Intuit Earnings Call Insights: TurboTax Spending, Pricing and ROI
Scott Schneeberger – Oppenheimer: Just a couple of things within Consumer Tax. Brad, could you speak to what type of spend you delivered with regard to TurboTax this season? Did you increase late fees and/or perhaps under spend?
Brad Smith – President and CEO: First of all we increased spending in TurboTax. We actually increased the investments in marketing and customer care, which includes free tax advice agents and extra customer care people by about 16%. I think the overall marketing increase was in the neighborhood of about 7%. So we continue to invest. We play this thing whistle to whistle. I would tell you that it wasn’t the level of investment. I’m not pleased with the return on that investment. I think we had a better opportunity to get our message more effectively communicated and I think we’ll take some lessons learned as we step back this year and get ready for next season.
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Scott Schneeberger – Oppenheimer: And following up, obviously a strong revenue per customer number this year. Could we (peel back the onion) a little bit just with regard to some things you mentioned were conversion mix, debit card, refund transfer probably applies and just give us a feel for the drivers within the pricing improvement?
Brad Smith – President and CEO: Scott, I’ll give it to you at the macro level. The biggest driver was improved free-to-paid conversion. That was the biggest mix opportunity we had. We also continue to see customers come in and chose some of our more premium price products, and we mentioned a few minutes ago that we also had continued growth in our debit card business which helped us well, but the biggest of those drivers was really the free-to-paid conversion.
Price and ROI
Sterling Auty – JPMorgan Chase & Co: Following up in terms of Consumer Tax. Can you talk to us about what you did in terms of pricing and Brad you mentioned it was the return on that investment. Is there a specific advertising channels or items that you could point to that you felt that you weren’t getting a return on?
Brad Smith – President and CEO: So first and foremost, our pricing was pretty consistent with where we were last year. There were no real changes in the marketplace in terms of the competitive dynamic. We all have an entry-level product that begins with free, and we tend to have a good, better, best product lineup for the tax services, and so it’s a typically aggressive game out there. In terms of the advertising itself, there wasn’t a particular channel as much as it was the message. One of the things we have to do as the category leader is to talk about the benefit of doing your taxes digitally where you get a superior ease of use at about a third the price and you still get the same or even better refund. If you look at some of our messages, I think we were a little confusing out there. We talked about getting free tax advice and help. We also talked about the notion of free, but we didn’t really reinforce the benefits of being able to do your taxes through mobile phones, through tablets or just easier to do it through a PC or web. So it was the attractiveness of the advertising overall across all channels, but I think we have the opportunity to sharpen our game as we look to next year.
Sterling Auty – JPMorgan Chase & Co: One follow-up, the $40 million that you said that they would possibly switch, did you get a sense in terms of what it would take to cause them to switch?
Brad Smith – President and CEO: You know we do, and if you will give me this luxury, we have a very good set of competitors in the market who’re probably having the opportunity to read our transcripts, and so I’d rather talk about that when we’re ready to get ready for next year’s game, but the short answer to your question is yes. We do have a very good set of insight. We ran some things this year that we know worked well and we’re going to double down on those as we head into next year.