Funeral Service Pricing
Introduction
Objectives of Pricing
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recover: merchandise costs
operating expenses
profit
satisfaction for consumer
fair to consumer
value
understandable to the consumer
choices
Factors That Influence Pricing
Price Determination
 Price Quotation
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Both must comply with applicable
federal and state law.
Cash Advance Items
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“Any item or service or merchandise
described to a purchaser as a cash
advance, accommodation, cash
disbursement or similar term. Also, any
item obtained from a third party and paid
for by the funeral provider on the
purchaser’s behalf.”
Price Determination
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“method used by management to
establish the selling price for services and
merchandise”
Basic Services of the FD and Staff
Embalming
Transfer of Remains
Caskets: catalog vs. SR vs. computer
Methods of Price Determination
1) Markup
 2) Graduated Recovery
 3) Sales Frequency
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Markdown: “a reduction of selling
price below the original selling price”
Consumer Value Index (CVI)
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“the percentage derived by dividing the
wholesale cost of the merchandise by the
retail price of the merchandise”
CVI = Wholesale Cost
Retail Cost
CVI + Markup = 100%
CVI (cont’d)
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If a casket retails for $2400 and has a
wholesale cost of $600 what is the CVI?
If the same casket retails for $1800, what
is the CVI?
If the same casket retails for $1200, what
is the CVI?
Merchandise Value Ratio (MVR)
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“the relationship between the wholesale
cost of the merchandise and the total cost
(both of service and merchandise) to the
consumer”
MVR = Wholesale Cost
(Total of Merch. + Serv.)
MVR (cont’d)
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If ABC FH’s basic service charge for a traditional funeral
is $3495; and the Jones family selects a casket retailing
for $2400 with a wholesale cost of $827, what is the
MVR?
827
(3495 + 2400) = .14 MVR
What happens if the same casket had a retail price of
$1800?
Markup
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(AKA: Gross Casket Margin, Margin)
“the difference between merchandise cost
and selling price”
Retail Price
Wholesale Price
- Wholesale Price + Markup
Markup
Retail Price
Markup (cont’d)
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If the wholesale price of the casket is
$600, and the retail price is $1800, what is
the markup?
Value Progression: the more a consumer
spends, the more value he/she should
receive
Types of Markup
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1) Fixed Multiple or Times Factor
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2) Percent
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3) Fixed Dollar Amount
Fixed Multiple/Times Factor
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“the casket cost is multiplied by a constant
factor”
The multiple is usually 2-4.
Every casket receives the same markup
factor.
As you move up the price ladder there is
no improvement in the CVI.
Percent
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Markup is a percent of the selling price.
If the wholesale price is $600 and the retail
price is $1800, the markup is $1200.
To calculate markup as a percent:
1200
1800 = 67%
Fixed Dollar Amount
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(Straight Line Model)
add the same dollar amount to wholesale
cost if item of merchandise
CVI increases with the value of the casket
Graduated Recovery
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“ a pricing method where the markup
varies”
Types:
1) Increasing Price Structure
2) Declining/Decreasing Price
Structure
3) Modified Declining Price Structure
Increasing Price Structure
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There is a direct relationship between the
markup and the price of the casket.
CVI tends to decrease with each step
upward in the product assortment
Advantages and Disadvantages
Declining/Decreasing Price
Structure
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There is an inverse relationship between
the markup and the price of the casket.
Higher priced caskets are given a lower
markup.
The markup is inversely proportional to
the wholesale cost of the casket.
Advantages and Disadvantages
Modified Declining Price Structure
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Similar to the declining model except the
lowest priced casket is less expensive.
Entry-level offerings remain within the
range of affordability for most consumers.
A gradual improvement in CVI is evident
as the consumer climbs the price ladder.
Advantages and Disadvantages
Sales Frequency
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“the number of times sales in a given price
bracket occur over a fixed period of time”
What are the advantages of recording and
analyzing sales?
Terms for Analyzing Data
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Average (Mean)
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Median
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Mode
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Range
Price Quotation
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“method by which prices are explained to
the consumer”
Methods: 1) itemization
2) package pricing
3) unit pricing
4) bi-unit pricing
5) functional pricing
Itemization
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“the method of price quotation by which
each unit of service and/or merchandise is
priced separately”
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Required by the FTC
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16 required items for the GPL
Considerations for Itemization
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importance of the activity
pay scale of employees who perform the task
percentage of building used
time devoted to the task
frequency of use/selection
known rate/scale
competitive factors
“position” of the firm
establish a reasonable markup
don’t discount merchandise price
Package Pricing
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“a pricing method which groups together
selected services and/or merchandise”
allowed by the FTC
Unit Pricing
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“a method of price quotation in which one
price includes both service and casket”
1960’s
Unit Pricing Technique
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Casket
$_________
Includes: services of FD & staff
embalming and other prep.
facilities, equip. & staff
transfer of remains
hearse to cemetery
limousine for family
flower car
Bi-unit Pricing
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“a method of price quotation showing
separately the price of the service to be
rendered and the price of the casket”
service cost
+casket cost
total price of funeral
Bi-unit Pricing Technique
Casket $_________
Services $________
Includes: services of FD & staff
embalming and other prep.
facilities, equip. and staff
transfer of remains
hearse to cemetery
limousine for family
flower car
Functional Pricing
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“a method of price quotation in which the
charges are broken down into several major
component parts such as professional services,
facilities, automobile and merchandise”
4 categories: professional services
facilities
transportation
casket
Functional Pricing
Casket $_______
Services $_______
Facilities $_______
(includes staff & equip. for visitation &
funeral)
Transportation $_______
(includes transfer of remains, hearse,
limousine and flower car)
NJSB Requirements for SFG&SS
Categories
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13:36-1.9
I Professional Services
II Other Staff and Related Facilities
III Transportation
IV Merchandise
Does this look familiar?
Pricing Strategies
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Competitive Pricing: products sold will be
priced about the same as those offered by
competitors
Penetration Pricing: products are priced
lower than those offered by the
competitor
Prestige Pricing: setting relatively high
prices for the product
Pricing Strategies (cont’d)
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Skimming: charging a high price for the product
Leader Pricing: price one or a few items at very
low prices to attract consumers
Odd Number Pricing: avoid using round
numbers when pricing products
Opportunistic Pricing: (Price Gouging) taking
advantage of a situation when setting prices for
product
Selecting a Vendor
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Considerations:
1) product line
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2) delivery
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3) terms: Trade Credit Terms
(cash discount)
Trade Credit Terms
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2/10,Net 30
MOM
EOM
CWO
CBD
COD
OR
2/10,n/30
Considerations (cont’d)
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4)
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sales representatives
point of sale materials
merchandising assistance
reputation
Accommodation Merchandise:
merchandise other than “regular”
merchandise
Price Pointing
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Good/Better/Best
Pricing caskets in a logical progression of value
to the consumer.
Caskets in the lowest (good) price line end in
“95”.
Caskets in the middle (better) price line end in
“25” or “75”.
Caskets in the higher (best) price line end in
“00” or “50”.