Problem Statement:
From a product manager’s perspective perform a critical analysis of JP Morgan Chase’s 2016
Chase Sapphire credit card launch.
Introduction
In 2016, JP Morgan Chase generated sales of $44.9 billion and a net income of $9.7 billion. It
was one of the top two credit card issuers and had a robust network spread across the United States. Chase Sapphire was created to transform the way people think about credit cards. It was able to identify and grab 15% of the market sector, which was made up of high-net-worth individuals. The Chase Sapphire Reserve Card met its sales target just two weeks after the launch rather than the expected 12 months. However, there has been a drop in net revenue, and top management is anticipating customer behavior and taking the actions necessary to change it in its favor.
Recommendations
The case discusses JPMorgan Chase’s four different lines of business: Commercial Banking,
Corporate & Investment Bank, Asset & Wealth management, and Consumer & Community
banking (CCB). Primarily the Chase Sapphire Product Portfolio. The strategy behind launching it, the target audience and the customer acquisition policies placed by the management. Although chase acquired a huge customer base and got an overwhelming response on two of its smartly positioned products (Sapphire Preferred and Reserve), retaining the same consumer base is the critical task and forming a legacy relationship in such a dynamic credit card market is not easy especially with so much competition.
Chase did a good job in identifying the credit card psychographic segmentation, distinguishing users based on their card activity, behavior, and their line of credit. The demographics could be bettered going into the future by devising custom analytics for each different consumer segment identified to offer customizable offering to each consumer segment. For example, analyzing what appeals to the dormant users to keep them active, something like a monthly dynamic scheme based on usage of the card and maybe offering a low annual fee to the financially stressed. This will keep user retention high and provide an individualized feel to each customer.
Analyzing loyalty of consumer, frequency of use, amount spent, bill habit on different features is good but another metric that should be analyzed is the discouraging and demeaning features that are cutting customers for chase. It is here that Chase will learn which particular areas it needs to improve in its product line. Spending more on research and development to modify its current offerings rather than only doing it only for new product development based on customer targeting is not enough.
Another thing to worry for chase is the inherent cannibalistic approach between its two
products Preferred and Reserve, it need to market its product to specific customers. It already has a lot of customers preferring Reserve even though they can’t maintain the expenses, eventually turning into churners. Maybe having a screening process on its customers based on their credit score as implemented by Amex for its Reserve card won’t be harmful for Chase.
One of the eye-catching and proud things for the chase customers is the card design and
flexibility in the experiences provided to its customers by chase cards. With the card market
being highly dynamic, it needs to engage the new affluent users on a constant basis. Offering customized suggestions on how users can spend their money or points makes sense and could be appreciated by consumers. This can be done by applying machine learning algorithms on their spending habits. This is obviously something which the user should agree on. Offering customized card designs within defined scope which users can set is another engaging activity for the consumers.
Another recommendation would be to bring back the 100,000 points reward as soon as a new competing card is launched into the market by one of chase competitors. It has worked from them in the past and the word of mouth from their legacy relationships could work in their favor to keep user acquisition high even when a highly appealing product is launched into the market.
A social gathering event for millennials or all consumers in a particular area to act as a
promotional event for all its new products and offerings could play out well for chase branches and help make important connections with friends and families of existing consumers.
As the card market is regulated by several factors and the recent cost to acquire a customer
between $250 to $300 and scope of it increasing, it is only sensible to compare that with the
lifetime generation value of its consumers before engaging in acquisition and marketing
activities.
Chase has worked hard to market its products through the right channels and distribution
networks, specially bringing in celebrities to market its product. This initiative could be more enforcing if it is also carried out on a small scale after identifying the areas where the emerging affluents live and their interests. Targeting these particular places would then be easy.
Another platform which worked really well for Chase was the social media platform. The tweets and videos on Twitter and YouTube generated a year’s projected revenue in two weeks. This should be carried on but now with incentives. The users who tweet and post videos can be given free points on the reward system or a gift voucher. If the advertisement is strong especially from established users, revenue generation is inevitable.
Another segment within the emerging affluents are professionals. Chase as we know as other banks have travel, hotel and other connections. Professionals are one segment within the one identified by chase that use these connections the most often. Forming corporate connections as established by some of the biggest airlines could be beneficial for chase. It can do this either directly or through airline connections it already has. This way it can offer group discount to enterprises based on the number of accounts they are asking credit for. These people normally have an established salary so Chase does not have to worry about them running out of money anytime soon.
Conclusion: At last, it could be said that the way Chase is leading the market share in the card market is impressive but it need to evaluate the market trends on a constant basis and consider above stated factors to remain at the top of the mountain.
Comments