1 / 39

Funeral Service Pricing

Funeral Service Pricing. Introduction. Objectives of Pricing. recover: merchandise costs operating expenses profit satisfaction for consumer fair to consumer value understandable to the consumer choices. Factors That Influence Pricing. Price Determination

ewan
Télécharger la présentation

Funeral Service Pricing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Funeral Service Pricing Introduction

  2. Objectives of Pricing • recover: merchandise costs operating expenses • profit • satisfaction for consumer • fair to consumer • value • understandable to the consumer • choices

  3. Factors That Influence Pricing • Price Determination • Price Quotation • Both must comply with applicable federal and state law.

  4. Cash Advance Items • “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.”

  5. Price Determination • “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

  6. Methods of Price Determination • 1) Markup • 2) Graduated Recovery • 3) Sales Frequency • Markdown: “a reduction of selling price below the original selling price”

  7. Consumer Value Index (CVI) • “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%

  8. CVI (cont’d) • 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?

  9. Merchandise Value Ratio (MVR) • “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.)

  10. MVR (cont’d) • 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?

  11. Markup • (AKA: Gross Casket Margin, Margin) • “the difference between merchandise cost and selling price” Retail Price Wholesale Price - Wholesale Price+ Markup Markup Retail Price

  12. Markup (cont’d) • 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

  13. Types of Markup • 1) Fixed Multiple or Times Factor • 2) Percent • 3) Fixed Dollar Amount

  14. Fixed Multiple/Times Factor • “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.

  15. Percent • 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%

  16. Fixed Dollar Amount • (Straight Line Model) • add the same dollar amount to wholesale cost if item of merchandise • CVI increases with the value of the casket

  17. Graduated Recovery • “ a pricing method where the markup varies” • Types: 1) Increasing Price Structure 2) Declining/Decreasing Price Structure 3) Modified Declining Price Structure

  18. Increasing Price Structure • 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

  19. Declining/Decreasing Price Structure • 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

  20. Modified Declining Price Structure • 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

  21. Sales Frequency • “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?

  22. Terms for Analyzing Data • Average (Mean) • Median • Mode • Range

  23. Price Quotation • “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

  24. Itemization • “the method of price quotation by which each unit of service and/or merchandise is priced separately” • Required by the FTC • 16 required items for the GPL

  25. Considerations for Itemization • 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

  26. Package Pricing • “a pricing method which groups together selected services and/or merchandise” • allowed by the FTC

  27. Unit Pricing • “a method of price quotation in which one price includes both service and casket” • 1960’s

  28. Unit Pricing Technique • Casket $_________ • Includes: services of FD & staff embalming and other prep. facilities, equip. & staff transfer of remains hearse to cemetery limousine for family flower car

  29. Bi-unit Pricing • “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

  30. 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

  31. Functional Pricing • “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

  32. Functional Pricing Casket $_______ Services $_______ Facilities $_______ (includes staff & equip. for visitation & funeral) Transportation $_______ (includes transfer of remains, hearse, limousine and flower car)

  33. NJSB Requirements for SFG&SS Categories • 13:36-1.9 • I Professional Services • II Other Staff and Related Facilities • III Transportation • IV Merchandise Does this look familiar?

  34. Pricing Strategies • 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

  35. Pricing Strategies (cont’d) • 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

  36. Selecting a Vendor • Considerations: • 1) product line • 2) delivery • 3) terms: Trade Credit Terms (cash discount)

  37. Trade Credit Terms • 2/10,Net 30 OR 2/10,n/30 • MOM • EOM • CWO • CBD • COD

  38. Considerations (cont’d) • 4) sales representatives • 5) point of sale materials • 6) merchandising assistance • 7) reputation • Accommodation Merchandise: merchandise other than “regular” merchandise

  39. Price Pointing • 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”.

More Related