Abstract
The funeral industry, one of the oldest and among the most stable of industries regardless of economic trends, is facing one of the biggest challenges of its existence, and the threat is coming from an unlikely source – their own customers. People’s attitudes towards funerals have been changing and as a result, the number of traditional funerals has been declining.
"Show me the manner in which a nation cares for its dead and I will measure with mathematical exactness the tender mercies of its people, their respect for the laws of the land, and their loyalty to high ideals." -- Sir William Gladstone

Survival in the U.S. Funeral Industry: A PESTEL Analysis

The funeral industry, one of the oldest and among the most stable of industries regardless of economic trends, is facing one of the biggest challenges of its existence, and the threat is coming from an unlikely source – their own customers. People’s attitudes towards funerals have been changing and as a result, the number of traditional funerals has been declining.

Funeral customs and services are as old as civilization itself. Throughout the history of mankind, every culture and civilization studied has attended to the proper care and disposition of their dead by way of three common things: some type of funeral rites, rituals and ceremonies, a sacred resting place and memorialization (Whittaker, 2005). Researchers have discovered Neanderthal burial grounds dating back to 60,000 BC along with animal antlers and flower remnants placed on the corpse indicating a form of ritual and gifts of remembrance. Primitive man lived in fear and reacted to life events and most natural phenomenon, such as weather, and attributed these acts to that of a higher being. Live and death events were thought to be the acts of spirits. These spirits were frightening as they could not be seen or sensed. This fear drove man to believe that they could somehow placate these spirits by devising ceremonies and rituals. Some burial customs, no matter how strange, arose from crude efforts to protect the living from the spirits that brought death. The dead have been feared throughout history and remain feared today (Funeral Industry, 2010).

Many modern funeral customs have evolved from historical pagan rituals. Mourning clothing – the returning spirits would not recognize them in their new clothes; covering the face of the dead – the spirit of the deceased would escape through the mouth; wakes – ancients kept watch hoping that life would return; firing of rifle volley over the deceased – mirrored the tribal practice of throwing spears into the air to ward off hovering spirits; floral offerings – intended to gain favor with the spirit of the deceased; music – reminiscent of ancient chants designed to placate spirits (Funeral Industry, 2010).

The act of embalming plays a crucial role throughout the history of funeral customs and rituals and the modern emergence of the American funeral industry. The earliest preservation methods were developed by the Egyptians and were performed for both religious and sanitation reasons. Egyptians believed in the immortality of the soul and that it would return to its body following a required 3,000 year journey as long as the body remained intact at which point the whole body was believed to arise from the dead and live with the gods forever. Egyptians also quickly realized the necessity of sanitation as it became evident that unsanitary conditions led to more deaths. Various embalming methods were practiced across the globe throughout the centuries, but not all cultures believed in it. Jewish custom did not allow for embalming or cremation because they were believed to be mutilation of the body. As noted in the bible, preparation for burial involved wrapping the body in cloth and applying oils and spices. Early Christian burial customs were derived from the Greeks, Romans and Jews following the strong tradition of burial with no embalming. During Europe’s “dark ages”, embalming was generally not practiced. This period gave way to great medical advancements when bodies were needed for dissection purposes. Medical discoveries during this time influenced the development and perfection of modern embalming techniques that would continue to progress into the early twentieth century. Dr. Thomas Holmes, considered the father of modern embalming, was responsible for introducing modern embalming during the American Civil War. Dr. Holmes, commissioned as a captain in the Army Medical Corps, embalmed thousands of soldiers and officers killed in battle allowing return of the dead to their homes for proper burial. His efforts gained significant recognition and legitimacy of modern embalming in America and hence was born the American funeral industry (Funeral Industry, 2010).

Funeral homes rapidly emerged across the country in the first few decades of the twentieth century as American life was transformed by urbanization, medical advances, and the increasing popularity of scientific attitudes and perspectives. The funeral home, a combination of business, religion, and consumerism, rapidly became an American institution in local neighborhoods. Even in infancy, the industry was plagued with public attacks leading to unfavorable reputations. Over the years, local funeral businesses across the country gradually won respect as established and trusted places of business and as a source of comfort for those suffering the loss of a loved one (Rostad, 2000). Indentified by the majority as "funeral directors” in America, these specialists have transformed the twentieth-century experience of death and body disposal (Cottingham, 2010).

Over the last decade or so, the funeral industry has been undergoing significant transformation driven by changes in technology, economy, sociocultural norms and beliefs, as well as a rise in competition (Cottingham, 2010). The consumer’s attitude is changing towards the funeral industry in general. No longer is the industry just in the business of embalming and burial, but customer service and personalization. From a strategic standpoint, the use of a simple analysis tool can aid in the understanding and identification of an industry’s external environmental factors. One common and effective tool used to discover the political, economic, sociocultural, technological, environmental and legal factors of a business is known as the PESTEL analysis. This analysis is useful in determining market growth and decline with a primary focus on the future impact of those factors identified (Carpenter & Sanders, 2009). The following is a strategic analysis of each of these external environmental factors challenging this ancient industry’s survival in modern-day existence.
PESTEL Analysis
Political
Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, taxes, and political stability (Carpenter & Sanders, 2009). The funeral industry is governed by the Federal Trade Commission specifically through the Funeral Rule. In very recent years the industry was dealt a heavy blow from a new ruling. New rulings removed the exclusive sale of caskets by funeral homes opening up the wholesale and retail casket markets to competition. As a result, consumers can now comparison shop. Funeral homes are now required to provide general merchandise price list, provide disclosures of specific items during service arrangements and itemize invoices to name a few (Funeral Rule - 16CFR Part 453, 2008).

Economic
Economic factors include economic growth, interest rates, and the inflation rate along with unemployment rates and availability of critical labor (Carpenter & Sanders, 2009). According to The State Journal (2004), funeral directors are in short supply. The NFDA is predicting a serious, nationwide shortage of directors and embalmers within 10 years. With a sixteen percent decline in mortuary science program enrollments from the previous year, there are fewer trainees in the pipeline to replace those retiring (Elmer, 2004). The industry is no longer immune to economic recessions due in large part to the new FTC Funeral Rule regulations on casket sales. The funeral industry has never been faced with competition in casket sales. Consumers are price shopping and buying cheaper merchandise from big-box retail and wholesale giants such as Walmart and Costco. In response, funeral homes are raising service prices to accommodate lowering of casket prices. In larger, crowded metropolitan where land is a premium, cemetery space is limited and drives up cost which in turn forces consumers to choose burial alternatives such as cremation (Hafenbrack Marketing, 2007).

Sociocultural Sociocultural factors include the social and cultural aspects and include population growth rate and age distribution and tend to be the more trend-based factors (Carpenter & Sanders, 2009). Many social and cultural changes are driven by a steadily decreasing population of the World War II and Baby Boomer generations. Consumers from these generations desire and fully expect a more traditional funeral service. The younger X and Y Generation population, growing at an exponential rate, have much more non-traditional ideas and expectations with emphasis on personalization and customization. Older generations prefer a traditional funeral service to the newer generations desiring non-religious, life celebration services (Cottingham, 2010). Funeral homes have invested in large facilities to support the more traditional wakes and services, but people are reverting back to holding services in the privacy of their own homes or in other various non-traditional venues such as parks and beaches. To accommodate this shift in generational expectations a multitude of new services have been introduced to the industry. Defined as affinity services, funerals are being customized to present a unique, meaningful and memorable experience. Traditional funeral home facilities cannot compete with the unique experience associated with non-traditional venues (i.e. a barn), so they are bringing that atmosphere or setting into their facilities. Some funeral homes offer themed parlors to create an environment natural to the deceased such as a living room setting with big screen television for the avid sports fan. This creates a continued need for the convenience of existing facilities but with the ability to provide a unique experience through these new services (Cottingham, 2010).

And of course, technology is paramount in providing all of these new life celebrations.

Technological
Technological factors include technological aspects such as automation and technological change (Carpenter & Sanders, 2009). The explosion of internet and computer era has led to a multitude of online services. Online guest books allow “visitors” the convenience of “signing” from virtually anywhere in the world, easily accessible obituary listings, web index of local complementary services such as floral arrangements, grief counseling and memorial foundations to name a few. The video memorial is a prominent feature at many visitations and services as part of the trend toward personalization (Cottingham, 2010). Funeral webcasting is also becoming popular in some metropolitan areas.

Environmental
Environmental factors include a growing awareness of the potential impacts to the environment in terms of waste, pollution and climate change (Cottingham, 2010). The worldwide eco-awareness or green movement is also spawned changes in the funeral industry as seen in an increasing demand for more natural burial practices. Instead of conventional wood and steel coffins, clients can bury loved ones in more biodegradable wicker or cardboard, or in a casket made of wood. Rather than going the full biodegradable route, some are simply choosing caskets that are more environmentally friendly that include biodegradable materials, such as wood or wood composites, as opposed to those made out of non-rusting semi-precious metals like copper & bronze (Green Burials Offer a Natural Alternative, 2008). Biodegradable urns are offered for cremains to be scattered at sea (Grant, 2009).

Legal
Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. Regulatory compliance heavily rules the industry. Regulations vary by state as to the maximum time limit permitted prior to disposition. Embalming, burial or cremation must occur within 24-30 hours following death. There are costs associated with the proper disposal of hazardous or infectious waste through a certified medical and biohazard waste company. The industry must also remain compliant with the Occupational Safety and Health Association’s (OSHA) requirements for emergency eyewash stations in embalming rooms along with protective clothing and gear and state of the art ventilation (Whittaker, 2005).
Although the funeral industry is facing some of the biggest challenges of its existence, they can survive. They can survive by adapting to the changing world to meet customers’ demands, no matter how traditional or non-traditional by today’s industry standards. And they have adapted, so far, by placing an increased emphasis on service and personalization. The funeral industry should continue striving to create that priceless experience.

References
Carpenter, M., & Sanders, G. (2009). Strategic Management: Concepts & Cases, 2nd Edition. Upper Saddle River: Pearson Education.
Cottingham, J. (2010). Funeral sector sees changes: industry responds to new challenges, demands. Arkansas Business , 1.
Elmer, J. C. (2004). Funeral Industry Experiences Personnel Shortages. The State Journal , 1-2.
Funeral Industry. (2010). Retrieved November 12, 2010, from Encyclopedia of Death and Dying: http://www.deathreference.com/En-Gh/Funeral-Industry.html
Funeral Rule - 16CFR Part 453. (2008, October 28). Retrieved December 13, 2010, from Federal Trade Commission: http://www.ftc.gov/bcp/rulemaking/funeral/index.shtm
Grant, T. (2009, November 5). Cremations increasing, funeral industry squeezed. Pittsburgh Post-Gazette . Pittsburgh, Pennsylvania: Scripps Howard News Service.
Green Burials Offer a Natural Alternative. (2008, August 30). Retrieved November 21, 2010, from The Daily Green: http://www.thedailygreen.com/environmental-news/latest/green-burials-funeral-industry-460808
Hafenbrack Marketing. (2007, November 5). Report – Analysis of Funeral Home Industry. Retrieved December 15, 2010, from Independent Advantage: http://www.independentadvantage.com/assets/ReportHMC-FuneralServicesIndustryAnalysis-100207.pdf
Hill, C. P. (2010, February 11). Technology - Changing Funeral Industry. Retrieved November 20, 2010, from Funeral Resources.com: http://www.funeralresources.com/technology-is-changing-the-funeral-industry/
Rostad, C. D. (2000). The Basics of Funeral Service. Retrieved December 13, 2010, from Wyoming Funeral Directors Association: http://www.wyfda.org/basics.html
Whittaker, W. G. (2005). Funeral Services: The Industry, Its Workforce, and Labor Standards". Federal Publications , 3-29.