The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations.
This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.

The passage suggests which of the following about service provided by the regional bank prior to its investment in enhancing that service?

It enabled the bank to retain customers at an acceptable rate.

It threatened to weaken the bank's competitive position with respect to other regional banks.

It had already been improved after having caused damage to the bank's reputation in the past.

It was slightly superior to that of the bank's regional competitors.

It needed to be improved to attain parity with the service provided by competing banks.


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