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July 11, 2019
Prestige usually comes with a price tag, but that hasn’t always been the case with premium credit cards. Twenty-five years ago, obtaining a gold credit card was relatively easy for many consumers – even those lacking a steady income or credit history. Card issuers’ eagerness to attract and retain customers coupled with consumers’ desire for additional purchasing power resulted in – far surpassing the number of standard-card offers up to that point. But the downside of high gold card issuance rates was fewer cardholder perks, which resulted in heightened consumer card-hopping.
Fast forward to today, and it’s a different story. Gold cards have evolved into “luxury” or “premium” cards targeting the mass-affluent segment of the market. Considering the fact that premium cardholders have a higher transactional volume and a higher net margin per account on average, issuers are seeking these more lucrative and loyal customers. With their eyes on these enticing prospects, premium card issuers today have redoubled their efforts to acquire these types of cardholders and increase card spending.
Mass-affluent consumers are the typical target for premium credit cards, defined by household investable assets and household income. According to , “mass affluent” are households with $500,000 to $1 million in investable assets, and “high net worth” define households with at least $1 million in investable assets. The reports that there are over 30 million mass affluent consumers in the US, up from just over 24 million in 2007.
Figuring out what appeals to the mass affluent market is not as easy as it may appear. Results of an revealed that most high-income Americans are still concerned about paying the bills and are not willing to part with their money easily. They do indulge in luxury experiences like travel, but overall tend to be careful with their spending.
Premium cards offer perks that give issuers a chance to drive loyalty, capture more transactional volume, and increase their interchange income on their portfolio. These perks typically include discounted travel and accommodations, purchase protection, and no-fee foreign transactions.
Cardholders are not unanimous in their desired perks. The Ipsos study indicates that most mass affluent consumers are working households and such, vary in their preferences. With many cards to choose from, enhanced offerings are necessary to attract and retain these consumers.
Travel and customer service are considered key differentiators. Many premium card programs offer services such as common carrier travel accident insurance, baggage delay insurance, 24/7 concierge services, identity theft restoration services, and other benefits designed to enrich cardholders’ lifestyles.
While some affluent consumers look for the card with the most lucrative travel discounts, others are attracted to cards with rewards programs featuring particular brands. Since flexibility is very important to today’s cardholders, most premium reward programs are limited in or completely void of redemption caps, expirations, and blackout dates. Other differentiators include the ability to transfer points to other rewards programs, and to redeem points on a variety of products and services from luxury brands.
The premium card market is definitely not a one-size-fits-all target. Instead, it is comprised of a range of customers with varying asset and income levels who value different products and services.
Mercator notes that three primary segments make up the premium credit card market: the mass affluent, who tend to value rewards; elite travelers who look for high-end travel benefits; and high-net-worth consumers who value luxury service. A good rule of thumb is to focus on just one of these customer segments and differentiate your premium card offering for this segment specifically.
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