TurboTax Tries to Compensate for Past Missteps with Free e-File Promotion

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TurboTax is offering five free federal e-files when you purchase TurboTax Online or download the software. If you made less than $56,000 last year, e-filing is free for you regardless. If you made more, the TurboTax online promo might be worth considering.

But there’s a backstory. TurboTax is compensating for a recent slip-up. Seeking Alpha’s Rafael Grillo describes how Intuit rapidly lost large amounts of customers (courtesy of the Internet’s realtime reputation-shredding qualities) when it decided to add nominal fees to its TurboTax service:

This year, Intuit screwed up. In an attempt to squeeze more money out of their customers, Intuit tried to change the rules of the game on them. In essence, Intuit tried to re-position its business as a provider of tax services rather than that of a software vendor. The first mistake was to significantly increase the price of Turbo Tax, trying to justify it by adding “free” federal e-filing to the package. This backfired badly. Many customers didn’t care about e-filing, so they perceived they were been charged for a feature they didn’t want to start with.

Furthermore, realizing that a portion of their franchise used the software to prepare the taxes not only for themselves but also for other members of their family, Intuit thought they could create a new revenue stream from that. So they imposed a fee for each tax return printed through Turbo Tax. That was the straw that broke the camel’s back. Their former loyal customers were infuriated, and many clearly stated their intention to switch to Turbo Tax’s closest competitor, H&R Block’s (HRB) Tax Cut.

Even though Intuit backtracked on its original intentions, eliminating printing fees and slashing their price, the damage was done. As a marketer with a strong, loyal franchise, the most important thing you have to avoid is for your customers to have an excuse to go and try your competitor, lest they like it and leave your franchise for good. Intuit’s ill attempt to gouge its customers left the door wide open for that. And H&R Block aggressively took the opportunity.

They positioned Tax Cut at a lower price point to Turbo Tax, including the free federal e-filing Intuit was hoping to use to justify their hike. In a brilliant, aggressive move, H&R Block even sent out their Premium Federal Tax Cut version for free to tens of thousands of consumers, pretty much eliminating a key barrier for disgruntled Turbo Tax users to try their product. And ultimately, taking advantage of its robust infrastructure as a true tax advisor, H&R Block is backing its software product with the promise of personal support to solve questions and, most importantly, to provide support and representation in case of being selected for an audit.

Know what I’m spending $125 on this year? Human tax software–my accountant. I’ll switch to TurboTax once someone convinces me it can work magic.