CMO Collins: Marketing Can Be Taxing For H&R Block

Taxes: Everyone knows they have to do it, but nobody wants to think about it. That’s the annual marketing challenge for H&R Block CMO Kathy Collins, who took time from the final stretch of tax season to talk to about the state of financial literacy, millennials’ tech-averse tax-filing habits, and why tax season should be a time of celebration.

CMO Collins: Marketing Can Be Taxing For H&R Block

Death and taxes might be the more commonly used phrase this time of the year, but at the headquarters of H&R Block, the typical tax analogy is going to the dentist: Everyone knows they have to do it, but nobody wants to think about it. That’s the annual marketing challenge for Kathy Collins, CMO of the tax-preparation market leader.

“There is a lot of inertia in this category,” Collins said. “Just like your dentist, you really don’t want to have to switch. So that’s one of the reasons we do so many marketing programs.”

And those programs have to be squeezed into a very small window: “Most businesses out there have four quarters to get it right. We have one quarter. April 16 in a typical year we start working on the next year,” Collins said.

Collins took time from the final stretch of tax season to talk to about the state of financial literacy in America, millennials’ tech-averse tax-filing habits, and the importance of leveraging those last three extra days to file this year. H&R Block is a leader in the sector, but it saw great changes with online filing from challengers including TurboTax and TaxACT. How do you deal?

Collins: That is actually something we study very carefully. We started a couple of years back with a consumer segmentation study that segmented the market based on their needs around tax preparation. What we found out through that study, and we validated several times since then, is there’s 60% of the market that still wants help. Either they’re not confident in their own abilities, they want to make sure they don’t leave anything on the table, or their taxes are too complex.

It’s a very fragmented market, for sure, and it’s getting more so every year. It’s easy for new entrants to come into the category. The good news is we are a brand people know. We have 96% brand awareness. They know us for taxes. We’ve been around for over 60 years.

All those things are good, but it’s about how we stay relevant when new folks come in, whether it’s online or in retail. We spend a great deal of time talking to consumers, making sure we’re relevant, making sure we’re giving them the best value, and offering the best experience we can. You’ve launched efforts targeting groups such as millennials, Hispanics, and other demographics. Can you explain that segmentation?

Collins: It was a large quantitative study, over 3,000 in the sample, and we did make sure we were representative of all the parts of the population. We did not just do it online; we made sure we represented clients who may not be online, and we supplemented that with some in-home visits.

The thing that was most important for us is people need to understand the attitudes and behaviors around tax preparation. Once we got through the basic segmentation, then we were able to supplement that with more lifestyle-driven data—more psychographic data, demographic data, media habits, that sort of thing.

The thing that’s funny about it is that most people would assume younger consumers, who are more technologically savvy, would be the first to want to do taxes on their own. Interestingly enough, that is not the case. Younger people are the most likely to come to a tax professional for help. They are not confident in their own abilities. They’re afraid that they don’t know what they’re doing. Even the simplest tax return is complex if you don’t understand the tax code, and most people don’t.

We use in our marketing and advertising an older gentleman in a green bowtie [Richard Gartland, a California-based CPA]. In one focus group there was a young man in his early 20s, and when we showed the ads, he really liked them and sparked to Richard.

I asked the question, “Is he too old for you?” He said, “Oh, no, when it comes to getting my taxes done, I don’t want the guy on the other side of the desk to look like me. I want somebody who has expertise and wisdom when it comes to taxes.” A lot of young people feel the same way about their taxes. Do you also use different messages for each segment, like your ads with NBA player Anthony Davis?

Collins: We talk about it in terms of air cover and then ground cover or screen cover—which is a funny way of describing digital marketing. When you think about air cover, that is our TV and radio, or broadcast media. Our screen cover is all digital media. We want the two to complement each other and be very, very integrated in our approach, just more targeted in certain channels.

Then we talk about ground cover, which is our local marketing. We have 10,000 offices, so we have 10,000 different neighborhoods. We want to make sure we’re targeted in those neighborhoods as well, around the offices. We do have different messages targeting different consumer segments and different channels, where we can dial up or down based on who our audience is. You launched a sub-brand, Block Advisors, to target small business. Can you explain the consumer insight behind it?

Collins: Our segmentation [study] showed there was a segment where we were underdeveloped. It was a segment that looked at folks with a more complex tax situation. In a lot of cases—one in five, to be exact—a lot of those folks are business owners. This is where our expertise is, so why are we not going after these folks in a much bigger way?

People have an association in their mind when they think about H&R Block. They think about tax prep and financial service, so we wanted to use the Block name. Block Advisors is different enough that it signals that something’s changed for us, that it’s something new. We have close to 300 offices nationwide, and they are different. They have our most experienced tax professionals working in those offices. … If they need help with anything related to that business, it’s not a seasonal business, so we’re open 365 days a year. You also handle cause marketing. Where does that fit in your branding efforts?

Collins: It has to be something that falls out of what your business is all about. For us, that is financial literacy. We’ve done some proprietary research that has been alarming, to say the least, about the understanding of basic personal finance among teenagers. That’s why we decided to focus our efforts on “The Budget Challenge.” That is all about making sure teachers are equipped to educate high-school kids about personal finance before they get out into the real world. Causes can draw attention, but they can also backfire. How do you avoid that?

Collins: There are a couple of things. One is, it has be genuine. It has to be a good fit with your brand and your business. I also think it has to be a commitment from the highest-level person in the organization all the way down.

Every year in our program, one student wins the $120,000 scholarship—the student who excels the most in the personal finance challenge. Our CEO insisted on being there when we awarded this young man with his check. You can imagine the emotion of telling a kid in front of his entire school that he has won a $120,000 scholarship. Our CEO said, “I’ve got to be there for that.” You have such a concentrated marketing season. What are some of this year’s highlights?

Collins: Close to 80% gets a refund back in tax season, so why are we dreading tax season? This should be a celebration. This should be a time of energy and positivity and fun.

We gave away $1 million every day for 32 days, and we did that at 1,000 increments—1,000 people won $1,000 every single day for 32 days. It was about putting the “fun” back in “refund,” celebrating the season, giving clients something to get excited about, hopefully driving new clients to H&R Block, and just kicking off the season in a way that nobody ever had.

There are a lot of changes to the tax code that we cannot forget about; we need to educate people about them. As a leader in this category, we feel that is part of our responsibility. This year was about the Affordable Care Act.

This tax season actually goes through to April 18; there are three extra days. A lot of consumers typically wait until the end. There is an opportunity for us to come around the end of the season, come in on April 15, and remind people: “You have three extra days to file. H&R Block will open early, stay open late, and be there as long as you need us to file on time.”

Within that, we have our Latino marketing, which falls out of our general market campaign. We also have our DIY product, which is a separate campaign, and we had a price promotion around that for a limited time. It’s just lining up everything under one line umbrella to get our message out to the people.

The last three days will be the end of our marketing for the season. We’re planning for next year, but now that we have Block Advisors, we’re planning for marketing year-round.

We have a couple of million clients who want to be in touch with us on a very regular basis, so we have a newsletter. That’s our way of keeping close to them in terms of what is happening with the tax code, things they should be thinking about. We have several websites, and we have other outreach programs—direct marketing, that sort of thing—to make sure that we stay in touch with those clients.

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