2003. Dividing that among the 476 funeral homes that year, that’s 66 funerals per year - barely more than one call per week. Do you call that “full time?” Even if half those locations were just branches — viewing chapels — that’s still only 124 funerals per year, per location. That’s 2.3 funerals per week. Is that “full time?”

If you have evidence that a substantial number of the funeral homes listed in Iowa by the Red Book are actually just branches or viewing chapels of one business, please present it and we’ll gladly take that into account.

Firms are able to do this because they have consolidated staff, prep facilities and vehicles, so that grieving families and friends can be served in the comfort of their own community . . . In any rural area of the country, the funeral is a community event and will be entrusted to the local funeral director who has invested in that community. To suggest that we should have less funeral homes, forces the consumer to travel to get funeral service, sends their money out of the local economy and forces funeral and visitation goers to travel as well. Suddenly, the funeral is no longer a community event and the consumer becomes a number.


Yes, some consumers want a funeral home that’s very close to home, and some of that consumer demand will influence the number of locations. But the economics are still the same: fewer calls per funeral home means higher bills, on average, for each call. It doesn’t matter why the number of funeral homes is what it is, the numbers are still the same.

What you’re not taking into account is the growing number of consumers who are not interested in using the funeral home as a physical location for a memorial gathering. As cremation rates rise, and as families choose non-conventional memorials, such as those at church or at home with no funeral involvement, many funeral homes are going to find themselves having to combine with competitors or close down. It’s already happening in some parts of the country.

What does this invite? Pricing abuse? Not at all. It invites competition, keeping prices in check.


Mr. Burke, you just contradicted yourself. Earlier you wrote, “the funeral is a community event and will be entrusted to the local funeral director who has invested in that community.” Now you’re claiming that consumers are shopping around shrewdly among funeral homes - not necessarily using the one “in the community/” Which is it? It can’t be both. Oh, and I think it’s more accurate to say the community has invested in the funeral home. It is after all, the citizens’ dollars flowing to your mortuary, not the other way around.

You know as well as I do that most consumers simply return to the same funeral home over and over, generation after generation (although, thankfully, that’s beginning to change). They don’t shop around nearly as much as they do for other important purchases. That’s what allows some funeral homes to charge, say, $3,000 for a direct cremation, while another firm 30 miles away charges $1,000. Since your customers don’t shop around, they don’t know about it, and the high-priced firms can get away with it.

When the consumer has a choice of funeral homes, the consumer then dictates what takes place. If funeral homes operated with the formula suggested by FCA, competition would be virtually nonexistent and the funeral homes could then dictate what takes place; Herein would lie the invitation to pricing abuse? FCA’s suggestion of efficiency certainly does not equate with effectiveness.


You’re correct that when consumers have a choice, they can bring pressure onto the market. But unless they shop around and compare wisely, they’re likely to pay whatever the local funeral home charges. Most folks don’t realize the price for comparable goods and services can vary by thousands of dollars just in a 30-mile radius (but you already knew that about funeral consumers - I’ll bet you count on the Smiths coming to you death after death).

You make a good point that if there were too few funeral homes, there would be much less pressure on funeral homes to keep their prices in check. But, there’s a balance to be struck between these extremes. A good example of this is the privately owned chain of funeral homes called Newcomer. Visit them here.

They offer everything from direct cremation to the full service, but they offer it at a price that almost always beats their local competition. How? Through volume. The Newcomer funeral homes advertise heavily on price and value for the money, and as a result, their numbers are beating the pants off the good old boys in many locations.

Josh Slocum’s response to Don also is only correct in the shoe store comparison when he suggests that with more funeral homes, each has less volume.


How’s that, Mr. Burke? That’s just a plain fact. There is a fixed number of deaths in any geographical area. That’s all there is to divide up among the funeral homes in that area. The more funeral homes, the fewer each gets, on average. How can you misunderstand that?

Josh gets two strikes on the rest of his response. He says you can only sell one funeral to each customer. When we conduct a funeral, we don’t serve the deceased-we serve the whole family. If Jane and Bill are a couple, I can sell a funeral to Jane for herself, her husband, her parents, her in laws, her siblings, her children, etc. You get the point. Funeral homes can and do induce the same person/family to come back.


Oh my word. This is so obvious I’m having a hard time figuring out why you can’t see it. Let me try again. You can only sell one funeral to each customer - because each customer only dies once . If you’ve figured out a way around this, then patent it before SCI does. If I’m a shoe store, or a restaurant, I can sell multiple pairs of shoes, and multiple meals, to Jane Doe and the rest of her family, week after week, year after year. But as a funeral home, even if I do all the funerals in Doe’s family of 16, I’ll never sell more than 16 funerals to the Doe family because they have but 16 lives to give. You see the difference, right?

It’s a zero-sum game, Mr. Burke. The only way for you or any funeral director to increase volume is to take volume away from a competitor. You’ can’t “grow” the funeral market the way Apple can grow the ipod market by selling multiple, upgraded versions of the ipod to the same customer year after year.

The only way to pay the bills is to provide better service and win over each consumer and the community. Funeral consumers aren’t stupid. When a funeral director serves the community in a manner that gives value to the funeral, funeral consumers are willing to pay for that service they value. The bills get paid by providing effective funeral service and being competitive. Effectiveness will win over efficiency anytime.


Just as I said above, if you win over every consumer, you’ll be taking volume from your competitor. I agree, and I wish you luck. But I wouldn’t be on mantras like “quality” and “effectiveness”saving you or the excess operators in funeral service. As more people wake up to the fact that a $3,000 direct cremation isn’t “higher quality” than a $1,000 service, they’re going to turn away from the needlessly overpriced. Maybe things change more slowly in Iowa, but they will change. Smart funeral directors will get ahead of the curve by copying the strategies of businesses like Newcomer, and by embracing growing demand for new services, such as green burial.

My suggestion to FCA is therefore to remove the “An Over-saturated Market” article from your website. It doesn’t hold water.


Nah. Then we wouldn’t have these fun back-and-forths.

Josh Slocum
Exec. Director, FCA
6 Tuesday, 16 December 2008 23:31
Alfred
The number of existing funeral homes on the list IS actually misleading. It is not FCA's fault, because they just quoted the number of funeral homes from a recognized directory. The problem is with how the funeral homes are listed in the directories. Most of the directories of funeral homes, whether it be the red book, yellow book, or whatever, do not distinguish between funeral establishments or branch establishments, nor do they tell you who owns each funeral home.

It would be very time consuming, but not impossible, to compile a list of funeral homes in each state by owner. Then combine all the funeral homes in each state that have the same owner. THAT number would be a more accurate number to use for this type of analysis. You would have to contact each state funeral board to get the information about funeral home ownership.

Using funeral homes by owner, the number of existing funeral homes would be much less than the numbers cited in the article above. It is not uncommon in rural areas for one owner to own 6 or 7 funeral homes in the same local area, and to share staff among all the facilities. Granted, 6 or 7 is probably on the high end, but it's not totally uncommon either. One owner owning 2 or 3 locations is extremely common, however.

It IS possible that in these situations the local funeral homes are actually doing just what FCA says they should be doing, which is combining enough locations to generate enough business to have one funeral per weekday per year. I'm not saying that FCA is trying to mislead with this article, but I am saying that if you really analyze this issue, there is more to it than this article claims.

You would also have to combine certain corporate locations in a given metropolitan area into "one" funeral home, rather than counting each location as a separate funeral home, since they usually share facilities and staff and are under the same ownership. There is also the issue of funeral homes in one state that serve customers from an adjacent state. For example, funeral homes in Missouri (Kansas City) that serve customers who die in Kansas, or vice versa.

Another example would be the business that a funeral home in one state gets from the death that occurs in another state. That information is not included in this table, because this data only includes deaths that occur in the state where the funeral home is located. For example, many funeral homes in the "snowbelt" handle funerals for people who retire and die in the "sunbelt" states. Those people are not taken into account in this table because they didn't die in the state where the funeral took place.
7 Tuesday, 16 December 2008 23:53
Lisa Carlson
Hey, guys. Don't you have to pay mortgages, taxes, and maintenance on "branch" facilities, too? Those are the reasons I counted roofs when I first put this chart together some years ago. If you're doing fewer than 100 calls a year--whether under one roof or three roofs--you have to charge a lot more per call than a facility doing say 300 calls a year to cover those expenses.

When I was growing up, the sign in a small Vermont town said "Upholstery, Hardware, Undertaking." They knew it was a part-time job. Alas, many FDs want full-time pay for part-time work. BTW, on the west coast--where supply and demand are in closer sync--prices tend to be lower.
8 Wednesday, 17 December 2008 12:43
Alfred
Lisa, I'm not an FD. I posted comments here because Josh sent an email about it to the discussion list. I'm not interested in adhering to any dogma, whether it be from FCA or anyone else. I'm only interested in truth and facts. I do think this article, and the table with it, is somewhat misleading. I didn't intend to get into a discussion of this, but I will if it leads to some constructive dialogue.

First, I do think there can be a debate about whether a funeral home having more calls would cause them to lower costs. Staff expenses are the biggest expense of any funeral home. The more calls they have, the more staff they need to handle those calls. They need to pay the staff, and might end up passing that expense on to the customer. They also will need more vehicles and probably larger facilities.

SCI is the largest funeral provider in America, and they have the highest prices. There is not a direct, cause-effect relationship between larger funeral home size and lower prices.

A funeral home that does 260 calls a year (one funeral per weekday per year) needs at least 3-4 funeral directors on staff, maybe more. One funeral director cannot handle a funeral every single day. There's way too much work. A funeral home that does 60 calls a year can get by with employing only 1 or 2 funeral directors. In many cases, a funeral home that size can operate from the funeral director's house, which many of them do. That saves costs, which can be passed on to the customer. I also know of many funeral homes that are combined with another business, such as a furniture store. These are not relics of a bygone era. I know of at least 4 small funeral homes in my local area that are attached to a furniture store.

I also don't know if I agree with the idea that a full-time funeral home has to have one funeral every day. Sounds like an arbitrary distinction. I think two or three funerals a week is plenty for a funeral home to be considered full-time. If a funeral home does two funerals a week, that's still over 100 funerals a year. If the average funeral price at that funeral home is $3,000, which is a very reasonable price considering that the average nationwide is $8,500, that funeral home generates $300,000 in revenue in one year. I would think a small funeral home, with a small staff, can operate profitably on $300,000 a year.

I guess I just don't buy the idea that a funeral home that does fewer than 260 calls a year would necessarily lead to higher prices for the consumer. Is this what FCA really wants? A "Wal-Mart" funeral home every 30 miles?
9 Thursday, 18 December 2008 18:04
Burke
Try approaching this a little slower and read carefully this time.

Original Comment: FCA’s article with the above title is probably the most idealistic and most unrealistic view on funeral service which I have ever read.

Josh: Really? The absolute most unrealistic you’ve ever read in your whole life?

Come on, Josh. When did probably mean absolute?

Original Comment: I would venture an educated guess that the number of firms operating in Iowa is a lot closer to the number of FCA suggested funeral homes “needed” , than the number of funeral home “locations” (many of which are simply “viewing” chapels) in Iowa.

Josh: …2.3 funerals per week. Is that “full time?” If you have evidence that a substantial number of the funeral homes listed in Iowa by the Red Book are actually just branches or viewing chapels of one business, please present it and we’ll gladly take that into account.

I researched the numbers with last year's state association directory. We had 161 firms operating 377 locations. That equates to 2.33 funeral homes per firm;(I don't think we have any reason to believe that this ratio would be different among non members) according to your estimate this should give each firm 146 funerals per year. This is more than adequate according to Alfred, and reflects that this balance you suggest is already in place. (Thanks for your help, Alfred. Having the perspective of a second person certainly brings things to light. The only thing I disagree about with Alfred is that it is not the Redbook’s fault they don’t list funeral homes by owner. It is a directory of locations, not owners. FCA knew they took raw numbers, and used them to their advantage. )

Original Comment: Firms are able to do this because they have consolidated staff, prep facilities and vehicles, so that grieving families and friends can be served in the comfort of their own community . . . In any rural area of the country, the funeral is a community event and will be entrusted to the local funeral director who has invested in that community. To suggest that we should have less funeral homes, forces the consumer to travel to get funeral service, sends their money out of the local economy and forces funeral and visitation goers to travel as well. Suddenly, the funeral is no longer a community event and the consumer becomes a number.

Josh: But the economics are still the same: fewer calls per funeral home means higher bills, on average, for each call. It doesn’t matter why the number of funeral homes is what it is, the numbers are still the same.

The economics are not the same. Mr. Slocum, what you do understand is how the economics of a funeral relate to the individual. But what you do not understand is that the attitude towards the funeral is much different in rural areas than densely populated areas, such as the East Coast, West Coast and larger metropolitan areas. The economics of keeping as much business in a small town is the big picture that, I guess, only community members will understand.

I couldn’t wait to get to this part. Josh, the “An Oversaturated Market” article directly asks, “Why are so many funeral homes still in business?” Then you turn around and say “It doesn’t matter why the number of funeral homes is what it is, the numbers are still the same.” Which way is it Josh? Does it matter or does it not matter? You can’t have it both ways.

Josh: What you’re not taking into account is the growing number of consumers who are not interested in using the funeral home as a physical location for a memorial gathering. As cremation rates rise, and as families choose non-conventional memorials, such as those at church or at home with no funeral involvement, many funeral homes are going to find themselves having to combine with competitors or close down. It’s already happening in some parts of the country.

Like in Iowa. You would have known this if you would have done your research beforehand.

Original comment: What does this invite? Pricing abuse? Not at all. It invites competition, keeping prices in check.

Josh: Mr. Burke, you just contradicted yourself. Earlier you wrote, “the funeral is a community event and will be entrusted to the local funeral director who has invested in that community.” Now you’re claiming that consumers are shopping around shrewdly among funeral homes - not necessarily using the one “in the community/” Which is it? It can’t be both.

Mr . Slocum, You find it very easy to twist what is presented in front of you. My “supposed” contradiction is in your words, not mine, that the consumer will shrewdly shop among funeral homes. Your suggestion to have less funeral homes, removes options for families and encourages other funeral homes to fill the gap, therefore increasing competition. The consumer/customer/funeral buyer, then gets to decide if they want cheap and inconvenient(which you suggest), or is it worth the price to stay local and keep their money in the community.

Josh: Oh, and I think it’s more accurate to say the community has invested in the funeral home. It is after all, the citizens’ dollars flowing to your mortuary, not the other way around.

Thank you, Thank you. You hit the nail on the head on the first sentence. However, when the community invests in the funeral home, the citizen’s dollars will “flow” to my mortuary, with the trust that I will keep my business “the flow of dollars” in the community as well. These community dollars come full circle, so more than you realize, it does go “the other way around” as well.

Josh: You know as well as I do that most consumers simply return to the same funeral home over and over, generation after generation (although, thankfully, that’s beginning to change).

Wait a second Mr. Slocum, I thought you said that there are no inducements to return to the same funeral home and that each consumer/customer can only purchase one funeral. Which is it? Can I have return customers, or can’t I?

Josh: They don’t shop around nearly as much as they do for other important purchases. That’s what allows some funeral homes to charge, say, $3,000 for a direct cremation, while another firm 30 miles away charges $1,000. Since your customers don’t shop around, they don’t know about it, and the high-priced firms can get away with it.

What you are not able to take into account here, is that people who choose to live in a rural area do account for the fact that prices for goods and services will be higher than if they went to the “City.” Businesses in rural areas cannot take advantage of volume discounts for the merchandise. Rural citizens understand that. FCA needs to get over the fact that just because a funeral may cost a lot, does not mean that the funeral does not hold value, and that a vast majority of the population I serve are willing to pay for something they value.

Original Comment: When the consumer has a choice of funeral homes, the consumer then dictates what takes place. If funeral homes operated with the formula suggested by FCA, competition would be virtually nonexistent and the funeral homes could then dictate what takes place; Herein would lie the invitation to pricing abuse? FCA’s suggestion of efficiency certainly does not equate with effectiveness.

Josh: You’re correct that when consumers have a choice, they can bring pressure onto the market. But unless they shop around and compare wisely, they’re likely to pay whatever the local funeral home charges.

All consumers know they can shop around, but why would they when they already see value combined with convenience.

Josh: You make a good point that if there were too few funeral homes, there would be much less pressure on funeral homes to keep their prices in check. But, there’s a balance to be struck between these extremes. A good example of this is the privately owned chain of funeral homes called Newcomer. Visit them here. They offer everything from direct cremation to the full service, but they offer it at a price that almost always beats their local competition. How? Through volume. The Newcomer funeral homes advertise heavily on price and value for the money, and as a result, their numbers are beating the pants off the good old boys in many locations.

Hey Josh, If Newcomer is so great, what makes their $2900 Direct cremation offered in Casper, Wyoming that much better than the $1195 direct cremation offered in Denver? Is the Casper location “needlessly overpriced?” as you compare cremation costs later in your responses. Has Newcomer decreased the amount of funeral homes? I don’t think so. Looking at the population of the cities where they choose to do business(only two cities have populations less than 100,000), Newcomer’s approach is to position themselves where the people are. Hey, that sounds vaguely familiar; kind of like what the good old boys in Iowa have done for generations. Why don’t I see Newcomer in rural areas? Because FCA’s formula isn’t one size fits all.

Original comment: Josh Slocum’s response to Don also is only correct in the shoe store comparison when he suggests that with more funeral homes, each has less volume.

Josh: How’s that, Mr. Burke? That’s just a plain fact. There is a fixed number of deaths in any geographical area. That’s all there is to divide up among the funeral homes in that area. The more funeral homes, the fewer each gets, on average. How can you misunderstand that?

Once again, try reading my original comment. I agreed with you on this. I understand the zero sum game.

Original comment: He(Josh) says you can only sell one funeral to each customer. When we conduct a funeral, we don’t serve the deceased-we serve the whole family. If Jane and Bill are a couple, I can sell a funeral to Jane for herself, her husband, her parents, her in laws, her siblings, her children, etc. You get the point. Funeral homes can and do induce the same person/family to come back.

Josh: Let me try again. You can only sell one funeral to each customer - because each customer only dies once .

Think hard Josh. I have a family of six children and their father dies. They split the bill. I just served six customers. Technically the funeral is for the deceased, not by the deceased. After someone dies, they are no longer able to make decisions and sign their name. (I take that back, you can still be a registered voter in Chicago). In all seriousness, Josh, my customers are everyone I encounter in my funeral home, at each visitation and each funeral or graveside service. This is pretty much semantics. We both understand that you only die once. We just don't agree on the definition of customer.
10 Friday, 19 December 2008 21:13
Alfred
This article has generated some interesting comments. Burke, I have read your comments, and I hope Josh responds again. You seem to be making a lot of interrelated points. Could you clarify what your main point of contention is with this article?

Just for the record, as succinctly as possible, I would like to point out what I think is the main problem with this article. The main problem is that it posits a correct notion, that the more funeral homes there are in a geographic area, the less volume there will be per funeral home, but gives incorrect numbers to properly understand the "supply side" of the equation. Funeral homes do not compete with themselves for business. For this type of analysis, all funeral homes owned by the same owner in a given geographic area would have to be combined into a single unit, because all funeral home locations in a given geographic area owned by a single owner are not competing with each other for business from the limited pool of deaths in that area.

This to me seems like a simple concept to understand. If you combined funeral homes in this way, the number of actual funeral homes would be much less than the "existing" number in this article. I am not going to say if the number would be closer to the "needed" number or the "existing" number, because since I haven't done such an analysis, anything I would say about that would be speculation.

There are actually many small markets where a single funeral home has a complete monopoly. I don't know to what extent the LACK of competition in the funeral industry increases prices, but I think THAT is as valid a concern as the idea that too much competition increases prices.
11 Tuesday, 23 December 2008 08:24
Burke
Alfred, Let’s approach it this way. The first half or so of this article is a story that starts with the word “If.” The story suggests that one funeral director should be able to handle 5 funerals per week. With that in mind, the story continues and suggests that by dividing the number of deaths in the state by the number of suggested funerals a funeral director “should “ be able to handle, brand new and lower numbers of funeral homes would be more ideal. Now remember this is just a story; only one or two factors that help determine if a funeral home can be fulltime is considered in this formula. (Numerous factors must be taken in to account for a funeral home to be a viable, full-time funeral home) Also the number of funeral homes locations is used in a very raw form; no consideration, or research, is given to determine if these funeral homes are stand alone firms or branches. Up to this point, the article is big “what if” with conclusions reached with raw and unresearched numbers; the conclusion being, what FCA has carefully formulated, that there is an excess of funeral homes. I don’t agree with this conclusion, but that’s okay. I understand it is just a story; it is certainly not as factual as FCA would like you to believe.

To conclude the article, FCA then asks “Why are so many funeral homes still in business?“ This is where I take exception. FCA then presents the conclusion to their “Story” as being factual and combines it with an alarmist statement which hurts the consumer, the funeral profession and FCA.
12 Friday, 26 December 2008 23:59
Tom von Alten
I think the reality of the industry is more complicated than the number of firms, their capacity, and the death rate.

Normally, with more suppliers, and therefore greater supply, prices would go down. Suppliers might try to maintain high prices and keep their net profit the same on lower volume, but a more efficient supplier could offer a lower price, gain more volume, and so on. This is the basic conventional wisdom of economics.

What I see in my state, Idaho, is that the higher density population centers, with more suppliers, have lower prices than the remote areas. But I haven't made a study of the per capita distribution or death rates, and am not prepared to state any firm theories about why the distribution is the way it is.

Other factors that affect prices include barriers to entry (training, and licensing requirements), barriers to exit (even with low volume, if the mortgage is paid for, and if there is little market for selling a firm, businesses can limp along, add or subtract staff as demand varies, moonlight at other jobs, etc.)

The size (facilities, staff, capacity) of funeral establishments varies widely, beyond whether it's a branch or a chain, and so a simple tally of businesses doesn't necessarily tell us all we need to know.

The inference that I would draw from the numbers tabulated here is that the oversupply probably explains relatively low profitability for the businesses. If prices to the consumer remain high, it seems more likely to be in spite of the oversupply rather than because of it.

As for the accuracy of the numbers here, before I would cast aspersions (or give credence to someone else's complaints), I would want to see some alternate research. I happen to know that the number of firms listed is correct for Idaho (compared to our Board of Morticians license database), and that there is nowhere near a 2.33 facility-to-owner ratio in our state. It might be 1.1 or 1.2, tops. None of the vague complaints in the comments shows anything like the credibility the FCA has earned for its compilation with sources cited.
13 Monday, 29 December 2008 16:50
Burke
Tom, I think you have alot of good points. Simply put, in your words, a simple tally of businesses doesn't necessarily tell us all we need to know. Even the FCA presented numbers in Idaho are deceiving. I looked on the Idaho Board of Morticians database as well and came up with 107 locations owned by 70 owners, equating to 1.53 facility to owner ratio. Sure it's nowhere near Iowa's ratio, but the states are different, and the numbers show that your gut was not as accurate as you thought. FCA needs to present some researched numbers, not just what they feel in their gut. I would agree that some alternate research is needed, by the FCA, before they present these types of conclusions. Tom, I do disagree with you in your conclusion. I believe the complaints in the comments totally submarine the credibility of FCA because a simple tally... does not tell us all we need to know and many of the complaints and arguments have illigitimized this theory that is not as firm as FCA would like us to believe.
14 Monday, 19 January 2009 10:28
Burke
Come on guys, let's take the article off the website or present some researched numbers that don't compare rotten apples to fresh oranges.
15 Monday, 19 January 2009 23:05
Josh Slocum
Burke, you're welcome to comment here just as anyone is. But you're not welcome to ride your hobby horse so hard you wear a groove in our floor. You've had your say to the point of tedium, so I'm closing the comments here. Notice I'm not deleting your comments, so no cries of "censorship," please.

Here's the bottomline:

1. The chart shows general trends, and illustrates one reason why funeral prices tend to be higher when there are too many rooftops. It's not the be all and end all to the analysis, and we never pretended it was. But it's a good starting point in a very general sense to understand the relationship between oversupply and high prices.

2. Even if you're right, Burke, that many of these rooftops are owned by the same entity, that does not invalidate the chart. Extra rooftops cost money to operate, too. A funeral home owner with three branch facilities that lay idle much of the time is still paying taxes, heating, maintenance, not to mention the initial building/acquisition costs. This kind of inefficiency contributes to higher funeral prices, too.

And by the way, I'm not just going to take your word for it that you've determined the ratio of owners-to-rooftops. You need to show your data. We've cited the source for ours.

3. It's obvious - just as indisputable as the fact that the sun rises every morning - that funeral directors can only sell one funeral to a customer. Why this is so difficult for you to grasp, Burke, is a mystery. Sure, the same families often come back to the same funeral home for multiple deaths, but it's still only one funeral to a body. A family of six will only ever buy six funerals from you.

If you've still got a bee in your bonnet over this, you can certainly email me. But I'm not likely to spend much time responding unless you come up with some new data or an actual rebuttal. Leaving aside the snide tone of voice helps, too.

Cheers,

Josh Slocum
Executive Director

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