Innovation Disrupts Funeral Industry

Innovating is never easy but in a conservative sector dominated by family-owned companies, it is even harder, says Carlos Lukac, Director General of Gayosso, the largest full-service funeral industry provider in Mexico. Nonetheless, companies, even in the funeral business, must follow this path to maintain their leadership. “Familyowned companies tend to be traditionalists by nature, which makes the funerary industry extremely traditional, conservative and closed.” 
Gayosso was a family-owned business for 135 years before it was acquired in 2008 by private-equity fund Advent International. This spurred a transformation process that merged a traditional industry with institutional stakeholders. “The result was a radical transformation of our operations,” says Lukac. “We believe that very much like what happened with drugstores or cinemas, the funerary industry is on its way to consolidation, with no more than three large institutional players dominating the industry.” 
Although Gayosso remains the sector’s only institutionalized player, it is determined to use its leadership position to continue growing. The company emphasizes three pillars: a clear value proposition, exceptional service and constant service innovation. Lukac says Gayosso has become a onestop shop for funerary services, solving clients’ current and future funerary needs and working according to a culture focused on exceeding client expectations, which generates loyalty and allows the company to set premium prices for its services. “Four years ago, we started implementing a customer satisfaction survey and clients gave us an average 75/100 grade,” he says. “We made changes to our service philosophy and today, all our branches average a 90/100 grade.”
Innovation, Lukac adds, is what keeps Gayosso at the forefront of the industry. The company is investing heavily in technology to modernize its processes and has acquired trade-marked Aquamation equipment to provide an alternative to traditional cremation. “The Aquamation process is an example of what innovation looks like in this industry,” he says. “It is more ecological than traditional cremation processes and because of rising gas prices, it is bound to be more economical in the future.” 
There is still a long way to go before the company can provide this service nationwide. Lukac says Gayosso has had to work with the authorities to obtain the permits required to introduce this service. However, the company already has its first machine in Tijuana, the second will be in Monterrey and a third will be in Mexico City, according to Lukac’s expectations. “Aquamation is our latest innovation offering. However, we need to always be thinking about how to continue innovating and offering new products and services in the coming years,” says Lukac. “In this industry, innovation is a key service differentiator and a growth driver.”
The company has also transformed the way it markets its products and solutions. In addition to its traditional sales force of around 1,900 telemarketers and 3,100 people in the field, the company is about to launch an e-commerce platform for the online commercialization of pre-need funeral services. “We believe that the future of our business lies in offering pre-need funeral services rather than in selling atneed funeral services,” Lukac says. 
He has good reason for optimism: the at-need funeral services business is worth approximately MX$8 billion (US$415 million) while 10 years ago its value was MX$6 billion (US$310 million), according to Lukac. The pre-need funeral services market is valued at MX$5 billion (US$260 million) compared to only MX$500 million (US$26 million) a decade ago. “While there is growth in both businesses, pre-need packages that bundle up funeral services with final resting place are clearly bound to experience the largest growth in the future,” he says. 
Migrating Gayosso’s business to pre-need also requires a higher level of institutionalization, as clients want assurance that the company will deliver its services years or decades in the future. As such Gayosso’s pre-need, according to Lukac, “is a mixture of the hospitality industry and an insurance product. Innovation and stability blended in one single offering.”