Funeral Home Business Plan

Defining who the customer is for a funeral home is complicated. Relatively few people pre-arrange their funerals while they’re alive, leaving most of the decisions to surviving family members. This becomes a complicated decision made by the person’s surviving spouse, if there is one, and the children of the deceased over the age of 30.

We have segmented the market in terms of the four generations that are over age 30 who form the active decision-making market. The four generations are the GI Generation (age 79 or older as of 2003), the Silent Generation (age 58 to 78), the Baby Boomers (age 39-57) and the portion of Generation X (age 23-38) that is over 30.

A new funeral home that was like all the others could not compete effectively for the most active market, the Silent Generation, against the reputations of long-established funeral homes in the area. The Center will be the first to appeal specifically to the tastes of the huge Baby Boom Generation for funerals that are about celebrating life rather than feeling morbid about death.

Targeting this market with this unique offering will not only attract Baby Boomers for their own funerals and those that they choose for their parents, it will also attract a significant percentage of the Silent Generation that has shown a propensity to spend money on itself and that likes to think young. It will further poise the Center for tremendous growth as the mortality rate of Boomers increases over the next 35 years.

4.1 Market Segmentation

The market is divided according to those who make the purchasing decisions regarding funerals. The market segments for the Center are divided by the generations of decision-makers over age 30.

• The GI Generation (born 1901-1924)  This generation is age 79 or older as of 2003. This is the most active market. Its mortality rate is about 12 percent per year but it makes up only 3.9 percent of Lane County. Because the rate of dementia is high among this group, if funeral arrangements haven’t been pre-arranged, it’s likely their Baby Boomer children are making the arrangements.
• The Silent Generation (born 1925-1945). This is the age segment probably most marketed by existing funeral homes. It’s mortality rate is 2 percent per year, and it’s the generation that generally has the most money. It has been called the Silent Generation because it was sandwiched between the heroic GI Generation that fought World War II (now sometimes called “The Greatest Generation,” and the explosive Baby Boom Generation (also called the “Me Generation”). Many of the Silent Generation have been strongly influenced by the cultural revolution of the Baby Boom Generation. Widows are 67 percent of surviving spouses in this age group because their husbands generally die first. This relatively wealthy generation has always been financially conservative, but at this point, is more willing to splurge. It is currently driving the high-end motorhome market. This generation is 58 to 78 as of 2003 and composes 15.9 percent of the local population.
• Boomers  (The post World War II “baby boom generation” born 1946 through 1964.)   Members of this generation are increasingly involved in funeral decisions as their parents, spouses or children die. This age cohort is currently age 39-57, as of 2003, and comprises 27.2 percent of the Eugene-Springfield MSA, and over half of the demographic that makes funeral decisions. This is nearly twice the number of the Silent Generation cohort. Its mortality rate is currently only 0.3 percent, but is poised to grow rapidly over the next 35 years. It also makes many of the decisions for older and younger cohorts.
• Generation X (1965-1980) This is the youngest cohort to make funeral decisions, with only members of this generation age 30 or older included as a market segment. Generation X members over the age of 30 comprise only 7.9 percent of Lane County, its mortality rate is low and it probably has the least input into the decisions about funerals. This generation challenges authority, is environmentally and socially concerned and watches its health. It’s more interested in quality time and peace of mind than in materialism. The members of this cohort age 30 to 38 makes up 7.5 percent of the MSA.

The Eugene-Springfield MSA conforms closely with the geographical boundaries of Lane County. Over two-thirds of the population of Lane County lives in Anytown metropolitan area.

4.2 Target Market Segment Strategy

The target market for the Center is the Baby Boom generation. It comprises over 50 percent of those of age to make funeral decisions in Lane County. The Silent Generation, for which more traditional funeral homes are competing, comprises 29 percent of the funeral decision makers. The GI Generation is over age 79 and its decisions are likely to be made by younger generations, including Boomers.

Baby Boomers, children of the post-war Baby Boom born 1946 through 1964, have changed business and culture from the time they were born. First the diaper business enjoyed the boom, then schools were rapidly built for them. In the years 1976 to 1980, the price of homes began to dramatically increase as this age cohort began to turn 30 and settled down. Now in middle age, Boomers are increasingly involved in making funeral choices for their elderly parents. As this generation approaches age 60, it is expected to dramatically increase the number of deaths over the next 35 years.

While the Baby Boom generation has been a boon for many businesses because of its numbers, it has also changed popular culture. It has been called the “Me generation” because it honors the individual. The trend toward more individualized funerals has already been widely noted in the industry.

The Baby Boom Generation is demonstrating a demand for more individualized funerals with more of a sense of celebration. Our strategy is to target this generation by appealing to its tastes. Just as Pepsi-Cola experienced in the 1960s when it targeted this generation, we believe we’ll draw more people from the Silent Generation who “think young” than we would by being just another traditional funeral home. The Silent Generation is showing a propensity to splurge, and we’ll offer greater opportunity to splurge on their funerals than more traditional providers.

Some 71 percent of people choose a funeral home by reputation. The Center would not be able to compete on the basis of reputation compared to funeral homes that have operated in the area for generations, or those that used to be run by families but have been bought by chains. In order to create a reputation rapidly, the Center will stimulate community involvement that brings people to the reception facility and generates publicity. It will draw the attention of those who want to celebrate life rather than host a morbid proceeding, and will create a new category of funeral provider which it will dominate.

Capturing this market will also put the Center in position for long-term growth as the Baby Boom Generation experiences mortality. The number of U.S. deaths is expected to increase at a rate of 11.3 percent over the first decade of the 21st century, reaching 2,634,000 deaths for the year 2010. The rate of deaths is projected to increase each subsequent decade until it peaks at 18.1 percent growth for the decade ending 2040. In that year, 4.1 million deaths are projected.

4.3 Service Business Analysis

When someone dies, there are relatively few alternatives available to people to take care of the remains and to bring closure.

• Funeral homes usually provide the following services:
• Funeral service, often with viewing because some people need to see the body to psychologically accept that the individual has died.
• Embalming is necessary if the funeral will take place more than 72 hours after death, especially if there is a viewing, unless it is refrigerated. 
• Preparation of the remains for viewing.
• Transportation of the body to the funeral home and to the gravesite.
• Funeral products, including caskets, urns and remembrance products.
• Immediate burial, performed without a service.
• Cremation, with or without a service.
• Cremation specialists, offering immediate cremation without a service that’s performed by a funeral director. If a service is desired, it may be performed in a church or other spiritual setting, or even outdoors, with or without clergy.

Some 75 percent of people nationwide choose burials that usually involve the services of a funeral home.

4.3.1 Competition and Buying Patterns

According to a 2002 survey by the National Funeral Directors Association, the most common reason for choosing a funeral home are location (78 percent of respondents), reputation (71 percent) and that it previously served the family (70 percent). Only 36 percent cited price, suggesting that for those who choose funeral services, price sensitivity is relatively moderate. Some 23 percent said they selected the funeral home because it was suggested by a friend, and seven percent by clergy, but only 11 percent said it was from advertising.

The survey underscores why the funeral industry is a very staid and conservative one. Location and reputation are everything for people choosing a funeral home. Some of the most successful funeral homes have been operated by the same family for generations. Some chain operations have bought up such funeral homes and have used the family reputation after it is no longer owned by the family. The power of reputation is such that many people appear unaware of the change of ownership, or their perception is unaffected by it.

In metropolitan Anytown, there are ten funeral homes, serving over two-thirds of the population of Lane County. There are four additional funeral homes serving small communities in the county.

There has been a steady growth in the market for cremation. In 1990, 17 percent of deaths resulted in cremations nationwide, according to the Cremation Association of North America. By 2000, the percentage had grown to 26.6 percent. This reflected a 71 percent increase in the number of cremations. In Anytown there are three providers specializing in immediate cremations