A Chase Sapphire experiment is getting revived and expanded after the trial run blew away expectations with millennials last year
- JPMorgan Chase piloted an experiment last year, offering a large rewards bonus to Sapphire customers who closed a mortgage with the bank.
- The promotion was so popular it doubled the number of homes bought by the Sapphire population compared with the previous year.
- Now, JPMorgan Chase is reviving the promotion and expanding it to its Freedom and United Mileage Plus cardholders as well.
Last year, in advance of the spring home-buying season - the busiest of the year - JPMorgan Chase engineered an experiment to gain an edge in the mortgage-lending competition.
Coming off the heels of the massively successful launch of the Chase Sapphire Reserve credit card in August 2016 - which offered a 100,000-point sign-up bonus that stoked unprecedented demand - the bank's home-lending executives had an idea. A juicy rewards bonus enticed millennials into signing up for a premium credit card with a $450 annual fee, previously considered a nonstarter among that demographic. Would a similar strategy encourage more millennials to take out a home loan with JPMorgan, too?
"Given the overwhelmingly positive response of the Reserve card, it immediately became clear that we should consider some type of points offer," Amy Bonitatibus, the chief marketing officer for Chase's home lending division, told Business Insider.
So the bank targeted its Sapphire customers, offering another 100,000 in rewards points if they closed a mortgage with the bank, a bonus worth as much as $1,500.
The response was enthusiastic: The number of loans taken out by Sapphire cardholders during that three-month window doubled compared with 2016, Bonitatibus said. (The bank says that figure takes into account new Reserve customers who bought a home the prior year before joining the Sapphire community.)
Given the level of success during home-buying season in 2017, it's no surprise that JPMorgan announced Monday that it is reviving the promotion.
"Given the popularity of points as an offer that we saw from last year's test, we wanted to use that same currency for this year's offers," Bonitatibus said.
The bonus rewards are lower, but this year the offers have been expanded beyond the Sapphire community to several other Chase credit cards, targeting a much broader audience of potential mortgage customers.
JPMorgan will offer tiered bonuses for cardholders that open up a mortgage with the company, ranging from 25,000 to 75,000 points or miles. The Sapphire Reserve and the co-branded United Mileage Plus Club card each offer the highest bonus level, while Chase Freedom cards - the largest and most diverse population of JPMorgan cardholders - earn the lowest level.
"Freedom is going to give us the broadest customer base, with a wide range of backgrounds, income and lifestyles," Bonitatibus said.
Deepening relationships
Chief financial officer Marianne Lake foreshadowed this expanded promotion during JPMorgan's investor day in February.
The company has repeatedly touted its ambition to mine the Sapphire community and tighten those relationships, and given the promising results from targeting Sapphire Reserve customers with mortgage offers, Lake told investors they "should expect more of that in 2018."
There's plenty of opportunity left to mine in home lending: JPMorgan banks about 60 million households, only half of which have mortgages and less than 10% of which have a mortgage with JPMorgan, according to Bonitatibus.
"We have a tremendous opportunity to deepen relationships with existing customers," Bonitatibus said.
Though they were once thought uninterested in buying homes, millennials - many of which are finally ridding themselves of crushing student loans - represent a giant and growing segment of home buyers: First-time home buyers, who are primarily millennials, accounted for 38% of all single-family home purchases last year, the largest share since 2000, according to Bloomberg.
The Sapphire Reserve population represents a natural starting place, given the card's popularity among wealthy millennials: The average Reserve customer has an annual income above $180,000 and more than $800,000 in deposits and investments. They'll likely have no problem affording a home when the time comes.
"With millennials being the fastest home-buying population today, that's one that we're focused heavily on," said Bonitatibus, who noted that millennials make up more than a third of JPMorgan's home-loan originations.
Of course, there are many millennials not captured in the Sapphire cohort, and still yet many homebuyers who aren't millennials.
And while older generations don't appreciate travel rewards nearly as much as millennials, they're very fond of redeeming credit card rewards for straight cash and gift cards, Bonitatibus said.
"While points for Sapphire cardholders are largely redeemed for travel, for Freedom customers you see a wider use for the points," Bonitatibus said.
She added: "We didn't want to design an offer that only appeals to millennials, but certainly that does capture that millennial audience in addition to the other customer segments."
Given that closing costs on a home can easily run into the thousands, Bonitatibus thinks "the cash-redemption offer is going to be particularly of interest" to many of their cardholders.
The credit card promotion isn't mutually exclusive with other Chase home-lending promotions, such as those available to Chase checking and Chase Private Client customers.
Customers are thus encouraged to be enrolled in a wide array of the bank's services - all part of JPMorgan's plan to deploy its most popular commercial offerings as gateway drugs to the rest of the JPMorgan experience.