Services Marketing An Asia Pacific and Australian Perspective 6th Edition Lovelock Test Bank

Services Marketing An Asia Pacific and
Australian Perspective 6th Edition

Lovelock Test Bank
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Chapter 7
Balancing productive capacity and demand
Multiple Choice Questions
1. When dealing with the capacity challenge, the goal is to use resources such as
staff and facilities as _________ as possible, not as _______ as possible.
a. productively; cost effectively
b. productively; much
c. efficiently; cost reducing
d. effectively; much
e. creatively; managerially
Answer: b
Level of Difficulty: 2
LO: 7.1 Describe what is meant by productive capacity in a service context
Topic: Defining productive capacity
AACSB: Analytical thinking
2. Which of the following aspects represent the productive capacity of a service

firm?
a. Physical facilities
b. Service-provision equipment
c. Number, experience and expertise of service personnel
d. a, b and c
e. b and c but not a
Answer: d
3. Which of the following are consequences of under-utilising or inefficiently

utilising capacity?
a. Capacity represents costs that must be recouped
b. Risk of lost sales or business opportunities
c. Service delivered may not satisfy customer expectations
d. Value propositions may be compromised
e. All of the above
Answer: e
Copyright © 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 1
9781486002702/Lovelock/Services Marketing/6e
4. The two measures of capacity which can be used to ensure that capacity is
fully used consist of a number of individual components. Which of the
following is NOT one of them?
a. Units of percentage space available
b. Percentage of total time
c. Percentage of total space
d. Percentage of total cost
e. Percentage of total equipment
Answer: d
5. Managers need to ensure that staff members are neither over-utilised nor
under-utilised. What might be consequences of overworking staff?
a. Customer value suffers
b. Staff morale decreases
c. Customer service suffers
d. Customer satisfaction decreases
e. All of the above
Answer: e
AACSB: Interpersonal relations and teamwork
6. Which of the following is NOT one of the four other causes of demand
variability that may interfere with the productive use of capacity identified by
Frances Frei (2006)?
a. Request variability
a. Effort variability
b. Capability variability
c. Subject preference variability
d. None of the above
Answer: a
7. All of the following actions can help managers adjust or tailor their
production capacity to match fluctuating levels of demand EXCEPT:
a. review the hours of business
b. spend less on advertising and sales promotions
c. cross-train employees
d. create flexibility in what is offered
e. schedule downtime during periods of low demand
Answer: b
LO: 7.2 Explain and use capacity management techniques to meet variations in demand
Topic: Manage capacity
8. When a restaurant offers a limited number of menu items at busy times of the
day, it is trying to:
a. create flexibility in what is offered
b. reduce capacity
c. influence demand
d. create flexibility of resources
e. none of the above
Answer: a
9. How might service companies create flexible capacity?

a. Provide for additional capacity in physical facilities
b. Increase the number of part-time employees
c. Outsource facilities
d. Employ a fixed number of employees for a fixed amount of hours
e. a, b and c but not d
Answer: e
10. Which of the following may NOT be used by a manager of a service

organisation to adjust or tailor capacity to match fluctuating levels of demand?
A. Anticipate the peak and off-peak periods of customer demand
b. Use more permanent employees
c. Train employees for multiple roles
d. Use more part-time employees
e. Rent or share extra facilities or equipment
Answer: b
11. Many airlines now offer electronic kiosks where customers can select their
own seats and print a boarding pass. This is an example of:
a. creating flexibility in what is offered
b. shifting demand
c. asking customers to share
d. customer involvement in co-production
e. reducing facility costs
Answer: d
AACSB: Information technology
12. Which of the following would NOT be a cause of cyclical variations in demand?
a. Public holidays
b. School holidays
c. Customer illness
d. Pay dates
e. Seasonal changes in climate
Answer: c
LO: 7.3 Explain and analyse patterns and determinants of demand for different customer
segments
Topic: Understanding the patterns and determinants of demand
13. The most essential component in developing a successful strategy for

smoothing out demand is:
a. understanding of the reason for the demand
b. discouraging demand
c. giving an alternative for the demand
d. segmenting demand
e. predicting a demand
Answer: a
segments
14. In which of the following situations might business be lost?

a. Demand exceeds maximum available capacity
b. Demand exceeds optimum capacity level
c. Demand and supply are well balanced
d. Demand is below optimum capacity
e. None of the above
Answer: a
LO: 7.4 Distinguish the different supply–demand situations that service firms with fixed
capacity may face
Topic: Strategies for managing demand
15. Customers may find the service disappointing or have doubts about its
reliability in which of the following situations?
Answer: d
capacity may face
16. Customers are likely to perceive deterioration in service quality in which of
the following situations?
Answer: b
capacity may face
17. Which of the following is NOT one of the five main approaches for managing
demand?
a. Allow demand to find its own level
b. Reduce demand in peak periods
c. Increase demand when there is excess capacity
d. Reduce capacity to match the level of demand
e. Inventory demand with a reservation system
Answer: d
LO: 7.5 Identify the five basic demand management strategies and techniques
18. A call centre has a system where calls go into a queue and are answered in
the order in which they arrived. This is an example of:
a. allowing demand to find its own level
b. reducing demand in peak periods
c. inventorying demand
d. reducing capacity
e. ignoring customers
Answer: c
AACSB: Application of knowledge
19. A bank decides to have the same staff levels all day in the hope that
customers will realise there will be long queues at lunch time and choose to
come at a different time. This is an example of:
a. allowing demand to find its own level
b. reducing demand in peak periods
c. inventorying demand
d. reducing capacity
e. ignoring customers
Answer: a
20. A company with insufficient capacity that wants to reduce demand should
engage in which of the following strategies?
a. Take no action
b. Consider priority systems for least desirable segments
c. Raise prices and use communication strategies to encourage usage at
other times
d. Reduce prices selectively
e. Try to predict wait periods
Answer: c
21. A company with excess capacity that wants to increase demand should
engage in which of the following strategies?
a. Take no action
b. Consider priority systems for least desirable segments
c. Raise prices and use communication strategies to encourage usage at
other times
d. Reduce prices selectively
e. Try to predict wait periods
Answer: d
22. The marketing mix plays an important part in stimulating demand. Which of
the following is the most direct method of making this change?
a. Price
b. Product
c. Distribution strategy
d. Communication efforts
e. Location
Answer: a
LO: 7.6 Apply the marketing mix elements to reduce fluctuations in demand
23. When faced with fluctuating levels of demand, a service firm can do which of
the following?
a. Stockpile inventory
b. Manage the level of demand
c. Adjust the level of capacity
d. Hire only on temporary contracts
e. b and c
Answer: e
Topic: Introduction
24. When considering options for managing capacity, service managers need to
consider all of the following EXCEPT:
a. customer requirements
b. competitive influences
c. inventory levels
d. impact on desired levels of service
e. organisation’s ability to implement
Answer: c
25. A university business school that offers weekend and evening executive
classes in addition to its normal undergraduate classes is using which of the
following strategies to shift demand to match capacity?
a. Price incentives
b. Modifying time and location of service delivery
c. Varying service offerings
d. Communicating with customers
e. Stretching service capacity
Answer: b
26. A service provider faced with different demand curves for different segments
during the same time period would likely NOT:
a. offer the same service to all segments
b. establish different classes of service
c. price each class of service according to its demand curve
d. add value to the core service for higher paying segments
e. vary the basic service for each segment
Answer: a
27. When public transport messages urge non-commuters (e.g. shoppers and
tourists) to avoid the crush of commuter hours, it is ___________ to shape
demand pattern.
a. using product variation
b. using pricing strategy
c. modifying the timing and location of delivery
d. using communication efforts
Answer: d
28. In situations where the public requires assistance for a variety of problems
(e.g. medical treatment, ambulances) and the service is overused, one
method of dealing with this is to:
a. refuse non-urgent cases assistance
b. re-educate the public on the correct use of these facilities
c. develop a media campaign to raise awareness
d. none of the above
e. b and c
Answer: e
29. The occurrence of waiting lines, both physical and virtual, is becoming a
major problem for both consumers and providers. Which of the following is
the most appropriate definition of the cause of this problem?
a. Unresolved capacity management
b. Behind the scenes problems
c. Lack of staff
d. Untrained staff
e. Servicescape
Answer: a
LO: 7.7 Explain the psychology of waiting and its implications for designing queuing systems
30. Managing waiting lines and reducing the customer waiting time often requires
a multi-pronged strategy. Which of the following can be successfully
implemented to increase customer satisfaction?
a. Installing a reservation system
b. Changing processes to shorten transaction time
c. Redesigning the queuing system
d. All of the above
e. a and c
Answer: d
31. Which of the following queuing processes is most likely to lead to

dissatisfaction among customers?
a. Single line/single server
b. Designated lines to designated servers
c. Multiple lines to single servers
d. Single line to multiple servers
e. Parallel lines to multiple servers
Answer: e
32. Market segmentation is sometimes used to design queuing strategies that set
different priorities for different types of customers. Allocation to separate
queuing areas may be based on all of the following, EXCEPT:
a. urgency of job
b. duration of service transaction
c. urgency of the customer
d. payment of a premium price
e. importance of the customer
Answer: c
33. William Janes observed ______ results from passengers being attentive to
the passage of ______ itself.
a. perception; service
b. annoyance; time
c. urgency; the queue
d. boredom; time
e. boredom; quality
Answer: d
34. Which of the following is NOT true about waiting time?

a. Anxiety makes waits seem longer
b. Occupied time feels longer than unoccupied time
c. Unfair waits are longer than equitable waits
d. Solo waits feel longer than group waits
e. Pre-process waits feel longer than in-process waits
Answer: b
35. Which of the following may NOT be true?

a. Uncertain waits are longer than known, finite waits
b. Unexplained waits are longer than explained waits
c. The more valuable the service, the longer people will wait
d. Unfamiliar waits feel longer than familiar ones
e. Group waits feel longer than solo waits
Answer: e
36. If queues are unavoidable, managers should consider all of the following
EXCEPT:
a. occupy customers during the wait
b. provide electronic news displays or videos
c. design queuing to give the impression of constant progress
d. scheduling staff breaks during peak times
e. involve customer in part of the service process during the wait
Answer: d
37. Problems often arise when customers fail to show up at appointed times or
when service firms overbook. All of the following are marketing strategies for
dealing with these operational problems EXCEPT:
a. requiring a deposit
b. cancelling non-paid bookings after a certain time
c. charging a price premium
d. providing compensation to customers for overbooking
Answer: c
LO: 7.8 Describe the importance of reservations systems to inventory demand
38. Which of the following is a method which cannot be used to create alternative
demand for otherwise wasted capacity?
a. Use capacity for service differential
b. Reward your best customers and build loyalty
c. Customer and channel development
d. Reward employees
e. Segment the potential wasted capacity
Answer: d
39. Service managers require substantial information to help them develop
effective demand management strategies and to monitor subsequent
marketplace performance. Among others, information needs include the
following EXCEPT:
a. historical data
b. forecasts
c. segment-by-segment data
d. sound cost data
e. consumption data
Answer: e
Topic: Effective demand and capacity management requires information
40. Substantial information is required to assist mangers to develop effective

strategies to manage demand. Which of the following would be of little value
in developing a strategy?
a. Cost data
b. Customer attitudes
c. Forecasts
d. Segment-by-segment data
Answer: e
41. Suppose demand levels for a service follow a predictable cycle, and the
duration of the demand cycle is one week. In this situation, demand likely
varies by ________.
a. hour
b. day
c. week
d. month
e. season
Answer: b
segments
42. A restaurant’s managers are trying to figure out why demand levels seem to
change randomly. Which of the following factors might explain the seemingly
random changes in demand?
a. Seasonal changes in climate
b. Employment schedules
c. Changes in the weather
d. Annual public holidays
e. Tax payment and refund schedules
Answer: c
segments
43. Which of the following methods can help marketers smooth out seemingly
random fluctuations in demand?
a. Streamlining processes to enable greater throughput
b. Reducing the profitability of each completed transaction
c. Shortening the duration of the demand cycle
d. Assuming all customers schedule services to meet the same needs
e. Breaking down demand on a segment-by-segment basis
Answer: e
segments
44. What risk arises when demand is operating between optimum and maximum
capacity?
a. Service quality may suffer, leading to dissatisfied customers
b. Customer attitudes may improve when they see how busy the company is
c. Service may improve above the optimum level, surprising customers
d. Productive resources may be underused, resulting in low productivity
e. Customers may perceive the company as unlikely to survive
Answer: a
capacity may face
AACSB: Reflective thinking
45. In which situation are optimum and maximum capacities most likely to be the
same?
a. Public transport
b. A live concert performance
c. An aircraft with high-density seating
d. Airport taxis at peak travel times
e. None of these; the two measures are never equal
Answer: b
capacity may face
True/False Questions
1. Cross-training employees will help to avoid both bottlenecks and the under-
utilisation of staff members.
a. True
b. False
Answer: True
2. Sometimes, maximum capacity is the same as optimum capacity.

a. True
b. False
Answer: True
capacity may face
3. Service firms can retrieve services from inventory during periods of high
demand.
a. True
b. False
Answer: False
4. Taking no action and leaving demand to find its own level is a legitimate
approach to managing demand.
a. True
b. False
Answer: True
5. When a business has excess capacity, customers are sure to have a

favourable impression of the service.
a. True
b. False
Answer: False
capacity may face
6. One of the most direct ways of reducing or increasing demand is through

pricing strategy.
a. True
b. False
Answer: True
7. For price to be effective as a demand management tool, the marketing

manager must have some sense of the shape and slope of a product's demand
curve at a particular point in time.
a. True
b. False
Answer: True
8. The value of using the marketing mix is useful to non-service organisations

but has little value in service organisations.
a. True
b. False
Answer: False
9. Although promotion and education through marketing communications are
useful to send information, they are of little value when trying to smooth
demand.
a. True
b. False
Answer: False
10. Nearly all service operations encounter problems with queuing situations at
some time or another.
a. True
b. False
Answer: True
11. Although some services cannot be stored for later use, this is not applicable
to most of the services available to the consumer.
a. True
b. False
Answer: False
12. Signage and advertising can modify demand patterns by reminding customers
of peak periods.
a. True
b. False
Answer: True
13. Reviewing the hours of business is not a recommended action to take to tailor
capacity to match fluctuating demand.
a. True
b. False
Answer: False
14. Managers cannot find patterns in random demand so cannot develop
strategies to manage it.
a. True
b. False
Answer: False
segments
15. Parallel lines to multiple servers are the most likely configuration to satisfy
customers waiting in queues.
a. True
b. False
Answer: False
16. A car detailer in a shopping centre should recognise that customers who are
unoccupied will feel as if their waiting time is longer than they would if they
were occupied.
a. True
b. False
Answer: True
17. Reservations strategies should focus on yield.

a. True
b. False
Answer: True
18. Cost data helps management to evaluate the impact of periodic cycles and
demand fluctuations.
a. True
b. False
Answer: True
19. Loyalty programs are a good example of using customer and channel
development to create demand for wasted capacity.
a. True
b. False
Answer: False
20. Customers are not willing to pay more for priority queuing.
a. True
b. False
Answer: False
Essay Questions
1. Assume you run a harbour cruise service. What kind of demand patterns
might you expect for such a business? What strategies would you recommend
for this business to balance capacity and demand?
segments
2. How might a restaurant in a big city CBD use marketing mix elements to
shape demand patterns? How might a restaurant located on a major highway
going through a small town use marketing mix elements to shape demand
patterns?
3. ‘Although service businesses can rarely inventory supply, they can often
inventory demand.’ Discuss how this statement would apply to a national
airline and a veterinary surgery.
4. Your company has not been able to reduce waiting times. Discuss the
psychological implications of waiting time and the managerial implications.
5. Discuss the benefits and problems for service firms associated with
reservations or booking systems.
6. The management of inventory can best be achieved through a reservation

system. Discuss this statement in relation to a specific service organisation of
your choice.
7. You are responsible for organising a queuing system for a new supermarket
which is just opening. Which of the queuing systems that are available would
you select to ensure your customers’ satisfaction? Justify your answer in
terms of queuing systems available.
8. How effective is pricing as a strategy to shape demand patterns during off-

season and peak times? In your opinion, is this one of the most successful
methods or could a combination of marketing mix elements be used?
9. Discuss the statement: ‘In a very real sense, queues are basically a symptom
of unresolved capacity management problems’. Do you agree or disagree with
the statement? Justify your answer.
10. Is it possible to tailor queuing systems for market segments and, if so, how
can this be achieved?

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Services Marketing An Asia Pacific and Australian Perspective 6th Edition Lovelock Test Bank

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Services Marketing An Asia Pacific and

Australian Perspective 6th Edition

Multiple Choice Questions

2. Which of the following aspects represent the productive capacity of a service

3. Which of the following are consequences of under-utilising or inefficiently

9. How might service companies create flexible capacity?

10. Which of the following may NOT be used by a manager of a service

13. The most essential component in developing a successful strategy for

14. In which of the following situations might business be lost?

31. Which of the following queuing processes is most likely to lead to

34. Which of the following is NOT true about waiting time?

35. Which of the following may NOT be true?

40. Substantial information is required to assist mangers to develop effective

2. Sometimes, maximum capacity is the same as optimum capacity.

5. When a business has excess capacity, customers are sure to have a

6. One of the most direct ways of reducing or increasing demand is through

7. For price to be effective as a demand management tool, the marketing

8. The value of using the marketing mix is useful to non-service organisations

17. Reservations strategies should focus on yield.

6. The management of inventory can best be achieved through a reservation

8. How effective is pricing as a strategy to shape demand patterns during off-

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