Test Bank ― Chapter 9 Page 1

Chapter 9
Balancing Demand against Productive Capacity

GENERAL CONTENT

Multiple Choice Questions

1. Which of the following is NOT one of the conditions that fixed-capacity firms may
face?
a. Excess capacity.
b. Demand exceeds desired capacity.
c. Demand and supply are well-balanced.
d. Ideal demand exceeds capacity.
e. Excess demand.
(d; Moderate)

2. Which of the following is NOT one of the productive capacity forms in a service
context?
a. Physical facilities designed to contain customers
b. Physical equipment used to process people, possessions, or information
c. Customers
d. Labor
e. Infrastructure
(c; Moderate)

3. Which of the following is the correct action for a firm to take that wants to reduce
demand and has insufficient capacity?
a. Take no action.
b. Consider override for most desirable segments.
c. Consider priority systems for most desirable segments.
d. Increase prices or encourage use in other time slots.
e. Lower prices selectively.
(d; Challenging)

4. Which of the following is NOT one of the ways to change the overall level of capacity
to match demand variations?
a. Use part-time employees.
b. Ask customers to share.
c. Invite customers to perform self-service.
d. Cross-train employees.
e. Share facilities with the supplier.
(e; Moderate)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 2

5. All of the following are questions to ask about demand patterns and their underlying
causes EXCEPT ____________.
a. Do demand levels follow a predictable cycle?
b. What are the underlying causes of these cyclical variations?
c. How much demand are competitors receiving?
d. Do demand levels seem to change randomly?
e. Can demand for a particular service over time be disaggregated by market
segment?
(c; Moderate)

6. Which of the following is NOT one of the five basic approaches to managing
demand?
a. Taking no action and leaving demand to find its own levels.
b. Reduce demand in peak periods.
c. Increase demand when there is excess capacity.
d. Inventory capacity until demand increases.
e. Inventory demand by creating a formalized queuing system.
(d; Easy)

7. Marketing strategies can be used to shape demand in all ways EXCEPT

____________.
a. modify mode of delivery
b. use price and other cost to manage demand
c. change product elements
d. modify time and place of delivery
e. use promotion and education
(a; Easy)

8. All of the following are ways to make waits more bearable EXCEPT ____________.
a. encourage group waits
b. keep customers occupied while waiting
c. make customers feel comfortable during waits
d. let customers know how long they are expected to wait
e. provide the customers with no explanation for the wait
(e; Easy)

9. Which of the following is NOT one of the alternative queuing configurations

discussed?
a. Single line/single servers at sequential stages
b. Multiple line to single servers (“snake”)
c. Parallel lines to multiple servers
d. Designated lines to designated servers
e. “Take a Number” (single or multiple servers)
(b; Moderate)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 3

10. Which of the following is NOT one of the benefits of having a reservations system?
a. Helps service personnel to serve more effectively.
b. Helps in pre-selling the service.
c. Helps customers to avoid queuing.
d. Helps firms to keep some time aside for emergency jobs.
e. Allows demand to be controlled.
(a; Moderate)

True/False

11. The term “productive capacity” refers to the resources or assets that a firm can
employ to create goods and services.
(True; Moderate)

12. Medical clinics, hotels, and passenger aircrafts are all examples of physical facilities
designed to contain goods and services.
(False; Moderate)

13. Financial success in businesses with limited capacity depends largely on how
capacity is used.
(True; Easy)

14. Optimum and maximum capacities are never one and the same (e.g. a sport
performance).
(False; Easy)

15. One way to stretch capacity is to ensure slack time is encountered.

(False; Easy)

16. Demand patterns are usually random.

(False; Moderate)

17. Good records of a firm’s transactions can help one to understand demand patterns.
(True; Easy)

18. When a firm wants to inventory demand via a reservation system and has insufficient
capacity it should lower prices selectively.
(False; Moderate)

19. We need to have queuing or reservations systems because demand cannot be

inventoried.
(True; Moderate)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 4

20. Yield analysis forces managers to recognize the opportunity cost of selling capacity
for a given date to a customer from one market segment when another might
subsequently yield a higher rate.
(True; Moderate)

Short Answer

21. What are the four supply and demand conditions that a fixed-capacity service may
face?

Excess demand, demand exceeds optimum capacity, demand and supply are well
balanced, and excess capacity.
(Moderate)

22. What are the two basic approaches to fluctuating demand?

Adjust the level of capacity to meet variations in demand.

Stretch or shrink existing capacity.
(Challenging)

23. List the six actions managers can take to adjust capacity as needed.

Schedule downtime during periods of low demand.

Use part-time employees.
Rent or share extra facilities and equipment.
Ask customers to share.
Invite customers to perform self-service.
Cross train employees.
(Challenging)

24. List the four key marketing strategies that can be employed to reshape demand.

Use price and other costs to manage demand, change product elements, modify the
place and time of delivery, and promotion and education
(Challenging)

25. What are thee strategies that can be employed when considering a modification to the
place and time of service delivery?

No change, varying the times when the service is available, and offering the service
to customers at new locations.
(Moderate)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 5

Essay

26. Describe four of the ten propositions on the psychology of waiting lines.

Waiting lines create dissatisfied customers for a number of reasons. The ten
propositions describe characteristics that can increase or decrease satisfaction. First,
unoccupied time feels longer than occupied time. The solution is to find a way to
occupy customers, perhaps with other services. Second, pre- and post-process waits
feel longer than in-process waits. Express/electronic check-in and speedy billing can
reduce dissatisfaction here. Third, anxiety makes waits seem longer. Here again,
occupying customers can help reduce negative effects. Fourth, uncertain waits are
longer than known, finite waits. Adjusting to a wait of known length is easier
because customers can see a finish line approaching.
(Challenging)

27. Describe what the term “yield” means in the context of a reservation strategy.

The term “yield” refers to the average revenue received per unit of capacity. Firms
should aim to maximize this yield to enhance profitability. Yield analysis forces
managers to consider the opportunity cost of selling capacity for a given date to one
customer segment when another might yield a higher rate. Reservation systems can
provide the detailed information necessary to support an optimal strategy from both
a historical perspective and current updates.
(Moderate)

APPLICATION CONTENT

Multiple Choice Questions

28. Mont Tremblant uses all the following ways to attract guests during summer
EXCEPT _____________.
a. water sports on the lake
b. face painting
c. balloon sculpting
d. wind surfing
e. roller-blading
(d; Moderate)

29. The demand on a city bus is likely to vary by all EXCEPT which of the following?
a. Time of day.
b. Day of the week.
c. Season of the year.
d. Population density in the city.
e. All of the above will likely cause demand to vary on a city bus.
(d; Challenging)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 6

30. ____________ is usually the first variable to be proposed for bringing demand and
supply into balance.
a. Price.
b. Place.
c. Personnel.
d. Product.
e. Promotion.
(a; Moderate)

31. One way for car washes to decrease the number of visitors to the existing site is to
a. Offer free pickup and delivery of cars to be washed.
b. Offer mobile car wash services.
c. Add more service options.
d. Increase prices to get the most out of current customers.
e. Educate customers on when they should have their cars washed.
(b; Moderate)

32. Supermarket employees are cross-trained as cashier and stockers to

______________.
a. manage patterns of demand
b. discourage undesirable demand
c. attend to shoppers when peak periods are
d. encourage shoppers to come to their supermarket
e. channel calls to medical services
(c; Moderate)

True/False

33. A subway can increase the capacity on a route after all seats have been occupied.
(True; Challenging)

34. Capacity of service can be stretched over long period of time and staff may be able to
work at high levels of efficiency.
(False; Moderate)

35. One of the most direct ways for a hotel to reduce excess demand at peak periods is to
charge customers more money to use the service during those periods.
(True; Easy)

36. Many firms allow customers to make their own reservations to manage their revenue.
(True; Challenging)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 7

Short Answer

37. Describe how optimum and maximum capacities may differ in the restaurant
industry.

A full restaurant may deteriorate service because the staff is rushed and there is a
greater likelihood of errors and delays.
(Moderate)

38. Give a situation where optimal and maximum capacities are the same.

Live theater or a sports performance.

(Moderate)

39. Discuss why a subway car has elastic capacity.

A subway car has elastic capacity because it is designed to seat perhaps 40 and allow
another 60 to stand with adequate space. Under rush hour conditions it can supply
space for 200, though the space would be extremely cramped.
(Moderate)

40. How did BMW occupy customers while they were waiting for their cars to be
serviced?

BMW owners could wait in comfort at the BMW service centers. The waiting areas
are furnished with designer furniture, plasma TV mounted on walls, Wi-Fi hotspots,
magazines and freshly brewed cappuccino.
(Challenging)

41. Which company is taking advantage of reservations system to do business?

PrimeTimeTables is an exclusive online company that helps customers to get table

reservations at the most popular dining spots, where only people who are somebody,
or have the proper connections can get a table.
(Challenging)

Essay

42. Describe how ski resorts manage traditionally seasonal supply and demand
fluctuations.

Traditionally ski resorts only operated during the winter months, shutting down for
the summer. Realizing that hiking and mountain biking were coming into vogue, as
well as the value of offering other summer activities, resorts began opening in the
summertime. This allowed the firms to smooth the seasonal demand and create value

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.
Test Bank ― Chapter 9 Page 8

out of unused capacity. Chairlifts used for skiing and restaurants used for feeding
customers now operate year-round instead of laying dormant for half of the year.
(Easy)

43. Describe how Disney decided to deal with long lines.

Disney implemented virtual waiting lines at their most popular attractions in

response to long waiting lines and subsequent customer dissatisfaction. Customers
pick up a special pass called FASTPASS, which tells them how close to the front of
the line they are without actually standing in line. This causes lines to self-regulate
such that customers who are not close to the front, do not stand around taking up
space and find alternative things to do. This enhances both customer satisfaction and
has been shown to increase profit because customers will spend money elsewhere
instead of idling in line. Disney provides this service at no charge extra.
(Moderate)

44. Discuss how PrimeTimeTables can be successful in their business and the problems
they face in the provision of their service.

Mr. Riffaud is the president of Personal Concierge International. This company is a

leader in providing exclusive concierge service in the United States. In the process,
Mr. Riffaud has built a large network of contacts with exclusive restaurants. This is
one of the ways in which he manages to obtain those hard-to-get reservations at the
most popular dining spots. His clients are delighted with his service and have been
flooding him with requests for reservations. However, there have been protests from
restaurant owners. They feel that he is upsetting their reservations management
system, and also selling their tables for a price. Even though Mr. Riffaud does cancel
unsold reservations, restaurant owners felt that these could have been sold to other
customers who really wanted to have a table.
(Challenging)

Essentials of Services Marketing, 3rd Edition

Jochen Wirtz and Christopher Lovelock
Copyright © 2018 Pearson Education Ltd.