Intuit Pricing Spineometer: 2 of 5 Vertebrae
Intuit, a financial technology company marketing the Quickbooks, TurboTax, Mailchimp and CreditKarma brands, had a positive FY 2023. Revenue rose 13% to $14.4 billion and earnings before interest and taxes rose 22 % to $2.6 billion over the same period last year.
A review of Intuit’s August 24th earnings call and financial report provided insight regarding the importance of pricing on performance.
While many management comments reflected the current zeitgeist of AI, flywheels, Big Bets, and Intuit Operating Systems, some reflected the importance price has on their strategy.
Sandeep Aujla, CFO, spoke to the power pricing had on Intuit’s recent results. “QuickBooks Online accounting revenue grew 22% in Q4 and 26% in fiscal ’23. Growth for the quarter and fiscal year were driven mainly by customer growth, higher effective prices, and mix shift.”
However, statements by Susan Goodarzi, CEO, imply pricing is not the major focus on Intuit’s strategy than customer engagement growth through unit volumes and upsells. She stated: “We have a framework at the company level where we want to drive the majority of our growth from a volume and mix and the lesser part from price, but we always focus on pricing for value.”
When it comes to pricing decisions, Susan Goodarzi indicates her team is using a data-based approach in stating: “We’ve also been doing a lot of price studies and price testing because we’ve had like one flat price internationally that doesn’t work. Some countries should be higher, some countries should be lower.” It should be noted, international (non-U.S.) business accounted for a mere 8% of Intuit’s revenue.
The business complexity, size, and industry environment implies that a fully staffed pricing capability at Intuit would include a pricing team of 28 to 140 individuals. Three to twelve individuals would be focused on international pricing with the balance focused on domestic US pricing. Some pricing professionals should be focused on product pricing while others on price promotions and transactional pricing with larger customers. Beyond price tests, Inuit should be running conjoint analysis studies to set product prices. The projected growth rate of Intuit and its evolving business model towards SaaS and entirely new offerings implies a need for Economic Value to Customer studies and creative strategic thinking regarding business models and defining the unit of price itself.
Unfortunately, management comments lead to a suspicion that pricing is an underdeveloped capability at Intuit. Is it? Yes.
Research into the investment by Intuit in pricing yielded underwhelming results. Though a handful of highly capable individuals could be identified with having pricing as their key responsibility, most pricing challenges were being managed by product and finance professionals. The dedicated pricing professionals that could be identified had titles of manager, director, and architect. While I am confident the product and finance managers at Intuit are strong in their field, pricing is neither a product nor a finance discipline. Intuit would benefit from having more people focused on pricing and price management.
Given the importance and capability of pricing at Intuit as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of October 2023.
Intuit Pricing Spineometer: 2 out of 5 Vertebrae.
INTU (Intuit Inc.) rose from 499 the day prior to their earnings call to 549 one week later. FY 23 revenue of $14.4 billion with a 22% operating margin and P/E ratio near 63.
For FY 2023, a 1% improvement in price would yield 4.6% improvement in operating profits holding all else constant at Intuit.