Pre-paid funeral plans....

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by Karen Coppock

From Soweto to Joburg to Limpopo, tombstone and funeral service signs dotted the landscape in all of the places we visited in South Africa last week. Billboards advertised tombstones, coffins, and even pre-paid funeral packages. Funerals are a big business in South Africa and unfortunately, with the spread of HIV/AIDS, it is a growth industry in Africa. The poor (and middle class) often experience the double trauma of both financial and emotional devastation when a loved one passes away. Our local researchers noted that in certain traditions, the family of the deceased is responsible for butchering a cow for their town every day from the person’s death until their burial. This cost is over and above the expenses of purchasing a coffin and a tombstone and has to be incurred even if the deceased person was the primary breadwinner.

Entrepreneurs have created business model innovations, such as pre-paid funeral packages and funeral insurance, to enable families to mitigate the financial losses associated with funerals yet still fully participate in traditional rituals. Both firms and families benefit from these innovations. Firms benefit as their clients’ lack of a constant income does not necessarily impact the firm’s bottom line. Families benefit by enabling a dignified end for the loved one and limited funeral-related debt for the surviving family members. Identifying this type of win-win situation is key to success in emerging markets…and in business in general.