Forecasting & Planning in an Extremely Seasonal Business-Intuit's Experience (2006)

For income tax filing, the two heaviest months are February and April .... more and more people are now using electronic medium for their queries .... forecast improvement increases market share and improves customer experience. Intuit, founded in 1983, is the developer of financial software geared toward small businesses, accounting professionals, and consumers. Intuit's flagship products include QuickBooks® (accounting software for small business owners), Quicken® (personal finance management), Lacerte® (accounting software for tax planning and tax return preparation for large professional firms), ProSeries® (professional tax software for accountants), and TurboTax® (personal tax software for consumers). With 7,000 employees, Intuit's revenue in fiscal year 2005 was over $2 billion. Its mission is to create new and easy ways to manage personal finances and small businesses. Given the complex and ever-changing tax laws and a cheaper alternative to a certified tax professional, more and more consumers use tax software to prepare and file their federal tax returns. In 2005, over 22 million people used Turbo Tax® to prepare and file their federal tax return. SEASONALITY IN TAX BUSINESS As shown in Figure 1, tax-season contact volumes are highly seasonal. As can be seen in this figure, the busy time in this business is typically 100 days. The post-season volumes represent only less than 7% of the total annual volumes. Two heavy-volume-generating months are February and April. Those who expect a refund from the IRS tend to file returns in the first week of February; whereas, those who owe money tend to file in April. These trends have been very consistent over time; though lately, those who owe money wait even longer to file their returns. To meet this highly seasonal workload, we have to significantly ramp up and down our resources between off season and busy season. Also, we have to make sure that we have in place the right resources at the right time and that we maintain a proper balance between cost and customer needs. FORECASTING AND PLANNING PROCESS Figure 2 shows the six steps in the process for forecasting and planning: (1) planning and direction, (2) volume forecasting, (3) staff planning, (4) model evaluation, (5) execution of plans, and (6) post mortem. Planning and Direction Once the busy season comes to an end, planning for the next tax season begins. Here we set our strategic objectives and specify metrics to be used for evaluating our performance. Volume Forecasting Volume forecasting is an iterative and collaborative process involving finance, marketing, and product development teams. It calls for analyzing contacts received via telephone, email, fax, and the Internet. As customers are becoming more and more proficient with self-service from the website, there have been increasing shifts toward the electronic medium (chat and email) for obtaining answers to their queries. Therefore, frequent updating of the website contents with the most current issues and their resolutions is very important. Phone continues to be a favorite channel for inquiries. In addition to forecasting the overall volume, we also forecast our staffing needs across all channels that include telephone, chat, and email. Forecast models that are built for volume forecasts are quantitative models, which include time-series and cause-and-effect models. For new products, where there isn't any history, we use event-driven models, which are based on Delphi models. Within time-series models, we mostly use exponential smoothing and classical decomposition type models. Within cause-and-effect models, we use primarily regression models. There is no single model that we consistently use throughout the season. We have found that classical decomposition is one of the better time-series models because it captures, among other things, the seasonality in our business. …