Tax Preparation Services And An Affinity Marketing Redux

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One of my earliest successes in the tax business, and the root cause of tax season overload that made me realize that I did not want to be in the three months a year consumer tax preparation business, was my success with affinity marketing, the marketing to a targeted group based on their affinity, or relationship.

Somewhere near the beginning of my foray into the world of tax preparation services, I wound up in a referral agreement relationship with a major credit union. The credit union would promote my services to their members by inserting a small advert into their members monthly account statement. I would give the members a 20% discount on tax preparation services, and rebate another 10% to the credit union’s members benefit organization (since the credit union could not legally take a referral fee directly).

The Power Of An Affinity

Unfortunately for me, or fortunately if you want to look at it that way, I did not realize that the credit union had 28,000 depositor accounts, or how effective this method of marketing would be. It seemed like that over the next few years every credit union depositor in the state wanted to have their taxes prepared in my office. I grew from 300 returns the first year to over 750 the second and over 1,250 the third, with every client getting a face to face interview and each return being prepared by hand before being submitted to a data entry service.

The stress and amount of work that I did in that last year is what convinced me to exit the tax return business. It was over 30 years ago, and I was a lot younger, but even then there were limits to my stamina.

Today, affinity marketing is much more competitive than it was back when I took advantage of it, but it is still an effective tactic.

Recently, H&R Block and Uber teamed up in an affinity marketing relationship, with Uber drivers receiving a 25% discount on tax preparation services from H&R Block. I don’t know what the kickback (or rebate) to Uber is, but I do know that with Uber employing hundreds of thousands of drivers just in the USA, spread among H&R Block’s 10,000 offices, H&R Block has the potential to pick up twenty or thirty new clients at each of their offices.

But, the most powerful part of the agreement is that H&R Block has developed an app which allows Uber drivers to import their Uber 1099 directly into H&R Block software, whether the driver prepares their return themselves, or has it done in an office. Either way, H&R Block captures a new client with an advertising expense (discount and rebate) that is directly tied to performance, something that is now called a ‘cost per action’ advertising, where the cost only occurs if the prospect takes a specific action (has their return prepared at H&R Block).

Is it Legal?

At first glance, this seems like a typical affinity marketing program, with an organization referring its members to the return preparation service in return for a price discount for the members and a kickback or rebate to the organization, but this program goes way beyond that with Uber and H&R Block developing a methodology for H&R Block to integrate their TaxEdge App software with Uber’s 1099 reporting software.

I don’t know how appropriate the integration of those two softwares is, or what the limits are, but I’m sure that more than likely that sooner or later someone will voice a complaint and ther will be an investigation, which in turn will take years, and will result in some slight modification to the program.

Strategic Shift?

As an independent practitioner, you don’t have the ability to fund the development of such software, but there are other means of defeating this tactic, and that is what it is, a tactic. And, it may inidcate a major shift in marketing strategy for H&R Block.

On a recent brainstorming call, one of Practice Builder Publishing members mentioned that he thought H&R Block was struggling this year as he had not seen much in the way of advertising from them. I wonder if H&R Block might be positioning itself to take advantage of its ability to fund technical developments that will tie in groups of prospects to its services through employers and to a lesser extent, external organizations. This would indicate a major shift in H&R Block’s marketing strategy, and would cause me to wonder what other tactics there are that they might be developing along these lines.

The end of tax season is fast approaching, and it’s too late to even think about developing an affinity relationship this year, but next year will be approaching soon. And, if you think you want to develop an affinity marketin program as a tactic, it takes months to develop a relationship with an organization of some sort, and possibly months to develop the marketing materials for the program, so now is the time to start planning.

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Best to you and yours,




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