I often hear from funeral professionals who aren’t sure if an active preneed program is the best fit for their funeral home. Owners who ask this are really wondering about the health of their business and, often, what strategy is best equipped to safeguard it moving forward.

While I am a little biased – I think preneed is always valuable to a funeral home business and the families it serves – there are a number of signs that the time is ripe and ready for a funeral home to invest in a more active preneed program.

You’re facing increased competition.
Whether a new firm has recently opened down the street or a long-standing competitor is capturing more and more of your market share, an increasingly competitive climate is often a key indicator you need to pay more attention to your preneed program.

Offering an attractive prefunding option can help you retain (and even grow) your market share and ensure your firm is top of mind when consumers look for a preneed provider. Consider the following example:

Three funeral homes, operating out of the same community, have historically split their market share evenly. The directors, Alex Active, Peter Passive and Andrew At-need, each decide to adopt a different approach to their community outreach. Alex sets a goal to maintain a 60% preneed to at-need ratio. Peter opts for a 20% ratio, and Andrew decides to focus his efforts on the at-need business, writing preneed only on a walk-in basis.

When setting annual sales goals, Alex and Peter work to maintain their desired ratio. If Alex serves 100 at-need families, he writes 60 preneed policies. The next year, his preneed goal increases to reflect that year’s anticipated call volume. Peter does the same, and on and on it goes, increasing each year. Over time, each owner’s approach begins to snowball, as preneed files become at-need calls.

For simplicity, let’s assume the market share in this community is a closed pool, and that any preneed they write comes from one of their competitors. If their client families mirror the average mortality of our policyholders (around 13% within a year of policy issue, 8% the following year, 7% the year after and so on), in a year or two, the difference in market share won’t be noticeable. But over time, the competitive landscape will shift dramatically.

 

Assuming they do not deviate from their goals, in just 10 years, Alex Active will be serving 48% of their market. Peter will have grown his market share to 37%, and Andrew At-need will be left with only 14% of the market.

Now, clearly this example in imperfect – it doesn’t take into account a number of variables that could influence preneed sales and at-need call volume. However, it does underscore the impact one (or two) active competitors can have in their market place over a very short period of time.

Assuming you will retain your market share doing what you have always done is a dangerous gamble, especially in light of increasing competition among funeral providers. If you are seeing increased competition in your market place, it might be time to adopt a more active approach to preneed.

Your client families have changed the type of funerals they plan.
It is no surprise to any of you that consumer preferences are changing. Modern consumers want more tailored solutions for their services – additional merchandise, customization features and, yes, cremation options. These consumers are also not as brand loyal as they used to be. Serving someone’s parent or grandparent is no longer a guarantee that you will be the chosen service provider for the whole family.
To be successful, funeral professionals must become more adept at differentiating their services and capturing business early, before a consumer needs immediate assistance and selects the first service provider that comes to mind. Many funeral professionals will tell you that one of the most discouraging things to hear from a family is that they would have done things differently if they had known all their options.

If you’re seeing shifts in the preferences of your client families – or hearing more and more of them bemoan their lack of options – it might be time to take a closer look at your preneed program. A prearrangement conference gives you the time and space necessary to get to know the family and explore ways you can customize your services to meet their unique needs.

Without the pressure of at-need time constraints, you can take a few extra minutes to make sure a family understands all their options and knows how dedicated you and your staff are to meeting their needs.

Preneed can also help safeguard your firm against the financial impact of shifting consumer preferences – particularly with regards to cremation rates. When someone plans and funds their funeral today, they do so with today’s buying habits. For many of you, that means you’re more likely to provide a casketed funeral for someone who prearranges today and lives another 10 years than you would be if they waited to make their arrangements 10 years from now when the cremation rate is 10 or even 20% higher.

If you’re seeing significant shifts in the consumer preferences in your community, your preneed program could be a great place to start.

Most of your preneeds come from walk-in customers.
There is nothing wrong with helping a family when they walk into your funeral home asking about prearrangements. Often, these families have the easiest needs to address – they already recognize the value of preneed, and they are actively taking steps to finalize their plans. But waiting for customers to walk through your door is not the best approach to your business for two reasons.

First, it puts the burden on your client families. As a service provider, you should be making it as easy as possible for customers to finalize their arrangements. If you are sending out messages to the community, making calls and appointments, presenting at local groups and organizations and remaining visible, you are meeting your customers where they are at – rather than forcing them to come to you. That is why so many successful preneed counselors offer to meet with families in their homes. It is more convenient for them and sets the tone right up front that you are there to serve their needs and make their lives easier.

The second issue is that walk-in business is unreliable and unsustainable. If you aren’t strategically pulling people into your firm, you have no way of knowing when they will walk through those doors. One month, you may have four walk-in arrangement conferences. Then, you may have one or two over the next six months. When you rely on walk-in business to sustain your preneed program, you abdicate your ability to control your business’s success. That’s a risky undertaking in any business, but especially in funeral service. Your customers only have one funeral to plan – there’s no option to regain their business once they’ve used a competitor.

If the majority of your preneed contracts come from walk-in business, it might be time to reevaluate your approach. An active program, one that immerses the community in your firm’s messaging, gives you more control over your success while simultaneously creating goodwill with your client families.

You are seeing an increase in your accounts receivable.
Because death is often unexpected, loved ones are sometimes unprepared to cover the costs of funeral services. Without a funded prearrangement in place, families can feel pressured to make hundreds of split-second decisions without time to think and consider what they truly want, need and can afford.

The result is often an accounts receivable problem for your business – you have a backlog of unpaid invoices from families who can’t afford to pay for services rendered. This creates a cash flow problem and puts you in a difficult position. You don’t want to damage relationships with your client families by adopting an aggressive payment policy, but you need to make sure you’re covering your own costs and making a modest profit.

A robust preneed program can help mitigate the impact of receivables on your business. Preneed is one of the best tools for managing accounts receivable issues and has a lot of tangible benefits for families. A fully funded funeral allows a family to pay over time and in advance, which often eliminates the last-minute scramble to cover the cost of services after the fact. And, by setting up a payment plan up front, you provide a better arrangement experience for your client families.

If you are seeing any of these signs at your funeral home, it’s likely time to reevaluate your approach to preneed.

Still unconvinced? Let me leave you with this final thought: our latest policyholder survey found that 96% of those who prearranged and prefunded were very or completely satisfied with their decision to prearrange. In fact, 98% reported that they would consider recommending it to a friend or family member, and 41% already had within two months of finalizing their own arrangements. What would happen to your business if four out of every 10 families you served recommended your services to a friend or family member? FBA


Wanda Sizemore is the Director of Field Training and Development at Homesteaders Life Company and is a Certified Preplanning Consultant and Certified Celebrant. Throughout her career, she has earned several sales honors and served as a board trustee with the ICCFA Educational Foundation. Wanda has also been published in the American Funeral Director, Tri County Crier, Updater and TIFG Newsletter, and actively speaks at various preneed and funeral director training events.