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INTRODUCTION
The turbulence in the UK financial services industry has dramatically increased in the last decade. The entry of overseas banks, the deregulation that increased domestic competition, the increasing sophistication and declining loyalty of customers all combined to place competitive pressure on financial service companies [see for example Thwaites, 1991; Edgett and Thwaites, 1990; Ennew, Wright and Watkins, 1990]. Other companies were seeking to attract customers, and customers were, more than ever before, willing to go [Lewis, 1989].
During this period marketing has made dramatic in-roads into the financial services industry. As environmental change and competitive pressure has increased, marketing has become a more and more important function in the UK financial services industry. However, this period of rising importance of marketing has coincided with a catastrophic decline in performance in the financial services sector. Researchers reporting this decline have advanced various arguments about how competition, marketing and performance have been linked in the industry [see Robbie and De Hoest, 1992; Chrystal, 1992; Economist, 1992; Skeel, 1991]. To shed light on these disputes this study reports research on the link between the orientation of marketing strategy and performance in the UK retail financial services industry.
As an introduction to these findings the article briefly outlines the development of marketing in the UK financial services industry and then goes on to discuss some of the arguments about the recent performance of financial service companies. In particular, aggressive and prudential marketing strategies are identified and their impact on performance is considered.
MARKETING AND COMPETITION IN UK FINANCIAL SERVICES
Marketing provides a mechanism by which the optimum positioning of a firm or its services can be determined and communicated to the target market. However, the perception of marketing and its status in UK financial service companies has evolved slowly over time. There has been 'marketing' in UK financial services for many years, but authors have frequently pointed out the limited understanding of the concept shown by financial service companies. Traditionally, financial service companies have been very process oriented. Their approach to deposit taking and lending was entirely reactive and what marketing existed was essentially advertising [Brien and Stafford, 1967]. As time moved on marketing was seen as a mechanism for collecting deposits, and the level of proactivity...