Supply and Demand and Its Impact Upon

Supply and Demand and Its Impact Upon Pricing in the Funeral Industry

One might be tempted to assume that the certainty of death, given that it happens on a fairly regular basis every year, ensures that the funeral industry is a fairly stable industry, and its pricing structures are thus immune to consumer whims and shifts in supply and demand. However, because a luxurious funeral is not strictly a necessity, this means that the pricing structure of the industry is often impacted by outside forces, such as a decline in living consumer's family incomes as well as shifts in informational technology as well as overall economic growth. According to Richard Willing, in his article about how traditional "Funeral homes fight for life," prices in the industry are becoming increasingly elastic, or subject to competition and the living consumer's desires regarding elaborate or simple funerals, and thus demand can shift more wildly and widely than ever before, and is more subject to outside as well as inside industry forces.

One external factor of particular note for Richard Willing is that the traditional funeral industry is facing increased competition and new supplies from discount venues, and alternative venues. For example discount casket stores have increased the supplies of caskets overall, and of discount caskets in particular. Many of these casket stores are located on the Internet. This technological impact upon the ease of funeral consumer perusal allows for more responsive consumer demand to shifts in pricing, as consumers can be more informed upon pricing differentials, even during a time of grief, by simply surfing the web, rather than driving all over their area or calling up different funeral homes. On average, families have paid upwards of $2,176 for a casket. Now discounters estimate that they can halve the cost. Consumers are also more aware of different materials that can be cheaper and funeral homes must provide a wider supply of discount as well as luxury coffins, to respond to this more informed consumer demand

Additionally, suppliers have also grown in terms of the market for plots. Now cemeteries now offer ceremonies and services customarily provided by funeral homes. The greater ethnic and religious diversity within families has also affected demand. Many families do not wish to stimulate long-simmering family conflicts during a time of grief, and thus forego a faith-based controversy altogether by not having a funeral. Also, some families are foregoing viewing of the body and chapel services in favor of nontraditional ceremonies. The decline in traditional adherences to community-based faiths and faith groups, as well as the cemeteries that are connected to religious venues means as well that cremations now account for one-fourth of all funerals. The cost is only approximately $500 plus extras, such as urns and vault drawer markers, in marked contrast to a casket funeral.

And, all joking aside, demand is down, as people are living longer and longer. There has been stable death rate and people are living longer and longer -- good news overall, but news with an undeniable impact on the industry. Also, despite the overall trend towards deregulation of businesses in government, there have been stricter government regulations on funeral pricing. Since 1984, funeral homes have been required to itemize charges (including the expensive "professional service charges"), rather than give a single price for a funeral. This allows greater power in the hands of consumers. Consumers can now itemize funeral expenses. This means that consumers can decide what they wish to pay for or exclude from a service, thus decreasing demand for expensive luxury items that were once forcibly included in the total cost. The most notable of these new regulations occurred in 1994, when funeral homes were prevented from penalizing families that wanted to buy the casket elsewhere. Now, because of the effects upon demand, traditional funeral directors want the regulations that apply to them also to apply to other providers of so-called death care services. The regulations would require price lists to be published and goods and services to be guaranteed. Cemeteries believe that their costs would rise.

Overall, in the industry, an increase in competition amongst suppliers in terms of competition from cemeteries, the Internet, and crematoriums, coupled with a decrease in consumer demand due to a healthier population and a less religiously unified and affiliated population, has forced the industry to become more consumer-responsive and to slash its prices. Government regulations have further impacted the industry, requiring bill itemization and prohibiting helpful regulations such as package funeral deals -- essentially forcing the industry to cut its prices, even though the law did not state this outright.