Smacked: TurboTax bungles a $25 price increase and retreats.

A couple of years ago I switched off TurboTax when they tried to start charging separately for each computer – meaning that I had to buy 2 licenses to have TurboTax on both my desktop and laptop.

I got back on the program when they backed off that silly pricing hack.

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Having learned nothing from that pricing backfire, TurboTax recently got itself in another brouhaha with customers when it tried another pricing sleight of hand.

Here’s what went down …

First, some pricing background …

TurboTax offers different versions of its software with different functionality to hit different price points … TT Basic for $29.99, TT Deluxe for $49.99, TT Premier for $74.99.

That’s a pretty standard pricing strategy … called versioning.

In the software business, the strategy gets implemented in a clever way.

The full-function version is usually developed and then some features are disabled to create a cheaper priced product.

When there are versions, it’s usually the middle price-point product that sells the most … the result of a consumer buying bias called “aversion to extremes”.

So, I assume that TurboTax Deluxe (the version that I use) is the highest selling version.

OK, now the latest backfiring move …

To get folks to step-up from Deluxe to Premier, TT disabled a couple of basic features in the Deluxe version.

Bottom line: A $25 price hike to do the stuff that you used to do with TT Deluxe.

When customers squawked, TurboTax’s CEO issued an apology :

We messed up. We made a change this year to TurboTax desktop software and we didn’t do enough to communicate this change to you as proactively and broadly as we could or should have.

I am very sorry for the anger and frustration we may have caused you.

Intuit has a long history of doing right by our customers, and in this instance, we did not live up to the standards of excellence you have come to expect from us. We did not handle this change in a manner that respected our loyal customers and we owe you an explanation of what we are doing to make it right.

The change we made to our desktop products, both the download and CD versions, includes removing Schedules C, D, E and F from TurboTax Deluxe, which some long-time customers had relied on to report business income, investment sales and rental property income.

As a result, you may now be required to upgrade the version of TurboTax you use even though your tax situation hasn’t changed from last year.

OK, so far so good.

Now, the head-scratching explanation for why they did what they did:

Here’s why we made the change.

Over the years, we have worked hard to make it easy for you to choose the TurboTax product that is right for you and your unique tax situation. We want that choice to be clear and confidence inspiring.

However, as new online and mobile technologies emerged, our products, and the tax scope and features they included, began to differ, leading to customer confusion.

These differences also impeded our ability to introduce new innovations across our entire product line.

So this year, we made the product experience consistent across all TurboTax offerings.

This change enables us to innovate faster and make improvements that benefit all customers at the same time, regardless of whether they use our online or desktop software.

Say, what?

English translation: We wanted to jack-up prices on our most popular version … by surprising you when you tried to use some old functions with a pop-up saying “for $25 you can upgrade” and restore last year’s functionality.

To “make things right” they offered a complicated $25 rebate program to make people whole.

Guess what?

People kept squawking, so the CEO had to send a second letter:

We recently tried to explain the changes made to our TurboTax desktop software and apologized for the impact it had on you. Many responded and let us know our apology and rationale were not acceptable.

You want the TurboTax desktop product (CD or download) you’ve used in the past to do what it has always done—handle your tax situation. We heard you. It’s time we make it right.

Beginning February 7, 2015, you can buy the same product you’d normally buy, and if you need to upgrade for your tax situation, we’ll help you do that at no additional cost. This means you’ll get all the forms you need, including Schedules C, D E, and F, without paying anything extra.

Next, we are committed to bringing back the product you know and love. By the time you are ready to prepare and file your taxes next year, the TurboTax desktop product you trusted in the past will include the forms you’ve counted on for years.

I understand our actions have caused anger and frustration, and our response has been far too slow. TurboTax is committed to regaining your trust and providing you with the level of excellence you have come to expect.

These guys are making the New Coke folks look like geniuses …

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