It’s been said that there are two guarantees in life: you’re going to be taxed and one day you will unfortunately die. When the latter comes along, the funeral industry will be there to take care of your final needs.
According to the National Funeral Directors Association [NFDA], the average cost of a traditional funeral, including embalming and a metal casket, is about $6,600.
If cemetery services are also desired, with the gravesite cost and a vault or liner, then this may increase the cost of the funeral by up to another $3,000. Although the costs seem high, these final costs are more about the grieving process for family and friends, so trying to save money is often discouraged because the rituals of tradition are engrained in society as a way to move on.
How Changing Economics Has Changed the Funeral Industry
- About 2 million people die in the United States every year, which brings their family to begin doing business with the funeral industry.
- There are 21,080 funeral homes in the United States that employ approximately 105,668 individuals.
- It is estimated that the funeral industry generates up to $11 billion in revenues each year.
- As reported by Fox Business, funeral directors are required to give families a written, itemized price list for their products and services according to rules that are enforced by the Federal Trade Commission [FTC].
- The funeral industry is allowed to charge a basic services fee for specific professional services, including planning, permits, death certificates, storage, and service coordination. In some locations, this fee can be as high as $5,000.
- Consumers are also entitled to receive a written price list for all caskets, including any lower-priced models which may not be on display.
- In 2015, the NFDA for the first time projected that cremations would exceed burials because of the need to save money. The cremation rate is expected to rise by 56% by 2025 from figures reported in 2010.
- Cremations cost an average of $3,200 and many large retail outlets, including Costco, offer urns for remains storage that may cost as little as $20.
- Because of these high costs, 1 in 3 people have engaged in some level of funeral pre-planning according to a survey conducting by AARP. 1 in 4 people have even pre-paid for their funeral.
- The NFDA reports that many people who pre-plan their funeral also choose to pre-pay because it will alleviate the financial burden for their families.
- Banks have helped by allowing for people to set aside money within their account that can be payable upon death to take care of the costs of a funeral.
Because everyone dies, there is going to be some level of cost associated with the funeral – even if it’s just a basic cremation without a visitation. There may also be specific requirements a family may need to follow according to state or local laws and this may also have an associated cost. This means there will always be a certain market for the funeral industry. The amount of revenue it can generate will often be determined today by the amount of pre-planning that happens. Many households can’t afford to spend $10,000 out of the blue, so households that pre-plan and pre-pay are typically going to be the best revenue generators for the industry. By focusing on this consumer segment, the changing economics of today and tomorrow can have a minimal effect on the industry as a whole.
How Marketing Can Change the Funeral Industry Trends
- The NFDA discovered that the most common reason for a funeral home to be selected by a family was because it had been previously used – 51.7% of respondents to a survey listed this as a reason for their selection.
- Previous service topped location [50.9%], reputation [50.4%], personal recommendations [19.2%] and advertising [3.4%]. This means that the best marketing effort for the funeral industry is to provide high quality services and to focus on building personal relationships.
- Certain funeral directors, however, do have the reputation of “requiring” families to purchase services that are not mandated by law – such as having an embalming for a wake when the FTC says an embalming is not required unless a body is not buried or cremated within a certain amount of time.
- Fox Business also reports that cemeteries often insist on casket vaults and liners to prevent graves from sinking as the casket deteriorates. But the FTC says state laws do not demand a vault or liner.
- Going “green” with funerals is a new trend being embraced by the public that may also promote increased revenues for the funeral industry. It can also save families on the costs they have. A biodegradable shroud may only cost $40 or a biodegradable casket just $300. The only issue is that there are only 22 cemeteries in the US which offer natural burial grounds.
- 23% of people in a recent AARP survey stated that they would consider a “green” funeral or a natural burial instead of a traditional funeral.
- Women have $129,800 of individual life insurance, on average, while men have $187,100, according to the life insurance industry organization LIMRA, and these funds are often used to keep a home, pay for tuition, or other family costs and the high price of a funeral limits the ability to access this cash for needed items.
- Yet despite the challenges, small operators can compete successfully with national companies because the funeral business is intensely local. The average annual revenue per employee in the funeral industry is $100,000.
- Most funeral homes conduct fewer than 100 funerals a year and have a large investment in physical assets that are often idle.
Although the cost of a funeral may seem high, it is important to remember that these are business owners that are supporting their own families with what they do. Not everyone can be a funeral director. As land becomes more of a premium and costs continue to rise, families will look for more economical options. Marketing toward families now, encouraging higher life insurance policies to help pay for funerals, and building relationships in the community can help the industry be able to thrive even when there may be fewer deaths happening. It is a careful balance which must be achieved, but when it happens, the industries and the families they serve can come away feeling satisfied.
Trends in Funeral Services for the Industry
- Many families are choosing funerals for loved ones or themselves based on values that have been different than in previous generations. Embracing this as an industry can help consumers to plan services that are unique, reflective of the individual, and still bring in a desired level of revenues.
- Advance funeral planning will continue to increase as more families attempt to cope with a person’s final costs. Even preparing for a funeral can help a family prepare for the cost when it happens, so pre-pay doesn’t have to be a priority.
- Cremation will continue to be on the rise as an affordable option for families, especially if economic trends spiral downward as they did in the recession years of 2007-2009 at the time of death.
- Low-cost casket options, urns, and other materials will continue to compete with the items provided by the funeral industry for families with limited economic resources. When Walmart offers caskets with free shipping, that can be a needed affordable option.
- Funeral homes can help families create videos, social media profile reviews, and other memorials with technology advancements so that keepsakes can become forever memories as a way to offset the losses caused by avoiding a traditional service.
- Green funerals will continue to expand as an option, from natural burials to placing the ashes of a loved one in containers that can help to grow trees. Look for more environmentally-friendly options in the future and organic options becoming available for traditional services as a way to embrace this trend.
- The funeral industry has often been a family business, dominated by men, but that is also changing. A majority of mortuary school graduates today don’t come from families that ran funeral homes and many decided to join the profession as a second career. 60% of new mortuary students are women.
The funeral industry is changing in many ways. The focus is often on the economics of the industry, but how it is structured is also changing. There are more choices available to consumers than ever before. More women are entering this industry to start a profession more than ever before. There are many opportunities available right now because each community needs to be served by someone within this industry. Although we may not want to think about what it means to die, the funeral industry welcomes everyone with open arms and encourages them to think about the economics of what these final expenses will be.
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