TurboTax Strategy Against a Free Tax-Prep Rival (Credit Karma)

You are a product manager on TurboTax, the do-it-yourself tax-preparation product, which makes its money mainly from paid editions. Credit Karma, a personal-finance company, offers a tax-filing feature that costs users nothing. Decide what TurboTax should do about it: judge how serious the threat is, compare the responses available, recommend one, and explain how you would know whether it is working. ```hint Follow the money Ask how a rival can afford to charge nothing for filing, and which TurboTax customers that offer actually pulls away. The answers tell you where a response is needed and where it is not. ``` ### Clarifying Questions - Does the free offer cover only simple federal returns, or also state returns and more complex situations such as self-employment or investment income? - Is there early evidence of switching, and from which groups: free-edition filers, paid-tier filers, returning customers or first-time filers? - Is the priority this season's revenue or the share of filers over the next several seasons, and are price changes, bundles or an acquisition in scope? - What does a user give up to use the free product, for example signing up for an account or sharing financial data? ### What a Strong Answer Covers - A diagnosis of the threat: how the rival funds free filing, and which TurboTax customer segments are most and least exposed. - Several genuinely different responses (price, product value, loyalty, partnership or acquisition, doing nothing) compared on upside, cost and risk. - A recommended plan with its cost to current revenue stated, sequenced around the tax season. - Success metrics and guardrails that fit a seasonal business, such as returning-filer retention, first-time-filer acquisition and revenue per return. - Risks, including cannibalizing paid tiers, trust problems around the word "free" and the rival's likely counter-move. ### Follow-up Questions - Leadership proposes making every TurboTax edition free for one season to stop the losses. How would you respond? - Midway through the season, fewer returning customers have filed than at the same point last year. How would you tell whether the free rival is the cause? - How would your plan change if the rival extended free filing to self-employed and other complex returns?