Intuit leads the wayAll the companies focused on have two objectives in common:
- To increase the lifetime value, or LTV, of their customers via shifting to their solutions to the cloud
- To increase the cross-selling opportunities within their products by having a customer shift to the cloud
Intuit is best known for TurboTax and its accounting software Quickbooks. However, the company also offers payroll, payments, and marketing tools to small businesses, with which it has the opportunity to cross-sell these products to its customers in the cloud. Simply put, customers using SaaS have far more interaction with the software provider than they do by using traditional on-license, on-premise software. Investing Fools can see the result of this with Intuit's attach rates (customers who add on other services) with its QuickBooks online service. Quoting from the recent Intuit conference call:
[W]hen you look at the attach rates, the people who are actually attaching our merchant services, our Payments business, that's up 50% versus the old QuickBooks Online. And the Payroll number is actually up a little over 5%.
So, Intuit is able to increase the LTV of a customer by shifting them into the cloud, and then selling them add-on solutions like payments and payroll. In fact, the company estimates that the LTV of QuickBooks online is 40% higher than with the desktop version. In addition, Intuit is also shifting its existing QuickBooks online customers onto its new QuickBooks online service, and with only 12% of them having made the move, there should be plenty of runway in future.
Intuit recently reaffirmed its full year guidance of 10%-12% growth in its small business group, with revenue expected to grow at 6%-8% and non-GAAP operating income at 7%-10%. Moreover, its attempts to simplify its TurboTax offering appear to be bearing fruit, because it reported 7% growth in TurboTax units to mid-February versus the IRS estimate of 6.6% growth in the same period".
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