I respectfully disagree.
I have seen lots and lots of businesses survive quite nicely with absolute crap for customer service.
The fact is, consumers have become inured to rude and inattentive clerks, restrictive store policies, and managers and sales people who could care less about the customer.
In the technology field who is number 1 in software? Microsoft. While they have some excellent products, what about their customer service: <sound of crickets chirping>
The reality is that mediocre customer service is the benchmark now (and if you are big and have only a couple of competitors poor customer service will suffice).
Want to excel in your market? Want to blow away your competition? Offer exceptional customer service. Go out of your way to please a customer. No, don't just please your customer; delight them! You may find you can increase your prices because you make the customer feel good about doing business with you.
Stop engaging in a race to the bottom.