Chase Sapphire Case Study by Angela
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CHASE SAPPHIRE CASE STUDY
Author: ANGELA A
Introduction
:
Chase Bank, a subsidiary of JPMorgan Chase, has positioned itself as a leader in the U.S. banking
industry, renowned for its high customer satisfaction and a broad range of financial services. In 2006,
Chase embarked on a comprehensive market research endeavor to bolster its credit card operations. The
study uncovered an opportunity to penetrate the affluent consumer segment, which accounted for a
significant portion of credit card spending but was dominated by competitors like American Express. This
led to the creation of the Chase Sapphire line, targeted at affluent customers, evolving through a strategic
series of offerings to cater to varying consumer needs and preferences.
The pivotal market research identified the affluent demographic, representing 15 percent of U.S.
cardholders but contributing over 50 percent of credit card spending. Chase recognized the potential in this
segment and strategically introduced the Chase Sapphire card without an annual fee, leveraging rewards
and superior customer service to entice customers. This initial move proved successful, with high
satisfaction and a significant percentage of customers indicating a willingness to recommend the card.
Chase's Sapphire credit card series evolved from the initial Sapphire to the Sapphire Preferred and
Sapphire Reserve, capitalizing on their success. The Sapphire Reserve, launched in 2016, targeted
Millennials with a strong focus on travel benefits and a generous sign-on bonus. Chase used
unconventional marketing and social media to create a sense of exclusivity, resulting in unexpected
demand and high customer acquisition.
Despite the high costs, Chase viewed the sign-on bonus as an investment, and even after reducing it, the
Sapphire Reserve maintained a remarkable 90% renewal rate after the first year. By understanding
Millennial preferences and emphasizing experiences, the Sapphire series created a cult-like brand identity,
emphasizing rewards, exclusive experiences, exceptional customer service, and adapting to changing
consumer behaviors, making Chase a leader in the premium credit card market.
1.
Who are the customers targeted by Chase with the Sapphire card? What are the key value and profile
characteristics of these customers?
Chase's Sapphire card, especially the Sapphire Reserve, is aimed at affluent Millennials who have a strong
interest in travel and experiences. Key customer characteristics include a higher income level, a focus on
travel, a preference for rewards and flexibility, and an openness to paying an annual fee for premium
benefits. The card also appeals to those who might have engaged in "churner" behavior, with the aim of
retaining them as long-term loyal customers. Overall, Chase has tailored the Sapphire card offerings to
meet the preferences of this specific customer segment successfully.
2.
What value does the Sapphire card create for customers? From a customer’s perspective, what are the
pros and cons of the Sapphire card compared to other credit cards?
PROS
CONS
Generous Rewards:
The Sapphire cards provide high points-
earning rates, particularly on travel and
dining expenses, which can lead to
High Sign-Up Bonus Costs:
The high sign-up bonuses can be costly for the
card issuer, and the reduction in these bonuses
over time may disappoint customers who
substantial rewards for cardholders.
initially joined for the rewards.
Exclusive Experiences:
Cardholders gain access to exclusive
events and experiences, such as Chase
Experiences, which can enhance their
lifestyle.
Limited Redemption Options:
While the rewards are valuable, they are most
beneficial when redeemed for travel, potentially
limiting flexibility for those who prefer cashback
or other types of rewards.
Customer Service:
Chase is known for providing excellent
customer service, including the presence of
live advisors who can assist cardholders
without needing to enter their credit card
number.
Annual Fee
:
The Sapphire Reserve has a relatively high
annual fee of $450, which can be a deterrent
for some potential customers. This fee may not
be justified for those who don't maximize the
benefits.
Unique Card Design:
The Sapphire Preferred, for instance, has a
distinctive metal core, making it stand out
and providing a unique tactile experience.
Limited Acceptance:
While the cards are widely accepted, they may
not have the same level of global acceptance
as some other major credit card networks.
Travel Benefits:
The cards often come with travel-related
perks, such as travel credits, airport lounge
access, and trip cancellation/interruption
insurance, making them attractive to
frequent travelers.
Good Credit Score:
To qualify for these cards, customers typically
need a good credit score, which can be a
barrier for those with less-than-ideal credit.
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3.
What role did promotional incentives such as the bonus points play in creating customer demand?
Would Millennials remain loyal customers once they had taken advantage of the initial offer? Would the
Sapphire card continue to be attractive to Millennials if its promotional incentives were reduced and
became like other credit card offerings?
Promotional incentives, especially high sign-up bonus points, played a crucial role in driving customer
demand for the Sapphire card series. Despite initial concerns, many Millennials remained loyal customers,
attracted by the ongoing benefits like travel rewards and exclusive experiences. If promotional incentives
were reduced and made like other cards, the Sapphire card might lose some initial appeal to Millennials,
but its enduring benefits and features could still make it attractive, albeit to a lesser extent. Striking a
balance between incentives and long-term value is key to the card's success.