05 — Business Model, Economics & KPIs

How the money actually works — pricing, the free-to-paid funnel, add-ons, and the metrics the business is run by.
Sources: research/SOURCE_INDEX.md — [S22][S23][S2]. Prices are 2026-season, approximate, and change yearly. ARPU/segment specifics are Analysis where noted.

The pricing ladder (2026 season, approximate) [S22][S23]

Intuit monetizes by moving filers up a ladder from free to DIY-paid to expert-assisted to full-service:

The ladder is the model: acquire cheap/free, then upgrade on complexity, anxiety, and add-ons.

"Free" as a loss-leader

The Free Edition (and IRS Free File) acquire top-of-funnel filers cheaply; the business monetizes when a return turns out to be not simple (a common, and historically contentious, upgrade moment — see file 10). Analysis: the economics depend on a healthy free→paid conversion rate and on complexity nudging filers up the ladder.

Add-ons / attach (high-margin) [S22][S23]

"Attach" = extra products sold on top of the core purchase; the attach rate is the % of customers who take them. Why it matters: add-ons are nearly pure margin (the software is already built — an extra $59 costs almost nothing to deliver) and they raise revenue per filer without acquiring a single new customer. Growing attach is often cheaper than growing customers — which is why it's in the exec KPI list below.

• Audit defense / representation (MAX-style add-on, ~$59) — essentially an insurance product: "if the IRS audits you, we'll represent you." Sells on the anxiety that defines the category (file 03); most buyers never use it, which is what makes it high-margin — peace of mind, not labor.
• Pay-with-refund (~$40 service fee) — pure psychology: the TurboTax fee is deducted from your refund instead of paid upfront. People pay $40 extra to avoid paying $79 now, because the refund doesn't feel like "their" money yet. Also lubricates the whole pricing ladder by removing the upfront-cost objection at the exact moment of upgrade.
• Refund Advance — a $0-fee, 0% loan (up to ~$4,000). The odd one out because it's free — so where's the money? (1) It's an acquisition hook ("get your refund money today" pulls early-season filers from competitors), and (2) the advance lands in a Credit Karma Money account — the TurboTax customer just became a CK banking customer. The payoff is a year-round financial relationship, not a fee (the flywheel, file 09).
• Live upgrade — not technically an add-on but the biggest revenue-per-filer move of all: converting a ~$79 DIY customer into a ~$200+ expert-assisted one. One upsell can be worth more than all the other attaches combined.

The math intuition: a Deluxe filer at $79 who takes audit defense ($59) + pay-with-refund ($40) becomes a $178 customer — more than double — with zero extra acquisition cost.

The pattern worth noticing (Analysis): every add-on anchors to one of the category's three emotional levers — anxiety (audit defense), refund timing (pay-with-refund, advance), or complexity (Live). The add-ons aren't random accessories; they're the business-model expression of what filers feel.

The economics that matter (Analysis)

• ARPU rises as you move up the ladder — a Full Service customer is worth multiples of a free filer. Growth strategy = mix shift toward assisted, not just more filers.
• Seasonality compresses both revenue and CAC — marketing spend is jammed into the same 10 weeks everyone else is bidding on, so acquisition is expensive at peak.
• Marginal cost of DIY is near-zero (software); assisted has real labor cost (experts, file 08) — so assisted trades margin for ARPU + retention + an AI-defensible moat.
• Lifetime value is boosted by carryforward retention and ecosystem cross-sell (Credit Karma, QuickBooks — file 09).

The KPIs execs run the business by (Analysis, standard for the category)

When leadership reviews the Consumer business, expect metrics like:
- Total returns filed and market share.
- Mix: DIY vs. assisted (Live) share; Live attach rate.
- ARPU / revenue per return and add-on attach (audit, pay-with-refund, advance).
- Free→paid conversion.
- Retention / carryforward rate and churn.
- Cross-sell into Credit Karma / Credit Karma Money / QuickBooks.
- Customer satisfaction / NPS and completion/abandonment in the filing funnel.
- Consumer Group revenue (~$6B segment) and its growth/margin.

Why it matters for a CG role: these are the numbers a leadership review runs on. Speaking in mix shift, attach, conversion, retention, and ARPU — not just "returns filed" — is what business fluency sounds like here.