Interview with Hooman Estelami

(1) Please briefly introduce yourself (education, professional experience, academic research, published books and articles).

I am a professor of Marketing at Fordham University in New York. My PhD is from Columbia University and I have an MBA from McGill University. My research and writing focuses on the marketing of financial services, pricing, and customer satisfaction. I have two published books. One of these books is used around the world as a textbook on marketing of financial services, and the other book is about marketing turnaround strategies. In addition, I have over 30 scientific journal articles published on my areas of research. I am also the associate editor of the Journal of Product and Brand Management.

(2) What is the current status of financial services marketing in the United States and other industrialized countries? What is the significance of this field among universities and financial services institutions, especially among banks, insurers, and investment service providers?

The practice of marketing financial services is in a constant state of change. This is primarily due to the fact that information technology has transformed many common forms of financial services and has made new categories of services available to the public. Many financial services available to the public ten years ago are of much less relevance and new categories have evolved to take their place. One simple example is how the travelers check market has very much disappeared in the west, with the wide adoption of credit and debit cards. Research indicates that companies that adjust their marketing and organizational capabilities to capitalize on these changes often do well. As far as the significance of the field, it has grown over the years. Especially in the past five years, companies have recognized that with the tough economic climate it is more difficult to convince consumers about the benefits of their services, unless very specific marketing actions are taken. As a result the number of universities focusing on this topic as part of their business programs has increased. From a company perspective however, due to the financial difficulty that many financial services companies are facing, employee training budgets have been reduced across many disciplines, including the field of financial services marketing. This is somewhat unfortunate since knowing how to wisely invest your marketing resources and training your employees to make good marketing decisions is even more critical in these tough economic times.

(3) What is the most unique aspect of marketing financial services and how is it different from the marketing of other forms of services or goods?

The most significant aspect of financial services marketing has to be consumers’ limited ability to understand the complexity of financial services. Most individuals tend to dedicate less than the required amount of mental effort in assessing their financial decisions. These decisions tend to be cumbersome and for the masses very difficult to make. In fact scientific research suggests that the ability of the human brain to process the complexity of financial services offers cannot catch up with the requirements of good decision making in financial matters. This is very troubling since it opens opportunities for less-than-perfect consumer decisions, and also highlights the central role that the education system should play in training the young to not jump into financial decisions without careful understanding of their options and the realization of the long-term financial consequences of their decisions.

(4) In your opinion how can financial services executives in Iran gain access to leading edge research and market findings on the marketing of financial services?

I believe the conference hosted by the Financial Services Marketing Center provides a great opportunity for the participants to share in very practical and useful knowledge about the field. Many of the Center’s activities seem to focus on the dissemination of leading-edge scientific knowledge and you have invited the best recognized practitioners and scholars in the field, both in Iran and abroad, to speak at your conferences. In addition, research journals on the field, such as the Journal of Financial Services Marketing, and the International Journal of Bank Marketing are very good resources for leading-edge research findings on the topic.

(5) Considering the unique aspects of financial services marketing such as the undifferentiated nature of the services provided, do you believe the concepts of marketing apply to this field? How can companies complete?

Marketing can definitely be applied to financial services well. In fact, the common perception that financial services are undifferentiated and that all providers are the same has in the past decade been challenged, especially in the US and Europe. Marketing activities such as consistent advertising campaigns have helped certain financial services providers in categories such as insurance and banking to create unique statements about their capabilities and have provided good reasons for consumers to choose one provider over another. Much of what determines consumer choice as to which financial services provider to use and which ones to avoid depends on their belief on differences that might exist among the service providers. Marketing has a role in emphasizing the differences that exist, and by doing so making it possible for companies to compete. If done properly, this not only encourages competition, but also ensures that financial services providers behave ethically and have the well being of customers at heart.

(6) Which marketing variables have the most effect on market response to a financial service offer?

This is the big question for many companies and in fact without formal market research is difficult to respond to, due to market variations across countries and even within different regions of the same country. In general, financial services categories that require one-time interactions with a financial services provider and very little contact after that would rely on perceptual variables such as advertising and word-of-mouth recommendations. An example is insurance, where an individual may become interested in purchasing an insurance policy from a given insurer because he may have seen the insurer’s advertisements before and believe (based on these advertisements) that this is a good insurance company. The ability to test and validate this hypothesis is however very limited (since most individuals do not end up filing a claim), and therefore whatever marketing effort is placed in the form of advertising is what would drive up policy sales. In other categories where customer contact is more frequent, it is important to invest in customer service and customer retention activities. For example in banking, especially at the retail (non-online) level, the incidence of dissatisfactory customer interactions may persuade customers to switch to a competitor. The dissatisfaction-based switching trend has grown in the past 5 years in many countries. However, as I noted, the extent of emphasis placed on each of these marketing activities is very much market-specific.

(7) To what extent is it necessary to hold the International Conference on the Marketing of Financial Services, and in your view what are the expectations from such a conference?

This is a conference that has been needed in this field for many years. Gathering experts from around the world to discuss emerging trends and findings is critical, and to the best of my knowledge this has not been consistently done on a yearly basis by any international organization. Such a venue can facilitate an open discussion about the challenges of marketing from the perspective of organizations that provide financial services, enable researchers to present their findings, and enable discussion with regulators and governmental organizations on how the public can best benefit from the financial services offerings available to them.

(8) In your view what areas should be emphasized in a specialized conference focusing on the marketing of banking services?

Certainly the issue of financial decision making and related research findings that can best inform ethical marketing practices is needed. Also, since banking is a financial services category that is very dependent on the general economic climate and emerging information technologies, discussion of both of these areas would be helpful. Regulatory concerns are often central to the operation of banking institutions in most countries, and a discussion of marketing regulations and perhaps even contrasting of regulatory requirements across countries would make for a very insightful analysis of possible needs.

(9) How significant is the support of financial services providers in the hosting of conferences and events that facilitate the expansion of their marketing activities?

Such a support is not only necessary but vital. The process of disseminating leading research knowledge, hosting conferences, and creating a forum for the exchange of ideas, is a very demanding undertaking. Often the support of educational institution and universities, and government subsidies are either not present or not sufficient to make this happen and for this reason there are very few centers around the world that focus on such topic areas. However the group that most benefits from such an exchange is the collective body of financial services marketing organizations. Their support and active involvement is therefore critical in making such an exchange of ideas possible.

(10) In your view how significant is the establishment of the Financial Services Marketing Center? What should the Center’s primary activities be?

The establishment of the Center provides an important opportunity for practitioners and researchers to develop a more scientific understanding of how best to promote their services to the public. Activities such as the annual conference, workshops and seminars, research publications, and textbooks would be very well-fitting to the Center’s mission, and I believe many are being implemented.

(11) What other suggestions or comments do you have related to the marketing of financial services?

Generally, the issue of regulations is less spoken about in the context of marketing financial services. This is due to the fact that there are significant differences in financial services marketing regulations as you go from one country to the next. However, the experience of financial markets in the past 3 years has highlighted the need for sound regulations that can protect consumers and at the same time allow for fair competition among providers. This of course is a very difficult topic to discuss, but one that should be part of the continued discussion in the field.