H&R BLOCK CANADA
By April of every year, Canadians search for options and evaluate alternatives for filing their personal and business taxes. Whether they are students, professors, or business professionals, Canadians who seek help for tax preparation services have a number of different options. After careful evaluation of their alternatives, Canadians remain loyal to only a few of them. Tax preparers who have discovered the correct strategy for effective pricing have realized the lifetime value of their clients.
Not only does H&R Block have an effective pricing strategy, but it also effectively trains the future tax preparers of Canada. Each year, more than 10,000 students enroll in H&R Block’s Income Tax School. Graduates of the school may become H&R Block employees, but they also may work for major banks, mutual fund companies, and brokerage firms in Canada. The training offered includes a written guarantee that the training is the strongest in the industry. H&R Block’s guarantee to its clients is just one element of its customer relationship management strategy and its success. Furthermore, H&R Block values students as future clients. Its tax preparation services in Canada offer special student pricing offers. For example, from August 2013 through July 2014, H&R Block offered a promotion giving students Student Price Cards (SPC) valid for savings at over 100 retailers.
H&R Block opened its first franchised operation in Canada in 1964 and opened its first company-owned operation in Canada the following year. This was its first venture into multichannel offerings for its clients, but definitely not its last. As the organization grew in U.S. and Canada, it also expanded into 13 foreign companies and it services Canadians at home and abroad.
It may seem difficult for such a large organization to keep its service offering consistent among so many locations, but H&R Block finds a way to do it. Hilary explains, “H&R Block spends a great deal of time educating its employees on the value they offer clients. Through effective training on position pricing, H&R Block employees explain the value their services offer in the context of perceived benefits in relation to price.” The value of the organization’s services increases as the benefits clients receive increase.
Pricing strategy is an important element of H&R Block’s business. When determining if the prices for the services the organization offers are appropriate, H&R Block researches its competitors. This allows the company to decide if it should be offering prices at, above, or below market pricing. More importantly, H&R Block conducts research on its clients. As director of marketing, Hilary leads the market research efforts. She explains the rationale behind the key questions clients are asked. “We first want to understand if our clients know what price they are paying for the service. From there, we determine the price they are willing to pay for the service.” What Hilary has noticed is that clients are actually willing to pay more if they receive a level of service that exceeds their expectations. “We also ask if clients are willing to pay a certain price for a service to see if it is appropriately positioned for the market.”
In addition to its at- and below-market pricing strategies, H&R Block also uses odd-even pricing strategies. “You will notice that some of our prices are shown below the whole dollar amount. That is just the beginning of the conversation. As I mentioned before, clients are willing to pay more for our services when they see the value-added service we offer.”
H&R Block’s Second Look campaign helps put the organization’s pricing strategy to the test. By attracting potential clients for a second opinion, it can illustrate the value of its professional services.
To get a sense of H&R Block’s customer experience from a customer’s perspective, consider Tony, an H&R Block client. When Tony moved into his new home, he also made a decision to change accountants. “There were a lot of individuals at work that were speaking highly of H&R Block,” shares Tony. “It made sense to try them out.” Going through his consumer purchase decision, Tony identified that “I did not want the hassle of doing taxes on my own.” Encouraged by work colleagues, Tony decided to investigate H&R Block as an option. His decision to go with the company over private accounting firms was finalized when he walked into the company’s convenient neighborhood office location. “There was a sandwich board in the H&R Block office,” recounts Tony. “I knew right there what I was going to pay and I had the assurance that my taxes would be done accurately. I also received my money right there.”
1. For H&R Block Canada what are examples of (a) shifting the demand curve to the right to get a higher price for tax filing (movement of the demand curve) and (b) pricing decisions involving moving along a demand curve?
2. Assume an H&R Block Canada location had a fixed cost of $12,000 to cover during tax filing season, and variable costs for each service of $29. What would the break-even point be for professional services of (a) 109, (b) $69, and (c) $39? Also, (d) if H&R Block Canada achieves the sales target of 2,000 units at the $129 retail price, what will its profit be?
3. Assume that H&R Block Canada opened an office to a remote part of Canada where fixed costs were cut in half to $6,000 and variable costs for each service were dropped to $19, what would be what will be the (a) new break-even point at a $129 retail price for this line of services and (b) the new profit if it produces 2,000 returns?