Chase Sapphire: Creating a Millennial Cult Brand

Chase Sapphire: Creating a Millennial Cult Brand

Synopsis In August 2016, JPMorgan Chase launched the Chase Sapphire Reserve (Reserve) credit card, offering customers an unprecedented sign-up bonus of 100,000 points. Chase relied on social media to reach its target users—affluent millennials—and partnered with prominent financial bloggers and other influencers to promote the card. Customer acquisition surpassed the expectations of President of Chase Branded Cards, Pam Codispoti, and Senior Advisor and former CEO of Chase Card Services, Eileen Serra, as the firm exceeded its 12-month sales target in just two weeks. Half of all new customers were millennials under age 35, a cohort that had long been resistant to credit cards. Reserve was described by one prominent credit card blogger as “the must-have card of 2016, if not the most appealing card ever.” 1

In July 2017, almost one year after the release of the Reserve card, management was focused on how to retain these cardholders, many of whom had been lured in by the large sign-on bonus, in order for them to become profitable to the firm. As planned, in January 2017, Chase had also dropped the sign- on bonus from 100,000 to 50,000 points. Codispoti and Serra wondered what impact this would have on new customer acquisition going forward. Management also considered how to incorporate Reserve into the existing Chase Sapphire product line, which included the Chase Sapphire card with no annual fee, and Chase Sapphire Preferred, which carried a $95 annual fee. How should the team manage all three Chase Sapphire products to best meet the needs of the diverse credit card market? Which features and benefits should each card carry to best differentiate itself from Chase’s other products and from increasingly competitive products in the marketplace? And how should all three be managed to enhance the brand equity of the Chase Sapphire line?

1 “Chase Sapphire Reserve Review and Application Link,” The Points Guy, August 22, 2016, https://thepointsguy.com/2016/08/chase-sapphire-reserve-100k-review/, accessed August 2017.This Teaching Note is authorized for use only by DR. CAMILLA JENSEN, University of Nottingham until Aug 2021. Copying or posting is an infringement of [email protected] or 617.783.7860.Case Notes & Answer with Free Case File for Chase Sapphire Creating a Millennial Cult Brand, By Shelle Santana, Jill Avery, Christine Snively Case File Download Link at the end of this file. 1 / 3

518-068 Teaching Note—Chase Sapphire: Creating a Millennial Cult Brand

2 Learning Objectives “Chase Sapphire: Creating a Millennial Cult Brand” was prepared for the required Marketing course for all first-year MBA students at Harvard Business School. The case was used as part of a course module on product policy that focuses on the mechanism(s) used to deliver value to the customer. It was also taught in the second-year MBA elective course Creating Brand Value. The case can also be used in modules or courses devoted to consumer behavior, new product development, product strategy, market segmentation and targeting, or brand management.The case introduces students to market segmentation, customer target selection, new product development and design, brand management, and related topics. It can be used to facilitate a nuanced discussion of product strategy, including how to design, launch, and manage a multi-product portfolio that meets the needs of heterogeneous customer segments.

The main learning objectives of this case include the following:

• To analyze the profitability of various customer segments, and to choose target segments that will benefit from the product’s features and will contribute maximum value to the firm.• To evaluate the success of a new product launch from multiple perspectives (such as the consumer, competitors, and company) to ensure that products create differentiated value for customers and for the firm.• To understand how to use customer lifetime value analysis to help determine product designs that are customized to attract the right (and repel the wrong) types of customers.• To determine how to manage the design and deployment of products and management of brands under dynamic competition and with a long-standing category leader.• To illuminate how promotional elements can substitute for traditional advertising in order to drive awareness.• To understand how non-traditional marketing—including social media, engaging with “influencers,” and building word-of-mouth—can drive brand awareness of new products and services.• To learn how to design and leverage promotional elements to drive acquisition vs. loyalty.• To highlight that customer acquisition and customer retention strategies may not be (and often are not) the same.• To assess strategies for vertical product line extensions, particularly moving brands up-market and down-market via product line stretches.• To reverse-engineer the development of a cult brand in order to determine success factors for iconic branding that can be transferred to other product categories.Suggested Assignment Questions 1.) What is your assessment of the Chase Sapphire Reserve card? Is this a good product for JPMorgan Chase (JPMC)? For the Sapphire brand? Why or why not?This Teaching Note is authorized for use only by DR. CAMILLA JENSEN, University of Nottingham until Aug 2021. Copying or posting is an infringement of [email protected] or 617.783.7860. 2 / 3

Teaching Note—Chase Sapphire: Creating a Millennial Cult Brand 518-068

3 2.) Why has Chase Sapphire Reserve been so successful in acquiring customers? Will this success continue over time? Why or why not? What changes would you make to their customer acquisition strategy going forward?

3.) The behavior of individual adopters of the card will vary in how much they spend, whether they pay all of their charges in full each month, and whether they churn (i.e., whether they renew their card annually or not). As noted on the top of page 3 in the case, three customer archetypes were transactors, revolvers, and dormants. Assuming the following for each type of customer, how can the Chase Sapphire team best design its product and brand to attract the right customers? Has it done so successfully with the Chase Sapphire Reserve? Why or why not?

• Transactors/Revolvers:

 Both spend $16,000 per year  Credit balance carried: $0 for transactors, 50% of annual spend for revolvers

 Interest rate average: 21%

 Renew the card at $450 annual fee

• Dormants:

 Spend only enough to earn the sign-on bonus

 Credit balance carried: $0

 Do not renew card at $450 annual fee 4.) If you are a competing credit card provider, how do you respond to the Chase Sapphire Reserve? How should Chase position itself to be ready for these competitive responses?

5.) How successful will Chase be at retaining Chase Sapphire Reserve customers into their second year? Why? What would you suggest they do to improve their odds of retaining their customers?

6.) Over time, the Sapphire brand has evolved from a single product (Sapphire launched in 2009) to a three-item product line as shown in case Exhibit 5. Going forward, how would you manage the Chase Sapphire brand and product portfolio? Does Chase have the right number of products in the line? Are the features of each product the right features? What changes, if any, would you make to the Chase Sapphire Preferred card given Chase Sapphire Reserve’s success?What would you do with the no-fee Chase Sapphire product? What, if any, changes should be made to the Chase Sapphire Reserve card?Teaching Plan This teaching plan is designed for an 80-minute class, with 70-minutes of discussion and 10-minutes set aside at the end of class for an instructor-led wrap-up. The case discussion should cover five main pastures. These pastures, including the appropriate leading and follow-up questions, are outlined in TN Figure 1. Each of these pastures is discussed in more detail below with supporting analysis.

This Teaching Note is authorized for use only by DR. CAMILLA JENSEN, University of Nottingham until Aug 2021. Copying or posting is an infringement of [email protected] or 617.783.7860.

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