Chase Sapphire Case Analysis:
Chase Sapphire has been one of the most successful credit card
products in JPM Chase’s history. In 2016, Chase launched the Sapphire
Reserve card, and the card exceeded its 12 months sales target within
two weeks of the launch. The chase sapphire portfolio has three credit
cards products to suit many needs. Whether it’s travel, redeemable
points, or perks such as airport lounge access. In the case analysis, we
will address key issues, possible alternatives, and decision justification.
Key Issues
The credit card industry classifies customers into three categories:
- Transactors
- Revolvers
- Dormants.
Customers that are considered Transactors, pay their balances in full
and on time each month thus they do not pay interest in late fees
which limits the ways that issuers can make a profit off of this group of
consumers.
Revolvers can be categorized into two groups - On time revolvers,
and late payment Revolvers. On time revolvers carry a credit card
balance and do not miss payments. Late payment revolvers carry a
credit card balance also but occasionally miss payments.
Finally, at the end of the spectrum are Dormants. Dormants carry
credit cards but do not use them frequently.
Our core challenge is offering the benefits to the customers, so they
continue to use the Sapphire card over the other credit card they have
in their wallets. When the customer card usage goes up, Chase will be
benefited from maximizing the interchange fees.
Possible Alternatives
To address the key issues, we have two options here:
Plan # 1 – Do Nothing and continue to run the Chase Sapphire
business as is.
Plan # 2 - To attract the right customers for its product brands based
on the three categories of customers. Chase must get to know the
customers that they wish to attract.
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First, we need to identify the target market and their expectations
wants and needs.
Second, we need to determine segmentation basis for individuals in
the target market with similar characteristics and needs. Further
segmenting the categories of customers will help the marketing team
to provide customized products to individuals and in particular
segment and gain a competitive advantage. Based on the criteria
given for the three categories of customers the following
segmentations are recommended:
- Geographic based on city size. According to the research
presented in the case, customers living in large to medium sized
cities or the suburbs prefer using a credit card to pay for
purchases.
- Demographic segmentation using age and income. This variable
will provide insight on the methods of communications for the
product in its features that will be most effective.
- Using the income as a variable will provide insight into the
customer's potential frequency of card usage.
- Behavioral segmentation, learning how consumers their credit
cards can help chase to identify other product offerings that
might be helpful for customers and can help with the upsell
opportunities.
Decision & Decision Justification
Our challenge was offering the product to the customers that they are
going to use. We will select plan # 2 to address the challenges. After
categorizing the customers and creating segmentation, we can set
forth the specific card offerings based on customer types presented in
our case analysis.
Transactors: Product design for the transactor group should be a
premium product offering rich and exclusive rewards and benefits to
cardholders. The card should encourage spending that will allow the
customer to receive maximum value from the card. Chase will also be
benefited from maximizing the interchange fees. Features for
transactors:
- A diversified rewards program that includes generous rewards for
a vast array of expenses including travel, entertainment, and gas
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purchases. The focus should be to encourage the customers to
utilize their chase sapphire cards for all purchases.
- Co-branded rewards should be offered, as transactors may use
their credit cards for work travel and will appreciate the loyalty
program rewards with merchants.
- Benefit should also include priority access to events and clubs to
provide a feeling of exclusivity.
- Higher monthly credit limits with a generous rewards program
may entice customers to charge their big purchase on the card
instead of taking out a loan.
Revolvers: The idea here is to develop customer brand loyalty
through a product that proves to them that the Chase has their back
and is just not looking to increase profits through the relationship. This
will incur spending and renewal of cards. Features for Revolvers:
- Revolver group would also benefit from a diversified rewards
program.
- Offering low interest rates for consolidation of credit card
balances.
- Financial education and credit score management.
- Alerts that warn customers when they're reaching his spending
limit that is outside their historical monthly spend.
Dormands: The product design for Dormands users should focus on
revitalizing customer relationships by reinforcing the value of holding
the chase sapphire brand. Features include:
- Some of the features include offering a lower annual renewal fee.
- Offering cash back as research has shown that cash back rewards
are preferred by 61.3% of cardholders.
- Starting small they could offer target reward programs with the
purchase of low-ticket items and get the customers to activate
the card and then offer enhanced rewards.
- Send special messaging regarding seasonal promotions and
sweepstake offers.
For Dormand group, it would be beneficial to employ an EMOB program
by focusing marketing efforts on the first 90 days of which a cardholder
owns a card issuer can drive activation and usage. They can make
special offers and rebates available during these first 90 days the
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actions the cardholders take within the first 3 months on books set the
stage for how they will behave in the future.
Implementation
To implement the above decision. I would present a business plan to
Chase Sapphire executive team. In the plan we would include the
following:
Situational Analysis - Background data on sales, costs, the
competition. The competition analysis is important here. By getting to
know its competitors Chase will be able to effectively communicate to
its target audiences the advantages of the chase products and point
out their superiority over the competitors.
Marketing Strategy- We have defined several key benefits for
different types of customers. Our marketing strategy will promote
specific brand products to each segment via identifying product
features and unique selling propositions. We will also define the proper
communication vehicles and execute on the communication.
Financial projections. To offer additional benefits to the customer,
we need to invest in the Sapphire product. We will produce financial
projections for Chase Sapphire management, including a sales
forecast, an expense forecast, and a break-even analysis.
Implementation controls. We will set goals and budget for the
quarter and the year so management can review results and take
corrective action as needed. We also need to monitor the segment
behavior, so that we can adjust market targets and size to ensure that
their original segmentation is effective.
Based on the business decision, we will implement the plan and add
the above outlined benefits to our Sapphire product portfolio.
Outcomes
If we carry out the plan, we expect the following result within the three
customer types:
Transactors: They would be attracted to the product as they would be
able to use the rewards for travel, dinning and entertainment. Also,
they will remain a loyal customer of Chase as we are offering a sense
of exclusivity due to the priority access to the events and clubs our
Sapphire product will be offering.
Revolvers: The sign on bonus points and lower interest rate would
attract these customers. With lower interest rate the customers will be
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able to consolidate the credit card balances and they will stick with the
brand for a long time.
Dormants: Dormant customers will be attracted to the product as
well. With regular marketing communication, they will be more
engaged with the brand and will use the card for day-to-day purchases.
We can monitor the card usage to analyze the pattern and to send
targeted communication to the dormant users. We will continue to do
market research to ensure our product is positioned to complete with
AMEX Platinum and Citi Prestige cards. Chase Sapphire target market
included younger affluent high-income customers that like to travel
and experience life. The new benefits we have proposed in this paper
will attract these customers to use the Sapphire card. With this new
approach, Chase will also be benefited from maximizing the
interchange fees as more customers would use the Sapphire card.
Exhibit:
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