H&R Block touts focus on gaining, keeping clients

H&R Block CEO outlines strategy for gaining, retaining tax preparation clients

• By Dana Fields, AP Business Writer
• On 3:26 pm EDT, Thursday September 24, 2009

KANSAS CITY, Mo. (AP) -- Tax preparation giant H&R Block Inc. hopes to attract new clients in the coming year with better service at its offices and advertising that reminds the public of its traditional strengths, Chief Executive Officer Russ Smyth said Thursday.

Smyth, who joined Block in 2008 after 21 years with McDonald's Corp., told shareholders at the annual meeting that the company will also offer reduced prices to selected groups of customers most affected by the tight economy, such as young and lower-income taxpayers.

Block has been tightening its focus on tax preparation services as it sheds some of the non-tax businesses it entered in the 1990s, including subprime mortgage and investment advisory divisions.

The company is recovering gradually from the losses or expenses it sustained in those ventures and has undertaken significant cost-cutting. For fiscal 2009, which ended April 30, Block earned $485.7 million, or $1.45 per share, compared with a loss of $308.6 million, or 94 cents per share, during the same period a year earlier.

But its surest route to sustained growth of profits is adding clients, Smyth said -- and the roughly 21 million returns it prepared in the 2009 tax season were down 3.1 percent from the previous year.

The economy is partly to blame, but the economy "just put a magnifying glass" on problems that have been brewing for years, he said.

Offering a "value equation" that measures clients' experience against their expenditures of time and money, Smyth outlined a three-pronged strategy:

-- Making Block's retail offices more attractive, professional and inviting, so that more clients walk in and fewer of those walk back out without doing business. Smyth had said in June that about 1.8 million customers walked in but didn't use H&R Block's retail offices.

-- Adjusting fees, which averaged $187.36 per return this year, to account for the needs of "key customer segments" in recessionary times.

-- Capitalizing on the famous H&R Block brand with a multiple platform marketing campaign that turns potential customers into paying ones.

"Our marketing message will be more credible and serious in tone, and more consistent in addressing key client priorities," Smyth said.

Shareholders got a glimpse of the marketing message with an inhouse video prepared by Block's new advertising agency, DDB US. The video shows Americans -- potential Block customers all -- in a variety of settings: with their children, at work, at play.

"I am the one who turns a shoebox full of receipts into many happy returns," the opening voiceover intones, then goes on to limn the company's traditional values: "I believe the little guy should always have a guardian angel and a fair price. ... I invented tax preparation in 1954 and I haven't stopped reinventing it since. ... I am your champion, right by your side."

Applause broke out as the video ended, and many shareholders suggested it could stand alone as an advertisement.

In a light agenda of official business, shareholders gave advisory approval of the company's pay-for-performance executive compensation policies, including the level of salary increases, bonuses and stock awards.

Buzz up!