Five days from the U.S. income tax deadline, tax prep ads are everywhere. I don't usually notice them because I still file the old-fashioned way, via CPA (note 1) and paper check. However, yesterday I noticed H&R Block's banner strung across the top of TechCrunch (screenshot below).

It caught my eye for a several reasons:

• 24/7 access to live tax help, a real benefit to the legions of last-minute filers.
• The "Tango" branding really intrigued me. How could a tax service be interesting enough to have its own brand, especially one as off-beat as Tango (note 2)?

The Tango product, complete with YouTube videos, <wannatango.com> URL, and more, deserves a post of its own, but here I want to focus on Block's pricing/segmentation.

The tax-prep giant divided its online services into two distinct categories, both catering to the computer savvy do-it-yourself crowd. Block calls the segments: "Do it Myself" and "Do it With Me" (screenshot below) with pricing as follows:

Do it myself:

• $14.95 for 1040EZ
• $29.95 for 1040 with itemized deductions
• $59.95 for 1040 with state return

Do it with me:

• $70 Tango option -- complete online and submit yourself with unlimited 24/7 support (includes state return)
• $99.95 (+$34.95 for state) complete yourself and then route to an H&R Block agent to review and e-file
• $99.95 (+$34.95 for state) and above (note 3) to fill out an online questionaire and submit your data to have someone at H&R Block complete the return for you

NetBanker strategic action item
Banks, take notice. Block's pricing strategy is brilliant and if applied to online banking, could revive the difficult business case. Online banking, like electronic tax prep, is a mature business, and has long ago proven itself as valuable and convenient.

Now it's time to cash in on that convenience. While levying fees across the board would create customer ill-will, it's possible to segment your online banking base into customers who want plain vanilla services for free and those that want the best, and are willing to pay for it. Block's Tango is a good example of how to price for those who want to go it alone for the lowest cost and those that want high-tech online services AND high-touch tech support.

A bank or credit union could mimic the Block program:

• Do it myself (FREE): Download data, set up my bills, create triggered alerts, monitor my own security settings, read my own credit report, store my own statements on my hard drive, and so on
• Do it with me ($5/mo): 24/7 access to an online specialist who will provide advice, assistance, and help doing any of the above. Added bonus: lifetime storage of all transactions, statements, and check images!!!

Call it VIP Banking and start turning online banking into a profit center. With dedicated fee income you will have fewer problems during the looming crisis in online banking measurement. 

For more on online banking pricing and how to develop a premium-priced online banking service, see our Online Banking Report: Pricing - The "Fee" vs. "Free" Controversy (#109).
 

H&R Block Banner on TechCrunch (9 April 2008, 1 PM Pacific)

Landing page from TechCrunch banner (9 April 2008)

Tango homepage (9 April 2008)

Notes:

1. In testing Turbotax and TaxCut, I have found both to be intuitive and surprisingly easy to use, even for relatively complicated returns with business deductions. This year, I did my teen's return on the free TurboTax online site, which was very slick. My son's already deposited his $2 refund into his online bank account.

2. H&R Block's Tango actually has a Wikipedia listing (within the H&R Block entry). That's something you don't see too often. According to Wikipedia, the Tango service first appeared last year for 2006 returns, but was plagued by computer glitches that forced the company to issue refunds. But it received good reviews this year, scoring an 82 here, just two points less than leader TurboTax Online. Tango finished ahead of the other four sites reviewed (here).

3. My federal returns would cost $199.80 through this most expensive option, about $500 less than my CPA.

At WBR's Net.Finance conference yesterday, Jon Kaplan, head of Google's Financial Services Group, showcased ways to work with Google that were NOT related to search. He showed some cool and free ways to showcase your brand on Google Earth, Google Gadgets, Google Calendar, and more. We'll look at those in future posts, but by far the most entertaining example is Intuit's refreshingly creative TurboTax Rap promotion.

The company sponsored a contest that ended on the traditional U.S. tax day, April 15, that offered a top prize of $25,000 to the best YouTube video featuring TurboTax. Intuit also gave the first runner-up $5,000 and the third place video $1,000. And anyone who uploaded a video entry received a free copy of TurboTax. Intuit hired 1980's rapper Vanilla Ice to do the intro and announce the winner.  

To promote the contest, Intuit created a special-purpose website (see screenshot below) and built a YouTube page (see below). The winning entry, showcased on Intuit's YouTube page, has more than 250,000 views. That's enough to put it on YouTube's most-viewed page (currently, it's number 13 on this week's most viewed), which really turbocharges the viewership. In comparison, the two runner-ups have less than 9,000 views.

This is brilliant work by Intuit. Although it was a costly promotion, it was still less than a major print buy and more importantly, it introduced the TurboTax brand to a whole new group of younger customers who'll be buying tax software for many decades. It will be interesting to see if Intuit makes this an annual event.

YouTube page  <youtube.com/thetaxrap>

Website home <turbotax.intuit.com/taxrap>

www.webturbotax.com

Intuit banner ad running on Excite (seen when searching on “TurboTax”).

The Company: Intuit is a financial services powerhouse. Its QuickenMortgage site hosted 900,000 visitors in January and closed $600 million in mortgages in 1998, its first year of operation. In January, Quicken.com delivered 160 million page views to more than 2.5 million visitors. The company is also active in Insurance with InsureMarket.com, business financing with CashFinder.com, and its latest entry in the annuity market, Annuity Center www.quicken.com/annuities in conjunction AnnuityNet.com from Lincoln Financial Group.

The Product: WebTurboTax.com is the Web version of Intuit’s market-leading tax prep product, TurboTax. It is a fully functioning service allowing users to complete even complicated tax returns directly from Intuit’s Web. The interface and interview process are similar to the shrink-wrapped version. Users may store their personal info on Intuit’s server to make the process go faster next year. Electronic filing and state tax returns are also included (see pricing below).

Price: The service is priced at $9.95 for 1040EZ and $19.95 for 1040, which includes preparation and electronic filing of federal returns and all schedules. State returns are an additional $9.95 or $19.95. Fees are paid by credit card at the end of the process. After you’ve sunk an hour or two into preparing your taxes, you aren’t likely to balk at paying 20 bucks to print them out and/or file them electronically.

In a public relations coup, the estimated 43% of U.S. taxpayers with adjusted gross income of less than $20,000 get to use the service for free, but only until April 1. Last-minute filers will pay full fare, unless Intuit decides to extend the free offer. Bank partners should remember to flag this free service for their 1999 CRA performance reports.

The Market: According to NPD SofTrends of Port Washington, NY, in 1998, 4.7 million copies of tax software were sold in the U.S. for a total of $147 million. Intuit’s TurboTax accounted for 70% of the total, selling 3.3 million units. Block Financial’s TaxCut accounts for most of the remaining 30%. Microsoft has yet to enter the tax business, but if they do, expect it to be entirely Web-based, and integrated with MoneyCentral.

Electronic filing has been gaining momentum during the past several years, growing to nearly a third of all tax returns. But the overall numbers are misleading. Of 21 million tax returns filed electronically in 1997, just 5%, or one million returns, were filed directly by the taxpayer via PC/modem or Web (see chart on next page). Most were filed by one of 85,000 IRS-authorized Electronic Return Originators.

1999 Results: Forrester Research projected that 250,000 returns would be filed via the Internet this year. A little more than one month into the filing season, we have already passed that estimate. As of Mar. 3, Intuit has processed 175,000 returns through WebTurboTax, nearly nine times the 20,000 who used its truncated Web service during all of 1998. SecureTax had handled 88,000. The two market leaders alone have processed 263,000.

Intuit has also processed 525,000 electronic filings through desktop versions of TurboTax and MacInTax, for a grand total of 700,000, or 60% of all returns filed electronically directly by taxpayers (through Feb. 19).

Electronic Filings YTD: 1999 vs. 1998

millions of tax returns (U.S.)

Source: IRS, 2/99 Note: Number of refunds paid by direct deposit through Feb. ‘98 is 13.5 million, a 20.3% increase over the prior YTD figure of 11.2 million.

Bank Opportunities: Banks that promote WebTurboTax receive a portion of the resulting revenues based on a sliding scale that rewards volume and placement (e.g., banks posting the WebTurboTax icon on their home page receive a higher revenue-sharing percentage). Participating banks also get to offer a co-branded version of the tax prep service. Co-branding consists of the financial institution’s banner running across the top of most screens. Intuit also returns the user to the referring bank at the end of the process. The bank-run “exit page” provides a good opportunity to cross-sell tax-related products such as refund anticipation loans, IRA’s, and so on (see Wells Fargo screenshot ).

33 Financial Institutions
Promoting WebTurboTax

Source: Intuit, 2/99; companies

Contact: At Intuit, Elizabeth Dougherty is Product Manager of Web TurboTax,
(619) 784-1406, elizabeth_dougherty@intuit.com Analysis

Intuit has created a delightful Web product. It rivals anything we’ve seen to date for any Web-based service. The Java applet downloads in less than a minute on a 28.8 modem and then takes users through the tax return interview process flawlessly and at such a fast pace you’d think you were running it from shrink-wrapped software. This product will win numerous “Best Of” awards in the computer and finance press. We’ve bestowed it with our first Best of the Web for 1999 (see OBR 12/98 for the five winners during 1998).

We are frankly surprised that Intuit priced it so low. We would think that $29.95 or $39.95 would be more appropriate given the convenience and integrated e-filing. Like many Internet companies, Intuit is going for market share over revenue in the short term. At that price point, it may be difficult for new entrants, from Redmond or elsewhere, to make a business case for a competitive offering.

As much as we like the product, banks should be careful how they position the affiliation. On the plus side, it’s a great tax solution with revenue sharing to boot. Your customers will like it and you’ll have a couple thousand bucks from Intuit to spend on your Web site.

But what about next year? Will users go to your Web site for tax prep, or will they simply go directly back to WebTurboTax.com come next April? And next year, Citigroup could own Intuit, or WebTurboTax could feature integrated preapproved loans from NextCard, or any number of competitive offerings. (One thing you can do, is send your 1999 WebTurboTax users an email next year drawing them back to your Web at tax time.)

These may be far-fetched, but we think the risk requires a commensurate reward. If you are going to send your customers to Intuit, you should be compensated. Some ideas:

•  Money/Ad Impressions – Revenue sharing should continue. Make sure you negotiate with an eye on the long term so that you continue to benefit from repeat customers who go directly to Intuit in future years. You also might press for an advertising exchange, free impressions on Quicken.com in exchange for the impressions delivered on your Web.
•  Automatic Direct Deposit – Intuit could create a mechanism so that refunds processed through the cobranding program are funneled back to the user’s account at the referring bank through direct deposit. Even without Intuit’s help you should tell users how to create a direct deposit refund at your bank, see <wellsfargo.com/per/planner/taxhelp/inotes> for a good example.

Wells introduces its own tax services before sending users off to Intuit.
This should help entice users back to the bank in April 2000

Better yet, create a value added program that rides on top of Intuit’s WebTurboTax so that your customers have a reason to come back to your Web when tax time roles around next year. Wells Fargo has done a good job with five tax-related info and cross sell pitches (see screenshot above and table upper right):

Wells Fargo’s Tax Area

*For the first time, U.S. taxpayers can charge the amount owed to MasterCard, American Express or Discover Card (Visa is not participating). TurboTax users can pay electronically with a Discover Card; everyone else must call an IRS automated telephone service to initiate the charge.

Other ideas:

•  Bank-Backed Privacy Guarantees – Given that a bank customer is likely to trust its bank more than Intuit, at least in terms of keeping their info confidential and private, the bank could add value by guaranteeing the privacy of returns filed through the co-branded service. (Intuit already guarantees the accuracy of the calculations). This would give customers another reason to return to the bank for next year’s tax return.
  
  Interestingly, Commerce Bank, Chase, and others take the opposite approach, creating an “HTML wall” between WebTurboTax and the bank. In the case of Commerce Bank, a strongly worded pre-entry screen www.commercebank.compersBankinghomeBanking/TTdisc.html requires users to agree that the bank has no responsibility whatsoever with any problems caused by Intuit’s product.
  Score: bank attorneys 1, users 0.

• Store Returns in Virtual Vaults – On the bank-run WebTurboTax exit page, offer users the ability to store the Intuit-generated PDF file of their completed returns in an
  e-safedeposit box, encrypted and stored on the bank’s server.
•  Free Instant Refunds – Offer instant loans in the amount of the tax refund. Loans could be interest free during the time it takes for the IRS to deposit the refund in the taxpayers bank account (usually 2-3 weeks). Intuit could program WebTurboTax to notify the bank of the refund amount. In the meantime, the bank could require the user to send the PDF file of the return to the bank to verify the refund amount.
•  Loan Cross Sell from Completed Tax Returns: Instead of merely offering instant loans in the amount of the tax refund (above), the bank could take the PDF file of the completed tax return and use it to qualify the taxpayer for an additional loan amount. This would be make it exceedingly simple for the user to apply, and you’d have far more info to base a loan decision on than the typical Web-based mini-application.
•  Real-Time Tax Advice – Banks could partner with qualified advisors to help users complete their returns real-time on WebTurboTax. Advisors could be available via email, telephone, and/or Web chat (see FIBI ) during certain hours to immediately answer user questions. The advisory services could be subsidized by the bank or users could pay the tax advisors through a checking account deduction or credit card charge (Caution: On all tax matters, check with counsel before proceeding.)
•  Tax Advisor Database with Feedback Loop – Local tax advisors could be listed in a searchable database so that users could find a good source of local help. A feedback system, similar to that used on eBay, could be established where users provide public feedback on the quality of service provided by the tax advisors.
•  IRS Forms Database – For those not interested in using online filing, provide a
  forms-finder function to easily track down and download paper forms (see Yahoo ).

Bank One continues its affiliation with SecureTax begun last year by its First Chicago unit (OBR 1/98 ).

Other Web-based Tax Prep Sites

SecureTax.com: SecureTax processed 50,000 tax returns last year, a 5% share of self-prepared e-filings (OBR 1/98 ). This year, company president Al Martiniello is projecting 200,000 returns priced at $14.95 each, $5 less than Intuit. Through the first week of March, the company had electronically filed 88,000 returns. More than 100 financial institutions send clients to the company, most are credit unions using Tax Refund Express, a service provider which processed 42,000 returns last year, 2,200 electronically via SecureTax. Bank One (screenshot above) and First Union send users directly to SecureTax. The division of Universal Tax Systems, Inc. (Rome, GA) has been advertising on Yahoo’s tax center. To encourage use, it also unveiled a PFM-like utility that allows users to store their tax records during the year to simplify the process at tax time. Again, banks have an opportunity to add value to a co-branded program by guaranteeing the privacy of users. Contact: Johan Praats, VP Mkt/Biz Dev., (706) 624-4245.

OneTax.com: The latest entrant is a division of Thomson Investors Network of Rockville, MD. OneTax has inked distribution deals with Charles Schwab, Money Magazine, and others in the hopes of attracting 250,000 filers this tax season. Cost is $9.95 each for state and federal returns.
Contact: Jane Moyniham is Product Mkt. Mgr,
703-352-9699 x222, jmoynihan@OneTax.com

TaxLogic.com: This pioneer has four years of experience using the Internet. The company routes info gathered from users to its network of tax preparers who finalize the returns with the user. Fees usually average $75 to $150 but can be higher for complicated returns.
Contact: Lewis A. Weinstein is President in Needham, MA, taxlogic@aol.com (781) 444-2299.

It’s too late for the 1997 tax season, but you could get a head start on creating a tax prep area for next year. We covered this in detail in January but to reiterate a the key points, working with a partner such as SecureTax, you can offer:

•  guided links to tax resources
•  free tax prep for basic returns
•  under $10 printing and/or electronic filing
•  database of tax preparation professionals

Intuit & Yahoo!

biz.yahoo.com/taxes

Banner advertising in Yahoo’s stock quote service.

Intuit’s online reach is phenomenal. They’ve extended the Quicken.com franchise with co-branded sites at Excite quicken.excite.com , CNNfn cnnfn.com/quickenonfn , America Online, and the latest, a co-branded tax information and preparation site on Yahoo! biz.yahoo.com/taxes/ . Beside information, tax forms, and links to the IRS, you can use TurboTax Online to complete your taxes and file them electronically for $9.95 (for relatively simple returns).

Quicken on Excite.

Quicken on CNNfn.

Co-branded TurboTax area on Yahoo! biz.yahoo.com/taxes .

Quiz: What’s odd about the Yahoo! screenshot above? (Hint: look closely at the banner ad.)

Answer: It’s an advertisement for Intuit’s primary competitor, Kiplinger TaxCut, touting its free online filing feature. This is more than a bit confusing for the poor user who just wants to get their 1040 done.

In other news, The Wall Street Journal’s Personal Technology columnist, Walt Mossberg, gave his annual run-down of tax preparation software (WSJ 3/5/98, p. B1). He compared Intuit’s TurboTax with Kiplinger’s TaxCut, giving TurboTax the nod by a slight margin.

Mossberg noted the advent of free electronic filing from both companies, a service that had cost as much a $20. He also liked both company’s Web-based online preparation and filing systems, though he was uncomfortable with Intuit’s method of storing his confidential financial details on its server. TaxCut stores data locally, but you must download software to use it. He mentioned SecureTax’s Web-based program but dismissed it as cluttered and prone to crashing his browsers (both Navigator 4.0 and IE 4.0).

Finally, just when you thought it was safe to link your customers to TurboTax.com for tax prep, Intuit has something new in the works that your small business clients are going to love, but your board won’t. Quicken Business Cash Finder, according to Intuit’s Web site www.intuit.com/bizservices will allow users to:

Easily compare, select and apply for business credit - including loans, lines of credit, credit cards and leases - from multiple financial institutions, all at once.

Cash Finder, with a posted March launch, sounds much like the company’s mortgage emporium, Quicken Mortgage mortgage.quicken.com.

Intuit is about to hatch yet another financial emporium on the Web, this time for small businesses looking for money at www.intuit.com/bizservices .

First Chicago’s File Taxes area is a standard menu item on the Personal Banking section.

First Chicago (Chicago, IL; $109 billion; 2.2 million ATM cards) is the most prominent financial institution partner of SecureTax. The bank also offers a link for ordering Intuit’s TurboTax ($49.95 using a link to a co-branded version of the Internet Shopping Network, www.isn.com ) along with the Web-based SecureTax option. First Chicago wisely captures user name and address before linking into the SecureTax co-branded site where bank customers enter an offer code to save $5.

The SecureTax engine contains 55,000 individual calculations on 940 forms. The company also supports 45 state tax forms, and offers electronic filing to all 20 states supporting that feature. In all, 1,800 forms are available through the Web site. Other competitors, including Intuit, also offer free Web-based tax preparation, but usually the forms supported are limited to a few of the most common ones. Security First Technologies www.s1.com Security First Network Bank’s sister company, designed the security architecture for SecureTax.

The benefits of electronic filing:

•  Refunds in as little as 10 days (a JavaScript program provides users with the estimated date of their refund if they submit their returns that day)
•  Receive an IRS acknowledgement that they received your return
•  Ability to store last year’s returns

SecureTax banner is displayed on AltaVista when searching on any term containing the word “tax.”

We wouldn’t advise getting into this business yourself. The price for Web-based or downloadable software including online filing has dropped to $5 to $15 at most providers (see table). A few, such as Intuit and Block Financial, still offer more expensive shrink-wrapped versions, though both are unveiling low-cost Web services this season.

Contacts: At Universal Tax Systems in Rome, GA, Randy J. Tullos is CEO; Naomi Williams is Mkt. Dir., (706)232-7757, naomi.williams@universalsystems.com .

Source: IRS, 1/26/98, www.irs.treas.gov

SecureTax offers a private-branded screen when users click in from Citizens Bank. The normal $14.95 fee is discounted $5 for bank customers.

SecureTax is a division of Universal Tax Systems www.taxwise.com one of the major players in the professional tax prep and electronic filing business. Privately held Universal began in 1983 and has been used by more than 12,000 CPAs, accountants and other tax professionals. During the past two years, the company’s software has been used to prepare four million returns. The company claims to have transmitted more online returns than all the others combined.

SecureTax was launched a year ago to process 1996 returns. This year, through strategically placed banner ads (see example on facing page) on search engines and at strategic partners, including some 80 banks and credit unions, the company has seen volume ramp up quickly. During the second and third weeks of January, more than 10,000 returns were prepared online, with volume growing 35% per day. Strategic partners can share in revenues depending on how much traffic they drive.

The company is also running a weekly sweeps through the entire tax season. Each week, one user is selected from all that have registered that week to win $1,040. The company uses the sweeps to draw traffic off banner ads, but also to encourage repeat visitors by sending non-winners an e-mail encouraging them to come back and try again for the next weekly drawing.

SecureTax also appears on Texaco PAW Employees FCU www.tfcu.com .