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. Invest-
ments in service, like those in production and distribution,
(5) 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
(10) 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
(15) 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
(20) determine whether it would attract new customers by pro-
ducing a new standard of service that would excite cus-
tomers or by proving difficult for competitors to copy. The
only merit of the improvement was that it could easily be
described to customers.