Hit by major losses in its card division
in the first half of 2009, JPMorgan Chase, the third-largest card
issuer in the US, is attempting to bounce back by launching Chase
Sapphire, a rewards-laden credit card targeted at the mass affluent
sector and backed by a major advertising campaign. Dan Jones
reports.
JPMorgan Chase’s launch of Sapphire, a mass affluent credit card
aimed at US households earning at least $80,000 per annum,
highlights two key trends in the wider banking industry at the
moment: a significant push on loyalty programmes and better rewards
packages; and a growing focus on the mass affluent segment. Chase
says the threshold represents 15 percent of US households, a market
that has become all the more important in the wake of the US
recession, and one already fought over in terms of card products by
the likes of Citi, US Bank, Bank of America, Barclays and American
Express.
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Chase Sapphire, described by the bank as a
“next generation rewards card”, also marks an extension of a summer
of rewards programmes at Chase. The move is in keeping with wider
themes: customer loyalty is at the top of the agenda for mature
markets’ leading financial institutions (see RBI 616) as evidenced by the fifth
anniversary of Citi’s pioneering ‘Thank You’ rewards scheme
(see RBI 617).
Among the benefits offered by Chase Sapphire
are premium travel services, access to the bank’s Ultimate Rewards
scheme and the assurance that customers will be instantly answered
by a specially trained adviser the moment they ring Chase for
assistance – 24 hours a day, seven days a week.
A separate product, Chase Sapphire Preferred,
has also been launched, offering enhanced benefits and a higher
value rewards, though it comes with a $95 annual fee, waived for
the first year.
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By GlobalDataA spokesperson for Chase Card Services told
RBI that the launch of Chase Sapphire had been years in
the making, and was timed to coincide with the current down-cycle
in credit provision. “Chase Sapphire is a heavily researched
product tailored to today’s affluent, rewards-focused card member.
It is the first ever proprietary rewards credit card offered by
Chase and is a compelling value proposition that is very desired by
the segment,” the spokesperson said.
“We began designing Chase Sapphire two years
ago to help Chase card members get the most value out of their
rewards with points that never expire, have no restrictions and the
flexibility to redeem points when and how they want to.”
Both Chase Sapphire and Chase Sapphire
Preferred operate using the traditional ‘points’ system, offering
customers cash back or discounts as they build up their points
balances, with what Chase says is the added attraction of a
transparent earning structure: one point for every dollar
spent.
The product is being backed by a heavy-duty
advertising campaign which began on 20 August with a spot during
the major network morning shows in the US. A microsite,
www.chase.com/sapphire, has also been launched as part of the push
to create a recognisable brand among affluent consumers. The
spokesperson added that the advertising campaign would run “at
least through to the end of 2009” but declined to specify targeted
customer numbers for the first year of the campaign.
Third scheme in August
The product launch is Chase’s third
initiative in one month to feature a rewards-based loyalty aspect
(see table below).
On 13 August the bank announced the launch of
a programme giving current account customers more rewards on their
credit cards than card customers who did not have a current account
with the bank. That followed an initiative announced on 3 August
enabling Chase checking account customers to earn reductions on
mortgage payments.
Such attempts to tie customers to a variety of
Chase products have long existed; the bank’s Chase Exclusives
programme is designed to reward checking account customers for
using the bank’s other products and services and also incorporates
offers including discounted personal loans and higher rates of
interest on deposits. But the latest round of initiatives appears
to be a concerted effort to boost Chase’s cross-sell ratio as well
as customer loyalty, though the spokesperson would not confirm this
metric was a particular focus for the bank.
An interim loss of $1.2bn
Chase’s attempts to focus on
upper-tier consumers likely to be more insulated from the travails
of the US economy is unsurprising, given the recent performance of
its card services division, which posted an interim loss of $1.2
billion for the first half of 2009 compared with a $859 million
profit in the first six months of 2008.
Net charge-off rates at rival American Express
show that a focus on more affluent consumers is not a panacea in
itself (see News Digest), but
of late some industry observers have begun to take a more
optimistic view. On 24 August, Barclays Capital upgraded a host of
US card companies, including American Express, Capital One and
Discover, on recent signs that delinquencies may be
stabilising.
Citing “five straight months of declining
early-stage credit card delinquencies”, analyst Bruce Harting
suggested future earnings power was once again taking precedence
over fears about unrealised losses.
|
LOYALTY |
||
|
Chase – programmes launched in |
||
|
Name |
Launch date |
Benefits |
|
1% Mortgage Cash Back |
3 Aug |
Offers current account customers one percent |
|
Chase Freedom |
13 Aug |
Upgrade of existing loyalty scheme giving |
|
Chase Sapphire |
27 Aug |
Mass affluent-targeted card offering rewards |
|
Source: Chase |
||
