The Real Reason the Cremation Rate is RisingMay 10th, 2012
Previously, I predicted that in 5 years from now, the national cremation rate will hit 57%. Today, I’m going to explain to you where that prediction came from.
Over the years I have heard many explanations about why the cremation rate is rising. Shifting demographics, incomes, religious affiliations, transient society have all played an alleged role in the downfall of the traditional burial service. However, focusing on these issues has not produced a solution to pursue. I would like to propose a different way to look at this, one that hopefully yields insights that will help shape a new direction.
I believe that our families or consumers, in general, pursue the best value they can get. This does not mean the cheapest or the most elaborate but it means they seek value based on their personal perspective.
Consumers seek value in one of two ways:
1. They attempt to reduce the price of the offering or;
2. They look for more benefits for the same price
The challenge in our industry is that our families have almost no idea what benefits they want, much less what they need. The obvious result is a focus on price and the pricing pressures we face.
The Shift to Cremation
So what caused the initial shift that started the search for value? Why weren’t families satisfied with what we, the funeral service industry, have always offered? Well their perspective changed and it changed rather dramatically. Meet the Baby Boomers and all their challenges to the status quo.
Consider these facts:
• Up until about 1965 the cremation rate was pretty flat at around 4%
• And since that point it has risen dramatically to today’s average above 40%
• In the early mid 70’s the first Baby Boomers turned 30 and began making funeral decisions for their parents
• By the mid 90’s they started to turn 50 and in 2005 over half of the 78 million Baby Boomers were 50 years or older
• The shift in perspective represented by Baby Boomers is unprecedented in the world
And how did funeral service providers respond? We basically did nothing! And even worse we were woefully inadequate in explaining the benefits of what we did! Combine those two issues and we have a recipe for tremendous price pressure. And the only way families knew how to get a better price with the same provider is to cremate.
The Value Found in Cremation
I believe that families have an innate need to honor and remember the life of their loved one. This need was not met for Baby Boomers by the traditional funeral service offering. But, an interesting thing happened as they used cremation to find value via lower prices; they discovered that cremation liberated them from the traditional views of the industry.
They no longer had a 7-foot box with a body to deal with, and they could now have their remembrance service, when they wanted, where they wanted and how they wanted—without a funeral director making them feel bad about their decisions.
In spite of funeral directors and the traditional views of the industry, Boomers found better funeral service benefits on their own in the form of family gatherings and memorials in locations relevant to the life that was lived.
The Pricing Pressure
We have looked at how value perception has changed through Boomers. Now, let’s take a look at how funeral prices compared to inflation during this time period.
A study from the past decade shows the increase of funeral prices matched the increase of medical prices, which was over 50%. This was only exceeded by the increase of higher education, which almost reached 90%! All of which were much, much higher than the Consumer Price Index increase of around 30%.
To add insult to injury, consolidation has grown at an unprecedented rate. There is an unsettling parallel between the growth of consolidators and the increasing cremation rate.
• In 1965 Cremation Rate = 4% and Consolidation = just beginning
• In 1995 Cremation Rate = 20% and Consolidation = 13% of the rooftops owned
Typically consolidation leads to higher pricing not only in the purchased property but to increases in pricing of the surrounding funeral homes as well. Combine this with the growth of Baby Boomers using the funeral industry and you have a perfect storm that served to fuel Baby Boomers’ search for value.
While I believe that cremation rates would have risen without these inputs, I believe these trends are at the core of the dramatic increase in the rate of cremation. But more importantly, this analysis suggests the direction of a sustainable solution: provide benefits that meet the needs of the families we currently serve at a price they consider a good value. Pretty words but more on that in a later post!
What do you think is the real reason the cremation rate is rising? If you have any questions or want to comment on this topic, please share your thoughts below!
About the Author: Lajos Szabo, a licensed funeral director in Ohio and Architect by training, has been involved in funeral service since 1988. His portfolio of work includes, PMP Rooms, Cut Caskets, Meaningful Memories, Funeral of the Future research and several US patents specific to our industry. Recently, Mr. Szabo partnered with the Schoedinger organization to create a virtual funeral home business model named Funeral Choices. Subsequently, he served as Chief Strategy Officer for Schoedinger Funeral and Cremation Service, a 2,500 call 14 rooftop firm in Central Ohio. There, he was responsible for realigning this 150 year old firm to more effectively respond to the changing funeral service consumer. His role included refining company infrastructures, implementing information systems, resource allocation, MourningStar arrangement implementation, website development, social media integration and initiatives impacting the creation of healing experiences for those touched by death. Currently, Mr. Szabo has joined funeralOne as President of Funeral Operations where he will use his industry perspective to provide organizational leadership and develop several key projects in pursuit of his personal mission; changing funeral service to more effectively meet the needs of people touched by death.