Monday, April 6, 2009

NFDA Stat Lacks Integrity-Fun With numbers

The great thing about statistics, and numbers in general, is that they can be manipulated to demonstrate whatever "fact" you are supposedly substantiating. Depending on so many variables, statistics are almost by design the perfect way to make fact out of fiction, allowing you to paint the canvas with the most appealing picture to influence others to your point.

The National Funeral Directors Association (NFDA) provides the 2006 average cost of a traditional funeral at $7,323, which most people who have arranged and paid for an at-need funeral know is much lower than they actually paid. Based on what I know and my background in finance, I simply do not believe that number. Skeptical curiosity got the best of me and I felt compelled to look into the statistical validity and integrity of that number, and...drum roll is bogus. Oh, don't get me wrong, it's an average of something...but not what I believe is the average cost of a funeral. Funny how a single fact can ruin a good argument.

I will clearly demonstrate, using the NFDA's actual data, why that number is misleading at best, just plain wrong at worst.

Here are some facts (per the NFDA, but with no date reference):
  • There are 20,080 funeral homes in the U.S.
  • Over 10,200 funeral homes are members of the NFDA in the U.S. and internationally (they do not provide a breakdown of U.S. vs international membership)
  • The NFDA provided 2006 average cost of a "regular adult funeral" is $7,323
  • The average was calculated based upon member survey responses
  • 3,000 member funeral homes, or 29% of it's membership, were invited to respond
  • The response rate was 38%

Okay, now it gets interesting.

There is no explanation as to why only 3,000 members, or less than 1/3, were sent the survey or the diversification of the invitees, the notes do not specify whether the 3,000 invitees operated in the U.S. or if international funeral homes were also included, there is no indication of the selection process to identify those 3,000 invitees...were they "cherry-picked" or randomly selected? All of these, among others, very simple points can and will drastically determine the outcome.

Let me break it down...

  • A 38% response rate equates 1,140 responses
  • 1,140 represents about 11% of NFDA member funeral homes, and only about 5.4% of total U.S. funeral homes
  • If survey invitees were not random, then inviting responses from targeted funeral homes in rural areas, financially depressed or disadvantaged areas, funeral homes whose business is influenced by providing goods and services to the homeless, mentally challenged or prisons, and family-owned vs corporately owned, basically allows the NFDA to handcraft a statistic to their advantage.
  • The NFDA took a set number of goods and services and priced only these items from the submitted general price lists. This list is decidedly vague in what exactly was being included, providing the average cost of a "viewing or visitation", but did not specify the number of days, time of day, weekday vs weekend, etc...things that can change that number, thus the overall average, by HUNDREDS of dollars
  • The average was NOT calculated from actual funeral receipts, but rather from only a pre-selected number of goods and services as determined by the NFDA.

Questions to the NFDA:

1) How would the average change if funeral home invitees were primarily located in the lowest median household income areas or rural areas? For instance, how would the prices differ from a funeral home operating in Liberty, MS (pop. 676) differ from one operating in Los Angeles, CA (pop 3.8M)?Or, funeral homes operating in Atherton, CA, with the highest median household income compared to those in Detroit, MI, with one of the lowest median household incomes?

2) Since when does information from 5.4% of total practitioners equate to "statistical integrity", as stated on the NFDA website? That's news to me...

3) What is the degree of influence from international funeral homes?

4) How were the 3,000 invitees determined?

5) Why did only 38% respond? A reasonable person might conclude that those funeral homes with higher prices operating in higher income, metropolitan areas may decline to respond knowing that they would influence the average up.

6) The funeral industry generates $11B annually...why weren't actual funeral receipts used as opposed to only the selected goods and services determined by the NFDA?

I could go on and on, but I believe my point is clear. When any type of analysis is prepared from unclear, misleading and manipulated data, the result is unclear, misleading and manipulated statistics. Only some of us can learn by other people's experiences...the rest of us have to be the other people.

Don't be the other people. Learn more about how to protect yourself and your loved ones by developing a thoughtful, comprehensive pre-need funeral plan at

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