Intuit’s TurboTax products dominate the tax preparation software business with over 60% market share in 2013. For 2014, Intuit removed some functionality (e-file forms for some schedules) from their “TurboTax Deluxe” desktop product. This move would force many “Deluxe” users to upgrade to the more expensive “Premier” or “Home & Small Business” products. The problem was that the changes were noted in small print on their packaging and many long time Deluxe users falsely assumed that they could still get the latest Deluxe product for their 2014 taxes. Unfortunately, they ended up with a big surprise when the software program informed them that they needed to upgrade when they dealt with the missing forms. This also represented a rather steep 50% price hike for a former "Deluxe" product user to "get back" past functionality. Thus, a past “Deluxe” user might feel that their product got downgraded to make them pay more.
The uproar was huge with long time users calling Intuit out and urging others to switch to alternative products. Over 1,200 negative comments were posted on Amazon.com with users complaining of “rip off”, “bait-and-switch” and “price gouging.” Things only got worse when an Intuit Vice President replied online stating that the Deluxe product still had the forms – albeit that one had to manually complete them, which further infuriated users since that negates electronic filing and defeats the main purpose of software. Intuit’s competitors also saw this as an opportunity to grab market share with H&R Block offering their tax preparation software for free to consumers who felt cheated. News of the controversy was carried by national media, including the Wall Street Journal and NY Times.
What happened next?
Intuit customer service offered free upgrades for Deluxe users who called to complain. The list prices were also drastically dropped by 50% on their website during the week of January 19. TurboTax General Manager, Sasan Goodarzi,issued a public apology stating that they "messed up" and the company is offering $25 to customers who used TurboTax Deluxe and had to upgrade to file their 2014 return. Intuit CEO, Brad Smith, recently posted a mea culpa on LinkedIn that "The past two weeks have been a humbling refresher of this lesson for me and for our company.” (Perhaps not coincidentally, Intuit also recently posted the position of "Director of Product Management – TurboTax".)
So What Are the Lessons?
Perhaps it is best to let Brad Smith share his words from his LinkedIn post:
"When changing a product that has served a customer well for many years, whether it is a change to the user interface, a feature, or even pricing:
Proactively engage in dialogue: Reach out and share why you feel the change is necessary, asking for their input on how best to manage the change. Seek feedback in areas you may not have considered.
Ease customers through a transition: Change is difficult for anyone, and having a bridging plan will help guide customers. For years, software companies and social media sites have learned this lesson many times over when changing the layout and design of their home pages and news feeds. They often offer a transition period between “classic” and “new,” helping loyal users transition over time. The same holds true for changing features, or even pricing. Always consider a transition plan that is best for the customer.
Finally, respond when you hear the questions, and don’t wait until you have all of the answers: Where there’s smoke, there’s fire. Once the change is implemented, listen for the feedback and move quickly to acknowledge you’ve heard it. Share what you’re doing to resolve and address any issues with a sense of urgency and commitment.
And above all else, if you mess up, don’t be afraid to say you’re sorry and make it right."
Good words of wisdom and a decent example of public relations recovery from Brad Smith but I'd like to add a few more lessons learnt:
- Never think that the customer is stupid. Customers can see through marketing ploys. Having an initial “corporate speak” reply that the forms were still available via a “work-around” only talks down to customers and makes things worse.
- Public perception rules. Your rationale does not matter. While Intuit justified the change as an attempt to align with their online offering, the customer did not care or buy that argument.
- Social Media spreads word fast. Negative press is viral. Many prospective purchasers can see the 1,200+ negative comments and hundreds of one star reviews on Amazon.com. Many of the commentators took the opportunity to complain about other Intuit products. This was all picked up by the media. You need to react fast and furious.
- Don’t take loyal customers for granted. It appears that TurboTax has really burnt their bridges this time with users switching to competitive products. People change only if the pain is great enough to force them to move (they are usually willing to pay a bit more to avoid migration concerns and relearning). Many online commentators stated that they were long time users who felt that this move was too outrageous - the proverbial straw that broke the camel’s back.
- People don’t get mad, they get even. TurboTax customers who felt snookered took to social media and advised others to switch to alternative products. Many posted that they had no problem importing their TurboTax files to other software and were happy with the alternative offering. They became free advertisement for H&R Block and others.
- Trust is earned. Be authentic and transparent. Intuit made some remedial moves, e.g. free upgrades and rebates but this was due to some very negative and widespread backlash. Those customers were placated and may not necessarily return. A lack of transparency made many leery of Intuit. Remember the saying, “All things being equal, people will do business with the people whom they like.”
- Pigs get fat, hogs get slaughtered. You can increase prices as long as you continue to show differentiation that matters to the customer and have a better value proposition. To gain revenue by other means only leads to customer resentment, a backlash, and the danger of losing customer trust, market share and revenue. You must always measure what you may gain by what you will lose.