Friday, November 7, 2014

Australia : Cheap software fails to sell Intuit message / Intuit’s strategy of selling its cloud-based accounting system on the cheap in order to spur demand has backfired

Source: writes: 06 November 2014 Newsdesk: Intuit’s strategy of selling its cloud-based accounting system on the cheap in order to spur demand has backfired – and from the end of the year the $4.99 price tag seems set to revert to $35...

Until March 2012 Intuit’s accounting system was sold exclusively in Australia by Reckon, but the final link between the companies was severed this February, leaving Intuit to build its own local user base. To spur demand it has been offering the QuickBooks online, cloud-based accounting system for as little as $4.99.

But its sales strategies have only netted it around 7000 Australian customers – well behind its cloud-based rivals. The company has yet to tackle the New Zealand market.

While Intuit claims it has enjoyed fast growth percentage wise, it has come off a low base. Asked whether the pricing strategy had failed Intuit Australia managing director Nicolette Maury said; “What we are hearing from advisors is that the price seems too good to be true.”
However she said that the company was now “starting to see the momentum come through,” even though Intuit’s local user numbers are a distant fourth behind Xero, MYOB and Reckon.

Demand for cloud-based accounting systems has risen strongly – and according to a new report being released this week by CCH, 69 percent of Australian accountants use a cloud accounting platform with their clients. However there is still a huge untapped market among SME customers, as the report noted that only 27 percent of small and medium businesses in Australia had yet deployed cloud accounting systems themselves.

Terry Hicks, vice president and general manager for QuickBooks Online, who was in Australia recently said that Intuit’s strength remained in North America despite the company’s global ambitions. But he noted: “As a company we are extremely patient and we look at the progress we are making relative to our growth aspiration.”

He said that internationally “our biggest competitor is non-consumption” because of the proportion of businesses which had not deployed an accounting platform. Even in the US where he said that there were 30 million small businesses, only about 8 million of them yet use an accounting system.

ExactCPA Comment:  We believe the motivation behind Intuit's $5/Mo pricing in Australia had more to it than "To spur demand".   Intuit wanted to force Xero to devote more resources protecting what they established in Australia and what is essentially their home market and less on efforts in the U.S.  

If you look, the term, start to finish,  of the Intuit $5 Australia pricing campaign parallels the decline of stock value of Xero.    Xero's market cap is less than half of what it was at the start of the $5 Intuit campaign and their sales in the U.S. came to a crawl over that period of time.  In fact Intuit @ 7,000 new customers in Australia probably gained more new customers in Australia than Xero did in the U.S. (reported as 4000 in the six months prior to September 30).  Further Intuit Stock is at 52-Week high levels.   

When you look at the state of Xero in the U.S. is possible Intuit's $5 Australia campaign was quite successful (in possibly stymying Xero in the U.S.).


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