Do You REALLY Own Your Market Share? A Guide for Funeral Homes.

Everyone who operates a business has a market- a group of potential consumers who have a need or a desire for their goods or services.

The consumers in that market who choose to utilize your funeral home is called your market share. In other words, it is your share of the market that you serve.

But…how does a funeral home actually know what their market share is? And, more importantly, why does it even matter?

Years ago I had heard of funeral homes maintaining a spreadsheet to track market share by the number of obituaries published in the paper. Then the practice transitioned to tracking obituaries on competitor’s websites. But, now that many families choose not to have an obituary published, it is more difficult than ever to track actual market share.

Why Market Share Matters

Knowing exactly where your business stands in the market(s) you serve is invaluable information that can help you build a more profitable future.

Get this…..

According to the National Funeral Director’s Association (NFDA), the US Cremation Rate is expected to be 80% by the year 2045.

If you operate in the death care business, that statistic simply cannot be ignored.

Is it a scare tactic? Nope. It’s reality.

And this rise in cremation rate means the funeral industry is becoming more competitive than ever. As a funeral home manager or owner, it is crucial that you know what percentage of your market that you actually own.

Knowing your market share percentage will help you better formulate pricing, marketing, staffing and investment strategies. And, with increased competition, you need all of those!

Let’s Calculate Market Share!

Okay. So before we get started, I need to clear the air about something.

As you dive into the material below, you will see that you and I are going to *pretend* that we own a funeral home together. This is just pretend, okay? So when you read “our funeral home” in the text below, it is PRETEND. I do not own a funeral home with you or with anyone else. Nor do I want to! I just want to show you how to calculate market share!

Now that we have that out of the way….let’s officially get started!

The Market Is Mis-Leading

The big problem is that everybody eventually dies. Therefore, it is easy for us to assume that our market is everybody. But that thinking is flawed.

Why?

Because everybody dies….eventually.

But, for the at-need market, you don’t care about eventual deaths.

You care about the deaths that will impact your business today, tomorrow and the next 12-14 months.

So how do we estimate the total at-need market? And, even more importantly, how do we calculate our slice of that market?

Who Is Your Market?

As death care professionals, we are innately aware of our market’s socioeconomic makeup. Afterall, we spend all day visiting with people on a very personal level about their feelings surrounding the loss of someone they love.

Ask any funeral director about the population(s) they serve, and they will provide information such as the ethnicities, religions, and social preferences represented in their area(s).

While knowing this information and having a geographic boundary is great, it offers very little in the way of providing dataabout your funeral home’s market share.

To calculate your market share we are going to take a more methodical approach and clearly define your market.

Defining The Market

For example and explanation purposes, let’s pretend that you and I own a funeral home in Dallas County, Texas. We want to know what our market share is so we can implement some strategies in the upcoming year.

To start, we will broadly define our market’s geographical location.

To keep our business example simple, we will say we serve all deceased individuals in Dallas County. We may pick up a few from surrounding counties, but the majority of our business is in Dallas County, and we will focus on that.

Step 1: Population

The first step we need to take is knowing the total population of the Dallas County. We can take the lazy way out and accomplish this by Googling “Population of Dallas County, Texas”. But we aren’t lazy and are not confident we can rely on the accuracy of Google’s information.

Instead, we will opt for a more reliable source and will go straight to the US Census Bureau.

On the US Census Bureau homepage we see several options and will click on “Data Profiles”.

From there, we are taken to a page that allows us to drill down and find the population of any market we serve or hope to serve. The screen shot below shows the menu that allows us to drill down to our geographical area.

We will start by selecting Texas. Then we click a link that will allow us to drill down to county and city population data sets. The link is circled in red in the graphic below.

Because we are using Dallas County, Texas, as our example, we will use the filters to find the profile information we are searching for.

Here we see that population for Dallas County, Texas, is 2,613,539. This is our general market.

But not all of those people are going to pass away any time soon. So now we need to calculate our actual, potential market.

To do that, we need to know our area’s death rate.

Step 2: Death Rate

The death rate is the ratio of deaths to the population over a defined period of time. Luckily, the Centers for Disease Control (CDC) statistically tracks and publishes the death rate.

Of course, in order to find the death rate specific to Dallas County, Texas, we need to drill down to the state level as opposed to the national level. We do this by following this link. The screen shot below shows where to find the information.

This chart shows that the death rate for Texas is 906.4 deaths per 100,000 population for Texas, or .009064%.

Step 3: Start Calculating

So, now we have our population and our death rate. We are ready to calculate our actual market.

The first thing we are going to do is estimate the number of deaths per year in our county. To do this, we will take the Dallas County population of 2,613,539 (taken from step 1) and multiply it by .009064 (taken from step 2) to arrive at 23,689, our estimated, annual, at-need market.

2,613,539 (population) x .009064 (death rate) = 23,689 estimated annual deaths

In other words, we expect our market to experience the loss of 23,689 people that will potentially require our services. This is our general market.

But Then…Cremation

Our pretend funeral home assists families with both cremation and burial needs. And, in order to reach our goals, we need to know our market share of both.

Step 4: The Cremation Rate

Before we can take cremation into consideration, we need to know our market’s cremation rate.

The very first thing we do to access accurate cremation data is visit the Cremation Association of North America CANA website. This organization performs an annual comprehensive statistical study on cremation rates in North America. I’ve followed their study for years, and have always found their data to be both easy to use and extremely helpful.

When we go to the CANA website, we see that Texas is not listed on the free information. That’s okay, though. They show the top and bottom states for cremation and it is safe to assume all states not listed fall somewhere in the middle.

Now is the time to note that if your business will benefit from CANA membership, it may be worth joining! Once you join you can get access to more in-depth statistics and information from their study.

But, because we only have a pretend funeral home for this example, we will choose to use the free information as shown below.

You will see that Texas is highlighted in yellow on the CANA map and the key shows the yellow state cremation rate is 51% – 60%. For purposes of our calculation, we will choose to be conservative and use 60%.

This means approximately 60% of our 23,689 Dallas County, TX, deaths will likely choose cremation.

A little quick math tells me this:

23,689 x 60% = 14,213 people being choosing cremation

23,689 – 14,213 = 9,476 choosing traditional burial

And…..

According to the National Funeral Director’s Association (NFDA), approximately 31.7% of people choosing cremation would also like to have their ashes buried.

14,213 choosing cremation x 31.7% choosing to have ashes buried = 4,505

Defining Our Market Share

Now we know the estimated size of our overall market, as well as our cremation and burial markets. The next step is to calculate our estimated market share.

Step 1: Know Your Sales

Knowing our revenue figures is important. But, for purposes of calculating market share, we are less focused on revenues and more focused on quantifying the actual cases we served.

To quantify this, we need to know:

• The total number of cases we worked, start to finish, during the year
• The total number of cremation cases we worked
• The total number of burial cases we worked
• The total number of cremation-internment cases we worked

For example purposes, let’s say we went through our cases and discovered we worked the following:

• 2,500 cases for the year
• 1,725 cases were cremation
• 200 cases were cremation + internment
• 775 cases were traditional burial

Step 2: Calculate Your Share

A little simple math reveals:

• 2,500 cases / 23,689 deaths = 10.5% Estimated Market Share in Dallas County, TX.

• 1,725 cremation cases / 14,213 estimated annual cremation = 12% Cremation Market Share in Dallas County, TX

• 200 cremation + internment / 4,505 estimated annual cremation + internment = 4.4% Cremation + Internment Market Share in Dallas County, TX

• 775 burial cases / 9,476 estimated annual burials = 8.1% Burial Market Share in Dallas County, TX

Using Our Market Share Calculation

Having these market share figures is great only if we are going to use them. But how do we do that?

Identify Competitors

Knowing that our pretend funeral home owns an estimated 10.5% of the general funeral market in Dallas County, TX, is incredibly helpful. It helps us know our position and can also help us identify our biggest competitor.

Sure, we may think we know who the biggest competitor is…but wisdom tells us that assuming does nothing for us. So we have to get creative in calculating who the biggest threat is. And we do it by going through obituaries.

We can take the total number of obituaries listed by competitor and roughly estimate their market share. For example, let’s say we compete with Great Funeral Home, Good Funeral Home and Okay-ish Funeral Home.

For those who are serious about this calculation, it is wise to not only count each obituary, but to open it and track whether it was a cremation, a burial or a combination of both.

It will look something like this:

Analyzing the Data

Now that we know exactly where we stand in comparison to our competitors, we can gain a lot of knowledge we didn’t have before.

But before we play the comparison game, we need to re-read our mission and vision statements. Why? Because we must remember that our funeral home has an entirely different structure than someone else’s. We have our own pricing strategies, cost and profit centers and more. It is crucial that we utilize this information in a manner than helps us act on those strategies with purpose.

The Unknown Competitor(s)

When we set out to analyze our competitors, we identified what we thought were three big players. However, our data suggests there are potentially more competitors that we either didn’t take into consideration or didn’t know existed. They are responsible for handling approximately 9,689 cases, or 41% of the market. So it is important that we identify them and calculate their respective market shares.

The General Market Share Discrepancy

The calculations suggest that we have a comparatively small overall market share in Dallas County. This is not necessarily a bad thing, depending on our underlying business goals and both the sustainability and profitability of our operations.

So let’s break this down by category.

The Cremation Market

The data shows we own 12% of the cremation market in Dallas County. First we want to know why. Why do we own such a large share of the cremation market?

• How are the families we serve learning about us?
• Are families coming in knowing they want cremation, or choosing it after we counsel with them?
• Is our cremation too cheap in comparison to our competitors?
• Are our burial services too price prohibitive?
• Do we have the capacity to handle additional cremation cases?

Next we want to know:

• What is our profit and profit margin per cremation package we offer?
• Will increasing our cremation cases result in increased or decreased profitability?
• Rather than increase the number of cases, should we focus on boosting or cremation + internment sales?

The Cremation + Interment Market

Next, we see that Great Funeral Home and Okay-ish Funeral Home hold a very large share of the cremation + interment market.

As the data indicates, our competitors convert a large number of cremations into cremation + burial. However, we only convert a small number of cremations. This lack of conversion may be to the detriment of both the families we serve and our bottom line.

Increasing conversions provides the deceased with a dignified final resting place (as opposed to being stashed in the closet or simply left at the funeral home), it provides the living a with a designated place to go and honor their loved one, and it offers us an opportunity to sell additional products and services.

Rather than focusing on specifically increasing cremation market share, it may be wise to first focus on increasing the cremation + interment market share by simply targeting our existing clientele. Then, once we have focused on boosting our sales and profit in this way, focusing on increasing our cremation market share through other means.

The Burial Market

Given cremation statistics, it may be easy to assume that our burial market share will simply decline. There are likely too many ways to tackle this issue to list, and that isn’t the purpose of this article. However, for example purposes, we will assume that our pretend funeral home desires to increase it’s burial market share.

But how? That is the million dollar question. And I sure wish I had the million dollar answer!

But what the data tells us is that our competitor, Great Funeral Home, owns 32% of the burial market and we only own 8%.

We might not know why we own such a comparatively low burial market share. But, if it is a sustainable and profitable goal for us to increase that share, we have to figure it out!

The Issue of Timing

One thing you will notice in this calculation, is that the CANA statistics are 2022 and the census was taken in 2020. It is important to use the same year, if possible, for each statistic you pull. Of course, you can always adjust the population given the estimated growth rates provided by the US Census Bureau to arrive at an estimated population for the year you would like to calculate.

You can also use cremation statistics taken from any reliable source for your area for the year in question.