The Mastermind Behind Chase’s Sapphire Reserve Card Sets Her Sights on Banking | Hacker News Reader

The Mastermind Behind Chase’s Sapphire Reserve Card Sets Her Sights on Banking

bloomberg.com

52 pointsuptown62 comments

I'm not sure if it's just the people I work with, or if chase has a problem because credit card ownership has changed. I don't use credit cards in the same way as parents where I'd have 1 card then make all of my charges on it.

For example: instead of making the csr my only card, I have the amazon card for 5% back on a.com. I have the csr for 3% on restaurants/travel which covers lunch/dinner + traveling and the 2.5% usaa card for everything else. Online bill payment and auto debit has really made it less annoying to have multiple cards.

The bad part right now for these cards is that if they slash their rewards, they'll just lose all of their customers because we have no real loyalty to them.

With mobile wallets this will get even easier. I keep my brand specific cards in Apple Pay and don't even carry it anymore.

There was an interesting story going around the desk December 2016. The head trader was laughing and shaking his head about [1], JP's $200MM write down on the card. He then turned to the younger (millenial-aged) traders to ask if they had it. They all did.

Perhaps JP is taking a calculated risk? Perhaps they created a $200 buck giveaway? I don't know much about consumer lending, but it seems like somebody convinced a management comittee that it's a money maker.

What's the play? Gradually reduce benefits and hope that switching friction leaves enough people on the card to make it up in fees? Is it just a straight forward transfer from merchant fees to card holders? Is it driven by wealth disparity: the higher income people likely to be enticed by the card are such a large proportion of the money flow (and therefore fees) that they are a critical target? Is it millennial hysteria?

[1] https://www.bloomberg.com/news/articles/2016-12-06/dimon-say...

Cross marketing with the data they collect, perhaps.

I think it's a lot of these things. The other thing not mentioned is "Status". When you hand over that metal card you feel special, sometimes the person receiving the card comments on its weight or its thickness. If not consciously, at least subconsciously this is a card that rewards your pleasure centers when you use it. There's no doubt I use it more than any of my other cards. My guess is they're crushing it on fees and giving ~40% of those earned fees back to the cardholder as benefits.

How often do you get people commenting on the weight of the card and where do you live? I have the Amex platinum and the CSR and honestly I was concerned that they’d draw too much attention.

They haven’t, and I’m happy about that. I suspect it’s because I’m in the bay area and both of those cards are common out here.

I haven't personally heard about the CSR card being commented on, but I've seen people comment on the Uber card. I almost feel like Uber/Barclays stole (or will soon have stolen) Chase's CSR customers.

I live in one of the wealthiest parts of LA and I get comments on it a few times a month. But this area is old money so a lot of the rich people here don't have the latest thing (unless it's a car) -- in the bay area I'm not surprised it's common. I also have the Amex Platinum and it gets about the same number of comments. When I travel, especially outside the US, I get comments on it about 30% of time I use it! lol. Metal cards are extremely rare, if non-existant, outside the US.

"When you hand over that metal card you feel special"

The CSP is a metal card as well though, and the annual fee is definitely lower.

> Something that offered flexible rewards for the categories they cared about: dining and travel.

So, the article's posit is that millennials care about these two things hence the card sold well. Were there no cards which covered this category? Was it only traveling and fueling which earned reward points?

It may be that I am too old for this, but when I go to the bank I do not want a 'high touch' experience. I'm reasonably certain about that. No matter how 'interactive' it is. I'd really prefer a 'no touch' experience. One where I settle for old school 'talking to the guy at the bank.'

High touch means talking to people.

Yeah, I get that. But she couldn’t just say that, could she? She had to have some dumbass business jargon.

Too old for this == I prefer to use ATMs only?

Because human interaction == high touch.

Especially if you only want to talk to a man at the bank! That's extra high touch!

So she’s a marketing genius for selling $2300 of rewards for $450?

(100k points at around $0.02 per point [0] plus $300 of travel credit)

Also, you had to go on a “listening tour” to discover that wealthy young professionals enjoy traveling and eating at restaurants?

[0]: https://thepointsguy.com/2015/03/redeeming-chase-ultimate-re...

The whole reason why credit cards provide benefits is because "points" cost less to them than the nominal dollar value. I'm pretty sure that Chase has done the math on that.

It’s irrelevant that it’s marginally profitable. The problem is that the article makes it sound like nobody ever thought of giving away free money before. It’s not genius marketing by any stretch of the imagination.

If it was simply a matter of giving away benefits and points for free, why is it (as alleged by the OP) that Chase/JP Morgan managed to such a major encroachment into the premium market due to the Sapphire? Sure, “anyone” can brainstorm a benefits package and viral branding and yet Chase seems to have dominated this phase at the particular moment.

Because they were giving people $1500 to sign up for their card effectively. I am one of those people that signed up. I signed up for no reason other than I am getting a tremendous amount more than what I am paying for. Last December Chase announced that they lost about 2-300 million off their profits due to the generous promotion. If I taped a dollar bill to every can of Coke and sold them for 50 cents and the sales of Coke exploded, would you say I put a marketing coup on Pepsi? Chase still has extremely generous benefits even without the promo I am wondering how long it will last. As long as it does I will keep the card.

> As long as it does I will keep the card.

So you see value in their product and you're a satisfied customer. Is it even possible for a bank to offer anything more?

I think you're missing his point. He never said that the card isn't valuable, or that the rewards were not worth it. All he said was that it's not considered "genius" if you need to continuously lose money hand over fist by giving away freebies to attract people to your product. It's "genius" when you don't have to do that.

If I taped a dollar bill to every can of Coke and sold them for 50 cents and the sales of Coke exploded, would you say I put a marketing coup on Pepsi?

This depends on whether you sell cans of Coke (boring) or convert people into Coke drinkers (very interesting to Coke).

Chase invested $X to, effectively, purchase a portfolio of new users. Some members of that portfolio will be worth less than the average cost of acquisition. Some members will be worth much, much, much more.

"Banks are full of dumb people who are bad at math" is one of hackers' common beliefs which is not just a vexatious tribal marker but also a really you-have-to-turn-off-your-abilities-to-perceive-the-world-truthfully-to-believe-this vexatious tribal marker.

They beat amex at their own game. That’s a big deal.

AMEX basically shot themselves in the foot.

AMEX had one of the highest renewal fees for users and one of the highest transaction fees for vendors.

Consequently, they lost the ubiquity required to be a useful credit card and wound up in a downward spiral positive feedback loop.

Losing Costco was a big problem for Amex.

> So she’s a marketing genius for selling $2300 of rewards for $450?

They've done the math.

They know how quickly the points will be spent (slowly). They probably have a deal that when you buy something with points, they don't have to pay the company itself for say 6 months, or maybe they get a discount on the service like 15% off. They could even decrease the value of points over time.

They also know that you'll renew, and they won't have to give you $2000 worth of points again. They know the probability of renewal for each customer, each year. Each time you do, the deal gets sweeter for them.

That's how someone can "give you $2300 for $450" and still make money.

/r/Churning

For some of us, taking VC/marketing money and laughing all the way to the bank is a hobby.

I didn't renew my CSR or 3 other cards I had with chase. I walked away with ~$5k in benefits for ~$700. That doesn't even get into the free $$ from a bank account or the other stuff I've done in the past 12 months.

The bet is that for each one of the /r/Churning crowd, there are many many more who are "followers" and simply get the card that their knowledgable buddy has - but less often, and only if the perk differential is dramatic.

That is the market the CC companies want. You merely benefit from this by riding the crest of the wave.

Yeah, but there are plenty of people visiting /r/churning who are renewing the CSR (myself included) and that I think is a win for Chase. Right now, the math works out to keep putting spend on the CSR (along with Freedom and Freedom Unlimited). Granted, the math is different for everyone based on their locations, spending, and travel habits, but I think we'll see a decent number of renewals.

Anecdote: she designed a program which went from 0 to "in the pockets of literally over 90% of SFBA professionals who've eaten with me in the last 12 months", in under a year, and when I ask about it every last one of them said it was their main card. You know the line from the Social Network? If it were as simple as outspending Amex, you would have outspent Amex.

Middlebrow dismissal all you want; this was one of the biggest coups in consumer banking in the last 20 years. (The LTV of a premium credit card gets into the five figure region.)

Yes, CSR is hot, but it did cause them to take a $300M profit hit, and their dominance will only last until the next bank offers insane handouts like chase did.

See if that's still the case after a year though. I bought for the free handout and then cancelled before the annual renewal.

This sort of shallow, hasty dismissal of someone else's work is just the kind of comment we're hoping to convince people to pause before posting here—and then not post. Would you please not do this in the future? It's easy to convert this kind of bad comment into a good one: instead of acting like you know someone's work better than they do, post your points as respectful questions.

The odds are that a hasty internet dismissal is missing something, and even if it isn't, it damages the conversation culture to snark this way. The kind of comment we want on HN comes from reflection, not reflex.

These sort of cards have been around for years, specifically AMEX has been offering these deals for a long time, with lots of points and free flights every year.

I can't see what is different about this card, so I think their complaint stands. This looks like a puff piece.

Perhaps you haven't yet read the excellent replies the comment received?

Even when an article is a puff piece, though, that doesn't make damaging this community ok.

I've never seen a card like the CSR. It really only compares to the AmEx Platinum and Citi Prestige (although some other banks are now trying to compete). The AmEx plat has far too many restrictions to make it valuable to me (and, it seems, many others). The bonus category (5% on travel) is only for one particular airline. I have (almost) no airline loyalty. I will fly with whoever is cheapest (unless the prices are close). The travel credit is for airline incidentals with a single airline. Since I never check a bag or pay for things in flight, that is entirely useless to me. The Uber credit is also useless. I might be able to use the Uber credit-- if it weren't spread out over 12 months. The Centurion lounge access is only useful if you are regularly in places that have a Centurion lounge.

Meanwhile, for the CSR, travel (for both the category bonus and the credit) is travel. There are very few restrictions. It offers the same Global Entry credit, the same Priority Pass membership, the same primary rental car insurance, and the same rental car benefits. It also offers things like trip delay insurance that the AmEx does not. Additionally, it offers United as a transfer partner and United still has the most flights out of my airport. If one were based out of a Delta hub, the math changes since the AmEx has delta as a transfer partner and offers Delta Lounge access.

tldr: The restrictions on the AmEx make it hard to use and justify the annual fee vs a no AF card like Citi Double Cash. The CSR's lack of restrictions make it easy to get more value than the AF.

Comments like this seem reasonable, but are part of how insanely toxic the community on HN is. People don't see it as toxic because they are either used to combative or are ok with insulting dismissivity as long as it isn't pointed towards themselves.

It gets tiring however, and that kind of attitude gets you edged out of many companies - rightfully so!

I don't agree that the HN community is 'insanely toxic', and have the sense that exaggerating the problem like that contributes to the problem. Many users who make this complaint also post their own share of examples of it. In other words the problem is partly unconscious. Pointing the finger at other people ("HN") takes us a step further from a solution.

Certainly it is a major concern, one we spend a lot of time on. But every public internet community of any size is at least this bad, no? and there are also many good qualities here. Let's not make the mistake of failing to take care of what we have because of its bad qualities.

Insanely toxic? Are you joking? This is the cleanest message board I've ever seen.

(I’m only responding because Dan getting involved in the conversation is equivalent to the bouncer at the bar putting his hand on your shoulder).

My target was inappropriate. The snark should have been directed at the author of the submarine PR advertisement, not the marketing executive. I believe articles like this, which are barely more than corporate press releases, are more damaging to the community than the loose language I employed.

The real problem with this piece is that it doesn’t say anything interesting about the successful CSR marketing campaign, and instead positions it as:

1) Chase REALLY listens to its customers! Isn’t that great? Especially you millennials!

2) Look at these CRAZY deals! What a bargain! You’re nuts not to get in on this!

This piece is thus uninteresting, and deserves the snark. The exec mentioned within it does not. (At least not yet — let’s see what happens with churn over the next 5 years).

> Don't be snarky.

https://news.ycombinator.com/newsguidelines.html

Since Scott already replied, now you've got two bouncers.

The trouble with what you've said here is that even if you're right about the article, it's easy to make your points without doing damage to HN. It simply takes a will to do it and a willingness to wait a little, to make it past the reflexive phase where the snark enzymes kick in.

That aside, there's another problem with your argument: if it's right, it's too right, because the same observation applies to nearly all media pieces. This sucks, but it is a cost of doing business on the internet (probably literally). If we focus on these annoyances, we only deprive ourselves of curious discussion. I'd say the guideline to apply here is the following one, translated to the article level:

Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize.

In other words, please respond to the most interesting things in an article, not less interesting things that are easier to criticize. If there are no interesting things, that's different, but then you should flag the submission.

https://news.ycombinator.com/newsguidelines.html

I feel like there is a customer acquisition bubble, where companies pay $1000 to acquire $500 customers and convince investors that they are worth $2000 and use that to get ever more funding which is used for bonuses and acquiring even more customers.

If that's true then the marketing genius isn't selling the card to customers. The marketing genius is selling the card to investors.

What a fluff piece. Strong sign ups driven by 100,000 bonus points doesn't prove anything much regarding the card's ability to retain its users. They gloss over the actual outcomes of the bank's efforts to reduce attrition, then provide very little in the way of what they're actual going to do differently with their retail banking division.

Especially since, last I heard, they are still trying to figure out how to make money from the Sapphire Reserve.

http://www.foxbusiness.com/features/2017/07/28/sapphire-rese...

"Mastermind" - giving away a ton of points for a card that is doing it's best to be an Amex Platinum?

I don't see how "copy the most successful prestige card" and "Give a huge point bonus higher in value to the consumer than the cost of the card to the consumer" is a mastermind strategy.

It seems like the most visionary idea in America these days is "just buy your customers by giving away a lot of money."

Chase, Uber, Amazon all seem to enjoy it as well as many wannabe startups.