Chase Sapphire Reserve’s Performance Analysis

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Table of Contents

Introduction
Customer Offers
Customer Acquisition
Customer Retention
Consumer Segments
Competitors
Managing the Chase Sapphire Brand
Conclusion
References

Introduction

The Chase Sapphire Reserve card outperformed its competitors by addressing the needs of a specific market segment. The product offers VISA services, which account for more than 60% of international credit accounts globally (Kang, 2018). After its launch in August 2016, it surpassed its twelve-month sales target in just fourteen days (Santana et al., 2018). Over half of the new clients were younger than thirty-five years of age, and they posted pictures of their new cards on social media platforms (Santana et al., 2018). The particularly attractive sign-up bonus fueled a frenzy that prompted consumers to acquire the product. After acquiring the new clients, the company focused on ensuring that the efforts turned a profit. The efforts were assessed in the context of competitive offers from rivals who were keen to ensure that they replicated Chase Sapphire Reserves’ success in customer acquisition. The following report presents a critical assessment of aspects of the Chase Sapphire Reserve card and its performance in the highly competitive financial market environment.

Customer Offers

The Chase Sapphire Reserve Card offered its consumers a variety of options that made the product immensely attractive. In 2009, the brand was developed to meet the needs of a distinct market segment that was characterized by affluent individuals with keen interests in dining and travel (Santana et al., 2018). The 2016 release of the Chase Sapphire Reserve was intended to capture a specific clique of consumers through the $450 annual fee requirement (Santana et al., 2018). The individuals, most of whom were aged between 25 and 44 years, had annual incomes of 150,000 dollars and above, traveled widely, and often put their card rewards to good use (Santana et al., 2018). CSR is an active competitor with players such as Amex Platinum.

The card offered three times the points earned on hotels and airfare, increased the frequency of point redemption, and provided new clients with a 100,000-point sign-up bonus (Santana et al., 2018). Therefore, in addition to addressing the demands of a newly defined market segment, the product was instantly associated with quality and modernity. It should be noted, however, that the Customer Lifetime Value is low by virtue of the fact that the company offered a high sign-up bonus. This means it will take the company a long time to recover its investment.

The rewards system that characterized the card was particularly appealing to consumers. It is worth noting that the product offered clients cash back on purchases. This was a viable option for individuals who preferred not to spend time planning to redeem points. Specific categories of products offered consumers high cash-back percentages, which made the card immensely successful. The facilitation of low-interest rates allowed people who desired to extend card payments to do so with ease. The company offered consumers rates that ranged between 12.88% to approximately 20% (Santana et al., 2018). Finally, the quality of cards that the organization offered its consumers bolstered its position as a prestigious organization with which many young people wanted to associate. The enhanced brand image and the parent company’s transparency helped increase consumer approval, which enhanced the card’s performance against competitors.

Customer Acquisition

Chase Sapphire Reserve applies an aggressive marketing strategy to acquire customers successfully. The company focused on generating buzz and encouraging organic growth by hosting social events and contracting social media influencers. The frenzy that was created around the product resulted in the organization meeting its consumer acquisition goal in two weeks (Santana et al., 2018). The high sign-up bonus allowed the company to expand successfully into new market segments, which gave the product immense credibility. The extension into the high-net-worth market allowed the organization to appeal to a large number of consumers.

The sustainability of the Chase Sapphire Reserve strategy is questionable. First, the promotion tactics employed by the company could potentially alienate casual travelers. Customers who own Chase Sapphire cards are likely to feel the effects of resource diversion as a result of the creation of a new product. In addition, they may not associate with the new shiny design or the general aesthetic that the new product represents. It is worth noting that the organization’s strategy served as a motivator for competitive responses and potentially reduced rates of retention. Other players in the industry announced novel designs for their cards. Even though Chase is performing well today, the consumers have no switching costs meaning that the increase in churners could result in significant losses if comparable rewards are not provided.

The high costs associated with CSR limit the exploration of other opportunities. While the company accurately calculated the cost per user, the number of consumers exceeded expectations. Therefore, Chase must spend more on the brand with limited certainty that customers will renew their cards and pay the stipulated fees. Such actions take away money that would otherwise have been invested in a different way to improve the brand.

There are specific changes that I would make to their customer acquisition strategy. I would lower the initial sign-up offering to improve the cumulative Customer Lifetime Value. I would also prioritize the filtration and re-categorization of the customer base. The case demonstrates the fact that there are a number of consumers who use CSR simply for the social perceptions it provides. Identifying such clients and offering them the option to use Sapphire preferred would solidify the CSR client base and improve brand loyalty. The provision of a set of questions to help the clients choose the right product for their needs is essential.

Customer Retention

Chase is likely to experience some success with regard to retaining customers in its second year. This is because even though the annual fees charged are high, consumers are likely to renew the card because of its 300-dollar credit given for travel spending. The fact that the card’s financial year runs from December to December, individuals who received their cards before December may have received up to 600 dollars in credits before the renewal fee is due. It is also worth noting that individuals who earn 300 dollars in credit effectively eliminate a significant portion of the annual fee, which makes it as competitive as lower-priced cards in the market. It is also worth noting that the card’s bonus offerings and rewards make it quite attractive. For instance, the higher value of points redeemed helps consumers amortize the high annual fees.

The customer retention strategy can be improved by implementing crucial measures and changes. First, CSR should improve its cash-back offers to encourage its clients to renew their cards for a second year. Such a move would encourage more spending, which would benefit the company in the long run (MacDonald & Evans, 2020). The re-introduction of personal referral offers, where a current cardholder can suggest the product to a new client and get points when they are approved, is an essential step. These offers are likely to incentivize current cardholders to keep the product and encourage others to use it. Further diversification of transfers to partners is essential to ensure that clients remain loyal to the brand. It is vital to note that the Chase Sapphire Reserve card will require some help to retain its clients for a second year, given the fact that competitors are offering lower annual fees and a wide array of benefits. In addition, the fact that the consumers no longer have access to the initial bonus offering provided by the company makes retention a rather difficult choice.

Consumer Segments

The transactors are a category of clients that use their credit cards regularly. These individuals get most of the benefits with limited costs, which means they get a significant degree of value from the card (Santana et al., 2018). Revolvers are a group of individuals in a vicious cycle that is difficult to escape. People in this category are often in debt and are incapable of addressing it because of difficulties associated with lifestyle choices and spending habits (Santana et al., 2018). The final category is the dormant, who are not frequent credit card users (Santana et al., 2018). They seldom pay the annual fees and rarely get the value associated with the use of a credit card.

In order to attract the right customers, the Chase Sapphire team has to take significant elements into consideration. For instance, the company must consider the life stages of its consumers. Individuals aged between 18 and 26 years accounted for 15% of industry revenue, while those aged between 26 and 60 accounted for 59% and were considered to be more loyal (Santana et al., 2018). The elderly were responsible for 15%, and the remaining 11% was attributed to business accounts (Santana et al., 2018). The second factor to consider is assets or credit distribution in the market. Wealthy households owned an average of between half a million to one million dollars in assets, while affluent families owned between 100,000 to 500,000 dollars in assets (Santana et al., 2018). These two categories of consumers had no trouble using credit cards and were less likely to accumulate debt compared to the average consumer. It is vital that the company assesses behavioral segmentation to gather insight into the manner in which consumers utilize their cards and the form of rewards they value. The elements they should consider include annual fees, rewards, and cash back on purchases.

In order to design a product that attracts the right clients, the Chase Sapphire team will need to make a series of complex trade-offs. The company must create a value proposition that includes a well-balanced mix of benefits, rewards, interest rates, experience, services, and annual fees. It is essential to continuously analyze the proposed blend of services to determine the set of features that provide the highest yield for the company, the best value for consumers, and clear differentiation for consumers.

The Chase Sapphire team successfully created a desirable product with CSR. The new product offered consumers valuable rewards, excellent customer service, and premium travel redemptions. The card successfully differentiated itself from other premium cards in the market. The product addressed heterogeneity by taking into account the differences in consumer knowledge levels regarding the manner in which their demands can be satisfied. In addition, it evaluated and addressed the differences in the client’s propensity to form associations with the company.

Competitors

If I was a competing credit card company, I would respond to CSR in a number of ways. First, I would allow the consumer to transfer venture miles to a wider array of travel programs. The objective would be to attract deal chasers, who are highly involved individuals who prioritize the acquisition of the best deals by moving their balances across cards to access the most valuable rates. This market segment often pays annual fees and they amortize the accrued cost by accessing rewards. Enhanced interoperability is essential in view of the fact that it allows consumers to access services remotely (Riley, 2020). I would also offer a higher welcome bonus, which can be redeemed on the company website after consumers spend a minimum of 3,500 dollars within the first three months of membership. In addition, approval restrictions would be limited to increase the number of eligible consumers. I would offer clients a lower annual fee and eliminate fees charged for the addition of authorized users. Rather than focus on dining and travel, my product would focus on other categories. The recent restrictions on movement as a result of the pandemic are important to consider given the fact that they have changed how people work and travel.

It is vital that CSR positions itself in readiness for the competition from rivals. The first strategy is to intensify marketing campaigns designed to inform clients of the features it offers to its clients. Secondly, the Chase Sapphire team needs to focus on acquiring loyal consumers who are willing to pay the high annual fees. Finally, the company needs to differentiate its product offerings further in order to stand out among competing brands.

Managing the Chase Sapphire Brand

The Chase brand served as an endorser to give Chase Sapphire, which targets affluent clientele, the credibility it required to perform in a highly competitive market. The product presents a variety of options for its clients, many of whom fit the outlined criteria. However, the options are muddled, and the varied products encroach into each other’s segments. The first recommendation is the elimination of Chase Sapphire from the Sapphire sub-brand as well as from all promotional material. The inclusion of a free card in the sub-brand could hurt the product’s image. The product is designed to address the needs of the high-net-worth market segment, and measures to avoid damaging its reputation must be implemented. It is also worth noting that the elimination of the free card will provide room for the remaining products to expand. The degree of product differentiation between Chase Sapphire Preferred and Chase Sapphire is too little to legitimize the zero-dollar annual fee charged for Chase Sapphire. Both cards provide identical points and perks, which means drastic changes must be made, or the original card must be eliminated.

There are certain risks associated with the aforementioned strategy. For instance, the company could lose all its Sapphire Card clients. There are certain mitigation strategies that can be applied to prevent such an event. First, the clients should be offered the opportunity to switch to Chase Sapphire Preferred. Alternatively, they could be allowed to switch to Chase Freedom, which provides points for individuals interested in cash-back offers but only willing to pay minimal fees (Santana et al., 2018). There is a chance that the removal of the company’s flagship card could hurt its image. It is worth noting, however, that the shift to the other two cards in the sub-brand ensures that the clients focus on better rewards, thus saving the product’s reputation.

The second recommendation is to enhance the differentiation of Chase Sapphire Reserve through unique marketing initiatives. The first step is a complete redesign of the organization’s official website to include a series of questions geared toward potential CSR clients. This will ensure that clients that are likely to remain loyal access the card. It is also important to intensify social media influencer participation in promotion campaigns. The objective is to associate the card with authentic and frequent travel, which provides options for organizations and business professionals that travel regularly. It is essential to market CSR features in comparison to other products in the same category. For instance, the company could demonstrate how the 300-dollar yearly travel credit offsets the high annual fee, provided a specified number of miles is covered in the specified time.

Conclusion

The Chase Sapphire Reserve card superseded market expectations after its launch. The initial success can, however, only be sustained if the market strategy is improved and measures to retain customers are implemented, given the rise of competitors in the sector. It is vital that the company recognizes the need for differentiation and prioritizes the acquisition of loyal customers. The organization will need to take risks in order to maintain the success it experienced during the product launch.

References

Kang, J. (2018). Mobile payment in Fintech environment: Trends, security challenges, and services. Human-Centric Computing and Information Sciences, 8(1), 1–16. Web.

MacDonald, N., & Evans, B. (2020). A theoretical examination of cash-back credit cards and their effect on consumer spending. SSRN Electronic Journal, 1–35. Web.

Riley, C. (2020). Unpacking interoperability in competition. Journal of Cyber Policy, 5(1), 94–106. Web.

Santana, S., Avery, J., & Snively, C. (2018). Chase Sapphire: Creating a millennial cult brand. Harvard Business School. Web.

Walker O. C., Mullins, J., & Boyd H. W. (2013). Marketing management: A strategic decision-making approach. (8^th ed.). McGraw-Hill Higher Education.

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