PrepTest 135, Section 2, Question 3
Banking analyst: Banks often offer various services to(34 more words not shown)
Which one of the following,(8 more words not shown)
- AMost banks have(12 more words not shown)
- BBanks do best(10 more words not shown)
- COffering services at(15 more words not shown)
- DOnce they have(11 more words not shown)
- ESome banks that(11 more words not shown)
Reading the argument
Why is it bad business to give newcomers a deal?
The bank may be trying to attract people who would otherwise stay with a competitor. Meanwhile, its longtime customers might be perfectly happy. Even if they notice the new-customer offers, switching banks could be enough of a headache that they stay where they are. In that situation, the bank gains new business without losing its established customers.
The analyst points out that those established customers make up most of the business and don't get the special offers. I understand why that might seem unfair. But we still need a reason to think it's a poor business strategy. Are the loyal customers upset? Will they move their accounts because they feel taken for granted?
What we’re looking for
For a strengthener, that's where I'd look: show that excluding longtime customers has a real cost. Perhaps the offers drive away the very people the bank depends on. The right answer could support the criticism another way, though. What matters is whether it helps establish that reserving these benefits for newcomers is less than ideal.
Working the answers
- A
Similar ordinary fees and interest rates don't tell us whether new-customer perks are a good strategy. Customers could still respond to the special offers, and existing customers could still stay. We'd need a further connection between these similarities and the claimed business problem.
- BCorrect
This gives us a different route from the one I predicted. We don't learn that customers are angry or leaving. Instead, we learn that banks perform best when special privileges go only to their most loyal customers. A practice that favors newcomers while excluding longtime customers runs against that best-performing approach. That supports the analyst's claim that the practice is not ideal.
- C
The analyst hasn't recommended giving free services to every current customer. There could be other alternatives, such as limiting benefits to a smaller group of loyal customers or dropping the offers. Showing that one alternative is too expensive doesn't support the claim that newcomer-only offers are a bad practice.
- D
This makes our objection more plausible: established customers tend to stay. If they remain loyal without special offers, the bank may be able to concentrate those offers on attracting new business. D doesn't prove nobody ever leaves, but it doesn't help the analyst establish a cost of excluding existing customers.
- E
Being successful doesn't mean using an ideal strategy. A bank could do well despite a poor practice, or could do even better after changing it. Also, some successful examples don't establish how well the practice generally works. This gives us no reason to favor the analyst's criticism.
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