Wednesday, January 19, 2011

H&R Block in uncertain times offers FREE TAX FILEING

This economy situation has really forced many businesses to use the ‘free’ marketing promotion tactics more then usual. In most cases it is meant to drive traffic to stores, to websites, or get consumers attention. The word ‘free’ in promotions works if it’s thought through and effective if it’s not deceptive. Clearly from the Businessweek.com article, below about H&R, there is a catch. H&R Block’s goals are to increase foot traffic, attract younger customers who could eventually become loyal customers. With an offer of ‘free”, it is most likely an offer of the very basic like Starbucks offering free samples, or McDonalds offering free coffee which cost at least 10% of the value meal they intend to sell you.

So if you are a small business owner considering this tactic. Make sure it’s well thought through. Strongly evaluate cost of giving away something away for free, will it affect the image of the product, or your business. Will you have to hire new staff? Upgrade equipment? Most often, free offers attracts value oriented customers, individuals looking for bargains or deals, not customers likely to pay full price. If you want to attract non-value oriented individuals, consider associating your promotion offering with brands or products that appeal to prestige, status, exclusiveness or other.

In addition, Netflix is beating Blockbusters, could H&R Block end up like the once superstar company, Blockbusters. There are online tax prep tools as well as tax software readily available especially during the first quarter of every New Year. Long term retail tax prep is dead. Where the money would likely be is a combination of tax prep, accountant with financial advisor services for customers within the modest-advance tax complexity.

Like I said in the past if your business can be digitized, either you get out or acquire the resources needed to compete in a digital world. Digital is going to kill a lot of old tradition businesses.



Thanks Businessweek.com. Article from Businessweek.com
The 2011 tax season is under way and the airwaves are full of a deal that sounds too good to be true: For another month, Americans can visit their local H&R Block (HRB) office and file their taxes for no charge.

How and why would the nation's largest tax filer give its service away for free? In a nutshell: 1) H&R Block is being forced to scramble harder this tax season to compete with other filing services. 2) It's unable to offer a service that brought in customers in years past. 3) The "free taxes" offer isn't for everyone.

Here are the details:

What's the Catch?

The promotion only covers those filing the 1040EZ federal form, which is about 16 percent of H&R Block customers.

What Does H&R Block Get Out of the Promotion?

The free returns aren't a charity project, even if many of H&R Block's early filers tend to be poorer people who want their tax refunds as soon as possible. "It's not about giving away business for free," says Amy McAnarney, H&R Block's senior vice-president for tax operations. One goal is to increase foot traffic at H&R Block offices. " 'Free' can be a very powerful word," she says. Until they arrive for their appointment, many of these new customers might not realize they actually need more complex tax forms—and thus will wind up paying for them.

Another goal is to attract younger taxpayers—those who can still use the 1040EZ—and win their loyalty in future years. The company estimates 55 percent of EZ filers will need to file a more complex form within two years.

Why This Year?

H&R Block's retail operation has been losing customers, with retail returns falling 6.1 percent last year. Morningstar (MORN) senior equity analyst Vishnu Lekraj says in-office tax preparation services continue to lose market share to tax software and websites, which can be much cheaper. "The taxpayer is becoming more and more comfortable doing their own taxes," he says.

Many software or online tax tools have already offered 1040EZ filings for free, including those from H&R Block and Intuit's (INTU) TurboTax. Last year, McAnarney says, H&R Block tried offering free 1040EZ returns in offices in three cities—Miami, New Orleans, and Atlanta—"and it was received very well."

Offering free returns is also part of the company's effort to bounce back from some rough years, analysts say. A rise in unemployment has hurt business for all tax preparers, with industrywide IRS filings dropping 1.7 percent last year, the largest decline since 1971.

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