The Pricing Game--Round Two

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Faced with a claim that it was losing customers, particularly for Lacerte, Intuit issued a vociferous denial earlier this year that it was losing ground anywhere.

That claim was reported in our electronic newsletter, “Consulting Insights,” based on reports from a couple of executives at competing companies.

So, it was surprising in the face of Intuit’s denial that in a May earnings conference call with analysts CEO Steve Bennett and CFO Brad Henske, admitted that “both the quarter and the season came in slightly lower than expected as we lost some customers to lower-priced competitive offerings.” Even though a spokesman said Lacerte isn’t the issue — that would mean ProSeries is.

Partner Insights

And that tends to bear out comments made by ATX president Glynn Willett, whose company markets one of those lower-priced offerings that has been taking customers away from Intuit. Intuit has reported $246.2 million in revenue in the first three quarters from its Professional Accounting Solutions, whose revenue is largely from ProSeries and Lacerte. It plans to take steps to regain share and certainly isn’t facing a major challenge.

Still, the admission underscores a point that some practitioners have made privately over the last two or three years. With most of the software packages doing about the same thing, and generally doing them well, price is increasingly an important consideration in buying tax software.

For example, LaserSystems, which markets the TaxWorks line, is using its Web site to encourage customers to switch based on purported savings. The company says that customers of some packages (names weren’t given) are spending $12,000 a year for tax software. The TaxWorks line, by comparison, comes for about $2,096 for the same functionality, according to this claim.

The consolidation of product lines has continued, most recently with Creative Solutions’ acquisition of the Package EX line from ExacTax. With not many players left to acquire, vendors cannot grow their customer bases via acquisition, which means that price competition will be increasingly important.

Until now, the trend has been the other way. Over the years, ProSeries has gotten increasingly expensive and some companies build in annual price increases. That will probably continue to be the case on the high end, where users need power and a wide range of features.

But for those preparers doing more modest returns, price is a big issue and, along with technical support, is often the most important factor in staying with a software package since most of the software available today will do that job accurately. That lengthy list of forms and features just isn’t as important to them, and the major lines have added about all the important features they can.

However, only so many can play at the low-cost game. It’s likely that one or two players can establish themselves that way. If Intuit wants to regain customers who were driven to switch by price, it’s hard to imagine it will do anything other than compete on price. It may not cut prices for its two lines. It could choose to come up with a Lacerte Lite, or something similar. But those dollar amounts are going to start falling, if only slightly. 

Robert Scott—Editor

Business on the Web
Despite the dot-com bust of a few years ago, electronic commerce is increasingly real. Businesses are doing great business on the Web.

Accounting Technology talks to companies that have implemented eCommerce features on their Web sites, and our annual eLeaders feature tells their stories.

Meanwhile, it’s time to look at the new crop of tax software. The issues increasingly go beyond the usual questions about which forms are available. Tax software is working and playing together with an increasing number of CPA applications, according to our “Tax Software Preview,” by Associate Editor Carly Lombardo.

In “Positive Thinking,” Senior Editor Richard McCausland examines the growing market for point-of-sale applications. Find out what mid-market financial software developers and their third-party partners are doing to automate the shop on Main Street or in the local mall.

Finally, in our annual review of online payroll, reviewer Dave McClure tells you the features that are available in the growing crop of products that let practitioners prepare payroll via the Web.

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