The Chase Sapphire Reserve Card is one of the innovative ways in which JP Morgan Chase (JPMC) has expanded its products and service line to expand its business operations to meet the changes in consumer behavior regarding their perception of credit cards. The product is good, as a look into the financial aspect of the card, based on the U.S consumer credit card market, indicated that credit card industry had total sales of $3 trillion in 2016, with JPMC dominating the other five issues in terms of market share with 21.7 percent. Additionally, the Sapphire Reserve Card targets a specific target market that engages in traveling and dining, with a majority being part of the affluent consumer using credit card services frequently, thus the service is profitable. The segmentation of the Sapphire reserve Card was a good move as the affluent consumers have shown the need to use the product, and they are economically able to use the services.
Chase Reserve has been so successful in the acquisition of customers because of several reasons. As a new product operated by a service provider, Chase Reserve was focused on creating customer value and satisfaction. It has been indicated that during the product design stage, the strategy was to develop a card with a set of features that was aimed at delivery of the most value for consumers. The features that the product had, even to customers as have been indicated sounded too good to be true. It should also be noted that JPMC made the redeeming of the bonuses for rewards easy and efficiency compared to some of their competitors. The success will change, as the introductory bonuses and rewards reduce after a grace period for the product launch expires. The changes that need to be made moving forward should those related to reinforcing the total value of the product and present more opportunities for customers to engage with the brand.
The Chase Sapphire team can best design its products and brand to attract and retain the right customers engaging in product differentiation based on the three different categories of customers that is Transactor, Revolver, and Dormant. Transactor should be provided with better and advanced services such as Priority pass airport lounges, receiving air travel credits that automatically applies to flight-related expenses. For the Revolver, they should be appreciated for at least trying to meet their card obligations, by provision of a free fourth night at a hotel in the form of a statement credit. The Dormant should be continually be served with pride and appreciation as customers to create loyalty that can enable them to become active users.
Based on the statistics given for the Chase Sapphire Reserve, the total number of sales from the credit card industry was $3 trillion, with JPMC leading the sales with 21.7 percent, with a majority of the revenue coming from the Chase Sapphire Reserve. The company can continue to grow an approximate interest rate of 21 percent with the average spending among of $16,000 for the Transactor and Revolver because they these are two groups that are active in the use of the credit card, thus the return on investment for the company will still be there. However, more incentives will have to be provided to avoid customers questioning the $450 annual fee and the 21 percent interest rate. Additional incentives to justify the annual fee and interest include care rental elite status, and hotel elite status, as this will help customers believe that they are getting value for fees charged.
The success of Chase Sapphire Reserve was huge to ignore as competitors quickly retreated and come up with different strategies. Annex responded by creating a new design for Its Platinum Card, which had a 60,000 point sign-on bonus, and a significant upgrade in rewards and benefits. There was also an increase in spending in terms of marketing and promotion. Citibank also responded by announcing many changes to its prestige Card, which included increasing the sign-on bonus to 75,00 for a limited time after a customer spending $75,000 within the first three months. As a manager for a competitor company, I would design a product that is similar to that of the competitor so that customers cannot find the need to move to the competitor’s bank for products that they offer.
To maximize Customer Long-term Value (CLV), I would create exclusivity that is recognition and rewarding of customers by creating exclusive offers and programs for them, particularly most loyal customers. In particular, I would create frequent shopper programs and other loyalty perks that make customers feel special. There would also be re-engagement of prior customers who have since become dormant, as this will help make such customers to be repeat customers. That cannot bring about a sustainability strategy because even the JPMC had to reduce their point sign-on bonus after the initial one year after its entry as its sustainability would have brought challenges.
To maximize CLV Chase could offer several types of services to cardholders. The cardholders could have exclusive merchant funded discounts from America’s top brands and local stores. Having over 700,000 participating restaurants, retailers, hotels, theme parks, and more. Creation of an online cardholder loyalty website, and provision of a toll-free customer services. These will ensure that the cardholders get maximum value for being part of Chase.
A critical review of the article, it reveals that JPMC brought on board some of the most experienced and qualified staff to help steer their credit card operations. The products that were introduced were after a thorough analysis of the business environment. The success of the card programs that were introduced also indicated that Chase got the idea of cardholders’ right. Based on these facts, It can be said that Chase has the right number of products in their timeline. The article also indicated that that Chase took the industry by storm after the launch of Chase Sapphire Preferred and Chase Sapphire Card forcing competitors to design products that could compete with the two products based on the features that the products had, shows that Chase have the right features in the cardholders ‘programs.
In the planning to design, develop, and direct a product launch to compete with Chase Sapphire brand, I would engage in a complex series of trade-offs. I would have to construct a value preposition comprised of the optimal mix of rewards, benefits, services, experience, and interest rates among others. The target market would be affluent segment because of their potential and economical capability to engage in transactions that can give them the rewards that they would get from using the services that have been offered. In terms of the features, I would feature cash bank purchases, proprietary rewards on purchases, and cobranded rewards on purchases through partnering with airlines, hotels, retailers, and other merchants that offer co-branded cards.
Since customers are migrating to a competitor, drastic changes must be undertaken to offer such services they are looking and at the lowest fee possible. It is mean that I would adopt and launch a “non-fee” card product. This will ensure that customers are retained and additional customers acquired because of the cheap nature of the card. As it regards the path for designing migration into a fee-based “Preferred” or “Reserve” product, I would make the price become half the price at which the competitor with the least price would offer such after the initial window period is over after acquiring the card.