2010 Cremation Consumer Survey By Gerald Davis

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1 STARMARK f u n e r a l p r o d u c t s 2010 Cremation Consumer Survey By Gerald Davis

3 They Are Speaking Are We Listening? Results from the 2010 Cremation Market Survey By Gerald Davis, President, Starmark Funeral Products As one industry professional to another, it is well understood that we are experiencing a dramatic shift in service revenues, faster cremations and fewer products sold. Combine that with today s consumer demand for transparency from companies when making purchases for their family and it s no wonder that we are recognizing the need to change the conversation with our client families and examine our business model. Uncertain economic times have raised the level of cynicism. Consumers are frustrated with what they don t know about the recovery process. They are savvy and want information. They want collaboration and seek relevancy when making purchasing decisions. They look to someone they can trust and rely on. The first step of proving relevancy is communication. Even if you know (or think you know) what your client families want, it s important to start a dialog, develop that relationship and work towards a mutually beneficial exchange. You may be thinking, We are already doing this. That s nothing new. What is new is that we are being asked to do it on the customer s terms and making them feel like they are a part of the process. All the while, we are trying to figure out how we are going to build revenue and react to the customers change in buying preferences and behaviors. We all know that cremations are expected to double over the next 15 to 20 years and that cremation families want to spend less money for these services. So, why should we spend time cultivating relationships with families that are only interested in budget cremation when we don t view this as a high revenue stream? Good question. The answer lies in our recent 2010 Consumer Survey. Grab a seat in your favorite chair, get comfortable and study our findings carefully. This survey is sure to spark a new way of thinking about industry trends and making profit-generating improvements to your bottom line. About The Survey In 2010, Starmark Funeral Products conducted our third nationwide cremation consumer survey. We use these surveys as a roadmap in recognizing industry trends and developing new products to best meet your needs and the needs of your cremation families. Unlike previous Starmark surveys where we asked all participants the same questions, in our 2010 survey we engaged 1,007 cremation consumers and asked them to first select their most likely service choice Budget Cremation, Cremation with Private Family Services and Cremation with Public Services. We then surveyed each service segment with different sets of questions to gain insight into their specific preferences and purchasing behaviors. The respondents were 55+ years of age and had determined that cremation would be their means of final disposition. They were gathered from 49 of 50 states and were demographically well balanced. With each group we purposefully did not include memorial service questions. We wanted to gain as much knowledge as possible regarding how they felt about how the body of their loved one should be handled.

4 It should be noted that at the time of this survey, funeral professionals were experiencing differences in cremation preferences from their client families based on geographical location. For example, those in California and Montana may find it difficult to understand why their contemporaries in Alabama or Mississippi still enjoy providing high-revenue cremation with full public services including viewing and sale of a hardwood casket. No matter whether you are experiencing it now or will be soon, the rapidly changing market is leading to changes in customer perceptions and dramatic declines in cremation revenues. Results Summary Overall, our goal was to identify each of the three group s preferences with regards to services and cremation products. However, we also wanted to learn more about their level of knowledge regarding cremation and what they expected from us as funeral professionals. Armed with this knowledge, we have concluded that as funeral professionals, we need to make a bold move towards a new way of thinking about cremation services. Our customers are obviously thinking differently and are demanding a shift in buying choices. Shouldn t we be also be thinking differently? Rather than just reacting to these changes, can we be more proactive on ways to better meet their needs and create new revenue streams for ourselves to keep us profitable? Absolutely. Let s take a closer look at the results we ve highlighted for each group. Revenue opportunities are right under our noses and waiting to be realized. Budget Cremation Group When asked, over half of the respondents (65.4%) favored budget cremation over private family services or public services. Why did so many respondents choose Budget Cremation services? Cost was the factor for 80.7%, 58.1% said it was the practical choice and 36.4% indicated they don t see the need for additional services and/or that the family will use the money for other purposes. In most national cremation customer surveys, we find that approximately 40% of respondents will indicate cost as the primary factor in their choice of cremation. This is confirmed by a nearly 81% response rate from the Budget Cremation Group citing cost as the key reason for their choice. This is no real surprise to you on the frontlines of serving families, but it does substantiate how important cost is to this budget minded cremation consumer group. Here are additional highlights of their buying preferences and service expectations: Result Highlights: Preserving the body 92.3% of those in the Budget Cremation Group want the body cremated as quickly as possible with only 2.1% expecting embalming and 5.6% expecting refrigeration. Seeing their loved one 48% of the Budget Cremation Group expect to positively identify the body or have some private time with the deceased prior to cremation. Dressing the body One in four of those in the Budget Cremation Group expect the body to be clothed.

5 Service provider choice 38.2% of those in the Budget Cremation Group would use their local funeral home, 27.9% would call their local cremation society and 33.8% would seek out their lowest priced service provider. Choosing a cremation container WE FOUND IT ASTONISHING THAT 44.3% OF those in the Budget Cremation Group did not think any container was necessary to cremate the body in. And 30% want to see the containers before they decide and only 18.4% would have chosen a plain cardboard box. Then when later asked the same questions without the plain cardboard box being available 95.4% would then choose the higher priced Starmark Transporter alternative container at $199-$239 retail. Respondents also expected that the Original Transporter cremation container or the Transporter Deluxe would retail for $225-$350 respectively. Intentions for cremated remains 65.9% of those in the Budget Cremation Group would scatter the cremated remains. If they did purchase an urn, they expect to pay only $50-$100 and 37.8% thought an urn was already included in the price of the cremation. What they expect to pay Those in the Budget Cremation Group expect to pay about $1,000 excluding urns, memorial services and final placement of the urn. Revenue Opportunities: With this highly cost-conscious group, evidence shows that those in the Budget Cremation Group will clearly favor the lowest priced cremation container that is offered. What you may find surprising is that most of those in the Budget Cremation Group prefer to see their choices before deciding (with a high number not even knowing they need a container at all.) Even more surprising is the fact that if given choices for alternative containers, only 18.4% would have chosen a plain cardboard box. What an opportunity! For cremation providers who include a cremation container in their basicimmediate-direct cremation (referred to here as budget ), money is obviously being left on the table. If we learn anything from this survey, it is to let families choose a container for cremation rather than selecting it for them. If a service provider (funeral home or cremation society) wants to make significant revenue improvements, removing the plain cardboard box from the choice list and eliminating it from any cremation package selection would be a smart move. Also more emphasis on providing a comfortable and dignified setting to identify the deceased or providing a modest upgrade to simple and informal gatherings will generate greater client family satisfaction and new mini-service revenue opportunities. Cremation with Private Family Services Group This service selection was chosen by 22.2% of respondents. Of the Private Family Services Group, 63.8% chose practicality over cost (58%) but cost was almost equally weighted. It should be noted that we also asked some questions regarding their choice of private family services to test the overall validity of the responses. For example, we asked them about public viewing of the deceased in a list of services they would select as part of the overall cremation price package. They responded with a rate of 15.2% choosing public services. This indicated to us that they may not have understood the

6 definition of private family services or they simply recognized their desire for more than a simple family goodbye. In either case, it proves that families need guidance in understanding the cremation options that will more clearly meet their needs. Here are the results of this group s buying preferences and service expectations. Result Highlights: Preserving the body 62% of the Private Family Services Group would prefer the body be cremated as quickly as possible. 11.6% or this groups respondents expecting embalming and 25.9% expecting refrigeration. Dressing the body the Private Family Services Group was split 50%/50% on wanting the body to be dressed or not to be dressed. Service provider choice 66.5% of the Private Family Services Group would choose their local funeral home and 28.6% would turn to a cremation society. Choosing a cremation container 54.9% of the Private Family Services Group want to see the selection of products before they make their choice. However, from a selection of products offered in photos, 60.8% would choose the Starmark Transporter alternative container at $199-$239 retail and 14.3% would choose the Starmark Harmony cloth covered alternative container priced at $ retail. 20.5% would choose the new Starmark Elise alternative reusable casket priced at $ retail. Respondents in this group also indicated that our suggested retail prices included with each product shown for survey purposes were somewhat lower than the retail prices they assigned to all products. This is good news for funeral service providers. Intentions for cremated remains Similar to the Budget Cremation Group, 58.9% of the Private Family Services Group would scatter the cremated remains. If they did purchase an urn, 71.4% expect to pay more than the Budget Cremation Group at $50-$299 retail with 19.2% thinking it is already including in the price of the cremation. 16.2% would consider burying the cremated remains in a cemetery. What they expect to pay The Private Family Services Group expects to pay about $2,000 excluding the additional costs for urns, memorial services and final placement of the urn. Revenue Opportunities: Although the Private Family Services Group was still concerned about price, they chose practicality as their primary driver and expect to pay two times more than the Budget Cremation Group for simple, informal services. The Private Family Services Group seeks more choices than the Budget Cremation Group and expect to pay more for that opportunity without going overboard. That is why we are seeing the general trend over the past few years of cremation societies upgrading their product and service offerings. They are seizing revenue opportunities that funeral homes tend to overlook. If 66.5% of the Private Family Services Group would choose a funeral home over a cremation society, we need to put some new thinking towards how we keep those families coming to us and create new revenue streams that are already knocking at our door. As with the Budget Cremation Group, the biggest financial opportunity is in the product offering. Eliminate the Kraft cremation container from the

7 offering altogether and replace it with a higher-priced product but one that still meets what the family expects to pay and is affordable. What we found encouraging is that there are additional opportunities to make more money with the product offering with Private Family Services Group. Our survey indicated that just under 50% would purchase something slightly more expensive at up to $499 retail. In addition to being smart in product selection, our survey indicates that funeral homes should offer dressing and cosmetizing of the body. In addition, consideration should be given to charging separately for refrigeration and embalming as they sometimes are charged with burial arrangements. Cremation with Public Services Group With only 12.3% selecting into the Cremation with Public Services Group, it is not surprising that this group is less concerned about cost (only 38%), and places greater value on traditional support of family and friends. When asked why they would chose cremation with a public service, 51.2% said they had family and friends that wanted to attend and 41.6% appreciated the emotional support from them as well. Interesting to note that even 38.4% of those respondents that chose Cremation with Public Services thought they would save money. Here are the results of this group s buying preferences and service expectations. Result Highlights: Preserving and dressing the body As expected, 100% of the Cremation with Public Services Group want the body to be dressed. 49.6% of this group wants embalming while 50.4% wanted refrigeration to preserve the body. This doesn t fit the typical always embalm the body for viewing model for most funeral homes. With the rise in green burial and this showing of such a large percentage not wanting embalming of the body, this is a trend that bears watching. It should be noted that 76.8% prefer to have the cremation or rental casket open during public services. Service provider choice 83.9% of the Cremation with Public Services Group would choose their local funeral home and 13.7% would turn to a cremation society. Choosing a cremation container 59% of the Cremation with Public Services Group will select the use of a rental/ceremonial casket such as the Starmark Aria and expect to pay $900 to $1,000 for the use of the casket. 30% will purchase a lower priced product than a rental casket and prefer the Starmark Harmony cloth-covered, alternative container priced at $399 retail. A small percentage of this group would consider a veneer casket (9%) priced at $1,499 while about 2% would consider an oak casket priced at $2, Intentions for cremated remains Scattering of the remains still ranks high (44.4%) but the Cremation with Public Services Group would be the most likely urn buyer. If they did purchase an urn, they expect to pay more than the Budget Cremation and Private Family Services Groups at $150-$300 retail. 23.4% would consider burying the cremated remains in a cemetery. What they expect to pay The Cremation with Public Services Group expects to pay about $3,500 excluding the additional cost of the urn and final placement of the urn. Revenue Opportunities:

8 Obviously, the Public Services Group expects to pay the most for the services they seek and prefer the use of a traditionally styled rental/ceremonial casket that provides for a good revenue stream and return on investment. A note of caution; when casket-like hardboard cremation products or even cloth covered burial products are made available at retail prices under your rental casket price, about 30% of these families selecting Public Services will buy down to the lower priced product that ultimately reduce a funeral homes net profits. The goal in serving these families is to price your rental casket like you want to use it and above all, use it often! Such that it is the preferred / most often and selected unit. Embalming services are most likely the largest additional source of income as the Public Services Group strongly favors embalming when compared to the other two groups. Religious affiliation seemed to play a part in selecting Public Services over Private Family Services and Budget Cremation. When asked what religion they generally follow the percentage of protestant Christians that stayed steady at around 43-47%. However, the Catholic numbers grew substantially from 16.5% selecting Budget Cremation to 35.5% selecting Public Services. This is also supported by the highest percentage of the Budget Cremation Group stating they are non-religious. No further questioning has yet been done to support the validity of targeting religious affiliation for increased revenue opportunities, but may prove to help direct sales efforts when working with Catholic families in particular. What Do We Know for Sure? As a result of our 2010 Cremation Consumer Survey, we can conclude that over half of cremation families expect to see their loved one again and a majority are willing to pay much more for services and products that we tend to walk away from or don t consider worthy of our sales efforts. This begs the question as to what families expect to experience from cremation, who will educate them and how we make a proactive move toward rethinking our offerings to be more relevant to their needs (and ultimately our bottom lines!). We no longer can afford to rely on our own expectations about cremation. It s time to rethink how we can profit from what we have perceived as the bottom of the services barrel (namely, Budget Cremation) and move towards increased opportunities to add dollars to the balance sheet. The cremation explosion has been set in motion. Our customers are speaking loud and clear. Are you listening? For more detailed survey results regarding the cremation products outlined in this survey, visit Gerald Davis is the President of Starmark Funeral Products, a company of Vandor Corporation a major supplier of casket interior components since Davis has enjoyed a long, innovative career in the funeral business and was a co-founder of Elder Davis, Inc. (Now a part of the cremation products division of Matthews International.) Davis has led Starmark Funeral Products in becoming the recognized leader in providing cremation consumer market research and product development with regards to Budget Cremation. Starmark Funeral Products offers cremation container essentials for funeral homes including rental caskets, rental inserts, ID containers and cremation consumables.

9 The cremation revenue shortfall problem is a direct result of an All-or-NOthing service model. ALL 15-20% choose cremation including public viewing of the body NOthing 80-85% of USA cremation consumers choose/default to Immediate, Direct, Basic of Budget types of cremation offerings which generate the lowest revenue/profits To improve cremation revenue we must transition from the previous All-or-Nothing model to the All-or Something model as illustrated below. ALL SOMEthing NOthing 15-20% Public Services with viewing 40-50% may upgrade to dignified and modest private family time with their loved one 30-35% may choose the absolute lowest priced provider How much did survey participants expect to pay for their selected services? (NOTE: The prices noted below generally do not include the cost of a cremation container, urn or final placement of the urn) ALL SOMEthing NOthing For Public Services $3,500+ (est.) For Private Family time $1,500 - $2,500 (est.) For Budget Cremation $800 - $1,500 Based on our survey results: Which Starmark products will each group most likely purchase? ALL SOMEthing NOthing Rental Caskets: Aria Poplar and/or Elise Alternative Reusable Casket Transporters and/or Harmony Series products and/or Elise Alternative Reusable Casket Transporters (Avoid or eliminate the use of a plain cardboard cremation container) What is the anticipated annual product mix volume under this All, SOMEthing or NOthing model? Transporter Series Products (as the first product made available) will be preferred by 75.89% of all cremation client families. Expect that 90% of client families in the NOthing and SOMEthing groups to use the Transporter. A combination of products from the SOMEthing product group as well as the All product group will make up 22.11% of unit sales. Products such as burial or cremation types of hardwood caskets sold by casket companies will generally make up the 2% balance of the sales.

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