CHAPTER 1

THE SERVICE ECONOMY

CHAPTER QUIZ QUESTIONS

True/False
1. Services are deeds, processes, and performances. (T)
2. The Clark-Fisher hypothesis notes the shift of employment from one sector of the economy
to another. (T)
3. The fall in employment in the agricultural sector is the primary reason for the increase
in service sector employment. (F)
4. The consumer participates in the service process, which is not the case in manufacturing. (T)
5. The classification of service systems using the "service process matrix" is based on
two considerations: degree of labor intensity, and the degree of service customization.
(T)
6. From an open-systems view, the output of a service system consists of satisfied
customers. (T)
7. The service experience defined as escapism requires the most commitment from
the customer. (T)
8. A study of service systems must begin with the fundamental idea that the basic inputs are
supporting facility, facilitating goods, labor, and capital. The output is the service offered.
(F)
9. In contrast to manufacturing, the aesthetics of the environment play a major role in
the customer's perception of the service. (T)
10. The fact that services can be inventoried is an important characteristic, which
distinguishes them from manufacturing. (F)
11. Reduction of the role played by the consumer is an effective way of improving
productivity and decreasing the cost of the service. (F)
12. Services are time-perishable. An opportunity to provide a service, if forgone, is lost
forever. (T)
13. Both manufacturing and services can suffer from technological obsolescence. (T)
14. Health care services are projected to have the greatest percent change in U.S. employment
in the period 2008-2018. (F)
15. From a marketing perspective, services, unlike goods, involve transfer of ownership. (F)
16. It is convenient and often necessary to combine the operations and marketing functions
for service organizations. (T)
17. Sharing service resources among customers presents a challenge for mangers. (T)
18. Little or no interaction between customer and service provider is required when the service
is customized (F)
19. Personnel training is a criterion for evaluating the explicit services feature of the
service package. (T)
20. The decrease in the proportion of income spent on the basic necessities of life has
encouraged the demand for more services and accelerated the transition to post-industrial
society. (T)
21. Marketing helps smooth demand to match capacity in service operations. (T)
22. Service-dominant logic is the foundation of “service science.” (T)
23. Value for the “business service experience” is derived from co-creation. (T)
24. A standardized experience is a feature of the new experience economy. (F)
25. A business service experience (B2B) has three dimensions: co-creation of
value, relationships, and sustainability. (F)
Multiple Choice
1. The service package consists of five features. Which one of the features listed below is not
included in the package?
a. Explicit services
b. Supporting facility
c. Information
d. Cost of service*
2. The major input into a large public hospital from a service point of view would be:
a. physicians' services.
b. patients.*
c. nursing services.
d. federal reimbursement (Medicare/Medicaid).
3. Which of the following is not true of services?
a. The customer is the input.
b. The customer takes an active part in the service.
c. A service can be inventoried.*
d. Production and consumption occur simultaneously.
4. Which of the following is not a type of service in the non-ownership classification?
a. Goods rental
b. Information*
c. Labor and expertise
d. Network usage
5. The service process matrix classification consists of four categories of services. Which one of
the four features listed below is not included in this classification?
a. Service factory
b. Service shop
c. Public service*
d. Professional service
6. Which service offering is best described by the following service mix: a high degree of
customer interaction and a high degree of labor intensity?
a. Public university
b. Cruise ship
c. Plumbing repair
d. Chiropractor*
7. Division of labor is the central concept of:
a. Industrial societies*
b. Preindustrial societies
c. Agrarian societies
d. Postindustrial societies
8. An empty airline seat or hotel room not occupied best illustrates the characteristic of
a service's
a. time perishability.*
b. labor intensity.
c. intangibility.
d. simultaneous production and consumption.
9. Which type of service falls under the category of "high labor/low customization?"
a. Service factory
b. Service shop
c. Mass service*
d. Professional service
10. Which one of the following is not a value-added service provided by a manufacture
to increase profits?
a. Financing or leasing
b. Customer-support call center*
c. After-sales maintenance
d. Network and communication services
11. Which of the following is not a feature of the new experience economy?
a. The experience is memorable.
b. The experience is customized.*
c. The customer is treated as a guest.
 d. The experience is staged.
12. The key technology of a postindustrial society is .
a. machines
b.energy
c. information*
d.intellectual capital of the workers
13. Capital decisions, technological advances, and managing demand are some
managerial challenges for a
a. service factory. *
b. service shop.
c. mass service.
d. professional service.
14. Which among the following strategies is used by fast-food restaurants to reduce
costs?
a. Increase advertising via the Internet.
b. Allowing the customer to play an active part in the service process. *
c. Increase prices.
d. Increasing menu items to cater to varying tastes.
15. Which one of the following reasons best explains the recession-resistant nature of services?
a. Services cannot be inventoried.*
b. Many services, such as healthcare, are essential.
c. Many service employees, such as those who work on commission, do not need to be
laid off during recessions.
d. The number of jobs in maintenance and repair services increases during recessions.
16. The concept of economies of scale is best described as
a. the replacement of fixed costs with variable costs.
b. selling a wider range of products.
c. a synonym for economies of scope.
d. the replacement of variable costs with fixed costs.*
17. The presence of a friendly desk clerk in a budget hotel is an example of which of
the four features of a service package?
a. supporting facility
b. facilitating goods
c. explicit services
d. implicit services *
18. The concept of economies of scope is best described as
a. a synonym for economics of scale.
b. the use of brand extensions.
c. using existing channels of distribution to introduce a new product.*
d. extending existing distribution channels to reach new customers.
19. Which of the following is not a principle on which service experience design is
based?
a. Theme the experience.
b. Eliminate negative cues.
c. Mix in memorabilia.
d. Encourage customer feedback.*
20. is a foundation premise of Service-Dominant Logic
a. The customer is always right
b. Only post-industrial economies are service economies
c. Goods are distribution mechanisms for service provision*
d. Money is the fundamental basis of exchange
21. Which of the following does not describe a business service experience?
a. stage*
b. co-create
c. collaborator
d. sustained over time
22. The realms of an experience include all but one of the following:
a. Entertainment
b. Education
c. Estheticism
d. Elation*
23. Which one of the following is not a dimension of a business service experience?
a. Co-creation of value
b. Problem solving*
c. Relationships
d. Service capability
24 Which of the following is an example of a business service (B2B)?
a. Communications
b. Auditing*
c. Retailing
d. Leasing
25 Service innovation is driven by which factor listed below?
a. New product technology
b. Customer needs
c. Observant contact employee
d. All of the above*
26 In an experience economy the method of supply is
a. revealed over time.*
b. stored in bulk.
c. delivered on demand.
d. inventoried.
 CHAPTER 2
SERVICE STRATEGY

CHAPTER QUIZ QUESTIONS

True/False
1. A characteristic of the overall cost leadership strategy is the incurring of start-up losses to
build market share. (T)
2. On-line networks between suppliers and their customers create a barrier to entry. (T)
3. When pursuing a differentiation strategy, a service firm should work to ensure that the
service being offered is standardized. (F)
4. Service winners are the competitive dimensions used by customers to decide among
qualified service providers. (T)
5. Quality is considered to be a structural element of the strategic service concept. (F)
6. Service industries have low entry barriers because economy-of-scale opportunities are
limited. (F)
7. The use of micromarketing has the potential to create customer concerns about invasion
of privacy. (T)
8. Implementing a low-cost strategy can sometimes revolutionize an industry. (T)
9. A cost-leadership strategy often involves customizing a standard service. (F)
10. The competitive dimension of dependability is a likely candidate for becoming a service
loser. (T)
11. Selling information and developing new services are examples of the role that
information technology plays in generating revenue. (F)
12. Information technology can be used to promote customer loyalty. (T)
13. The IRS has identified frequent-user programs as anti-competitive. (F)
14. American Airlines' early development of the SABRE reservation system became the
foundation for its yield management innovation. (T)
15. Information databases are an asset, because they represent a source of revenue. (T)
16. Information is a substitute for inventory. (T)
17. Focus is a competitive strategy that creates a service perceived as being unique. (F)
18. Service encounter, quality, information, and capacity planning are all managerial
elements of a strategic service concept. (F)
19. Ordering from L.L. Bean by telephone is an example of a service firm maximizing
opportunities for economies of scale. (T)
20. A firm facing serious competition for the first time is in the journeyman stage of a
service firm's competitiveness. (T)
21. World-class service operations strive to replace workers with enhanced automation. (F)
22. Firms classified as "available for service" view quality improvement efforts with disdain.
(T)
23. For a firm achieving "journeyman" competitive status, the back-office function is
considered an activity that plays an important role in service delivery. (F)
24. In a world-class service firm, the front-line management controls the process. (F)
25. The job design premise in a world-class service organization is division of labor. (F)
26. Porter’s five forces analysis is used at the industry level to determine competitive
intensity. (T)
27. SWOT analysis is objective with easily agreed upon results. (F)
28. Scalability is a measure of how unit variable cost relates to transaction volume. (T)
29. Infinite scalability can occur only when the variable cost is zero. (T)
30. Healthcare is an example of a service that exhibits high scalability. (F)
31. A highly scalable firm such as Kelly Blue Book (kkb.com) requires a call center. (F)
32. Scalability is enhanced with self-service. (T)
33. Customers seldom take note of firms that are leaders in the sustainability movement. (F)
34. Recycling paper and reducing energy usage often is the first step towards sustainability.
(T)

Multiple Choice
1. The qualifier for an airline offering short commuter flights is:
a. quality of the meals.
b. safety record.*
c. politeness of the crew.
d. on-time performance.
2. Place the McDonald's fast food chain within the following matrix:
Extent to which Service Is Customize
Low High

Little
(a)* (b)
Extent to which
Contact Personnel
Exercise (c) (d)
Judgment
Much

3. A difficult economic environment exists for service industries for all but one of the
following reasons.
a. Relatively high overall entry barriers*
b. Product substitution
c. Minimal opportunities for economies of scale
d. Exit barriers.
4. A personal training facility that is located in the exclusive Beverly Hills area with only one
other competitor could adopt a service strategy that emphasizes .
a. overall cost leadership
b. differentiation*
c. focus
d. personalization

5. Of the nine dimensions of service competition, three are regarded as most likely to become
service losers. Which of the following is not one of those three vulnerable dimensions?
a. Speed
b. Price*
c. Dependability
d. Personalization
6. Which of the following is not identified as a strategy common to many
successful service providers?
 a. Close coordination between the marketing and operations
b. The exploitation of information to generate new business
c. A project-oriented organizational structure*
d. Redirection of the strategic service vision inward to focus on employees
7. Which of the following usually is not a good idea with respect to an overall cost leadership
strategy?
a. Offer as many different services as possible to spread overhead costs.*
b. Concentrate on routine/standardized services.
c. Replace labor with capital where possible.
d. Perform some service activities off-line at a centralized site.
8. The nature of the service act depends on to whom or to what the service is directed and the
degree of "tangibility" of the service provided. An example of a tangible service directed to
the possessions of a customer would be:
a. a stay in a hotel.
b. an investment advising session.
c. a fortune telling session.
d. a full-service car wash.*
9. Which one of the following is not a key characteristic that leads to a difficult competitive
environment for service industries?
a. Low barriers to entry
b. Lack of sustainable competitive advantage
c. Lack of government regulation and oversight*
d. Low switching costs for customers
10. In which of the following cases does the use of information raise ethical issues?
a. Yield management
b. Selling information
c. Micromarketing
d. All of the above*
11. American Airlines' SABRE reservation system fills the following strategic role
of information:
a. Revenue generation
b. Productivity enhancement
c. Creation of barriers to entry*
d. Data base asset
12. Services can create barriers to entry by
a. using economies of scale.
b. creating switching costs.
c. using databases and information technology.
d. all of the above.*
13. Which of the following is an example of the competitive use of information in
generating revenue?
a. Reservation systems
b. Data envelopment analysis
c. Micromarketing*
d. Expert systems
14. Which of the following is not a role of information technology?
a. Creating a barrier to entry for competitors
b. Generating revenues
c. Displacing workers*
d. Managing multisite operations
15. Using the dimensions of strategic focus and competitive use of information can identify four
strategic roles of information. Which of the following is not a strategic role of information?
a. Create barriers to entry.
b. Generate revenue.
c. Create a data base asset.
d. Provide global communications.*
16. Real-time information technologies that have a focus on internal operations can play a
competitive role in increasing revenue opportunities. Which one of the following uses of
information does not play a role in generating revenue?
a. Yield management
b. Point of sale
c. Expert systems*
d. Sale of information
17. Bar coding and checkout scanner technology have created a wealth of consumer buying
information that can be used to target customers with precision. This process is an example
of:
a. service development.
b. micromarketing.*
c. data envelopment analysis.
d. point of sale.
18. Kraft targeted its cream cheese flavors to match the tastes of a store’s customers using off-
line analysis of POS (point-of-sale) data. This is an example of:
a. yield management
b. expert systems
c. data envelopment analysis
d. micromarketing*

19. Service firms use information technology to create barriers to entry, generate revenue,
enhance productivity, and serve as data base assets. Where does productivity enhancement
fit in the diagram below?
 Competitive Use of Informa
On-line Off-line
Externa l
(a) (b)
Strategic Focus

Interna (c) (d)*

l
20. Which of the following service quality descriptions would be considered "World Class?"
a. It raises the customer's expectations and improves continuously.*
b. It exceeds the customer's expectations and is consistent on many dimensions.
c. It is less important than cost and is highly variable.
d. It contributes to service and plays an important role in total service.
21. Not satisfied with just meeting customer expectations, this category of service firms expands
upon the expectations to levels that competitors find difficult to meet.
a. Available-for-service
b. Journeyman
c. Distinctive competence achieved
d. World class service delivery*
22. The innovation of moving from a "country" store where the proprietor fills the
shopper's list with items that are kept behind the counter to a self-service supermarket
where the shopper fills a cart with items represents a move between which of the
following pairs of competitive stages?
a. From available-for-service to journeyman
b. From available-for-service to distinctive competence achieved*
c. From journeyman to distinctive competence achieved
d. From distinctive competence achieved to world class service delivery

23. Which of the following stages of a firm's competitiveness describes customers who seek out a
firm based upon its sustained reputation for meeting customer expectations?
a. Available-for-service
b. Journeyman
c. Distinctive competence achieved*
d. World class service delivery
24. Which one of the following does SWOT analysis not have as its aim?
a. Reveal competitive advantages
 b. Determine the competitive intensity*
c. Analyze prospects
d. Development of contingency plans
25. Porter’s five forces analysis does not include which one of the following considerations.
a. Pricing power*
b. Potential new entrants
c. Threat of substitutes
d. Bargaining power of suppliers
26. Which one of the following is not a dimension of scalability?
a. Information vs. goods content
b. Degree of self-service*
c. Cost of after-sales service
d. Shipping and handling costs
27. Which of the following is not considered a criterion for evaluating the triple
bottom line?
a. social progress
b. economic growth
c. environmental stewardship
d. market share*

CHAPTER 3
NEW SERVICE Development

CHAPTER QUIZ QUESTIONS

True/False
1. The "line of visibility" found in a service blueprint separates the front office operations from
the back office operations. (T)
2. A factor that simplifies the design of service systems is the presence of the customer in the
process. (F)
3. A “line of interaction” also can be found on a service blueprint. (T)
4. An increase in divergence can maximize the revenue that is generated by each customer. (T)
5. Dry cleaning is an example of a service where isolation of the technical core would be
inappropriate. (F)
6. Fast-food restaurants have adopted the production-line approach to service design. (T)
7. An important variable in the design process is the amount of customer participation in the
delivery of the service. (T)
8. Financial consulting is a service with low complexity and high divergence. (T)
9. Ideas for new service innovations often originate with customers. (T)
10. A major incentive for innovation in services is the ability to patent an idea. (F)
11. Service complexity can be measured by analyzing the number and intricacy of the steps
required performing it. (T)
12. The “project authorization” in the NSD cycle is part of the development step. (F)
13. The “line of visibility” for a self-service process blueprint would be near the top of the
diagram. (F)
14. A service blueprint will not facilitate creative problem solving because it will be too rigid a
definition of the service delivery system. (F)
15. Investment banking is a financial service that has high complexity and high divergence. (T)
16. Limited discretion of service workers is a feature of the production-line approach to service
design. (T)
17. Basic research typically is limited to federal, university, and nonprofit organizations. (T)
18. In the new service development process cycle, development follows design. (F)
19. JIT is an example of information driven technology innovation. (F)
20. The service encounter is a structural service design element. (F)
21. Intellectual property is a creation of the mind. (T)
22. Intellectual property rights allow the owner to secure monopoly profits for a limited time. (T)
23. Radical service innovations are driven mostly by technological innovations. (T)
24. Readiness to embrace new technology is a measure of how fast new technology is adopted in
the marketplace. (F)

Multiple Choice
1. Which of the following is not a characteristic of a production-line approach to provide a service?
a. Division of labor
b. Substitution of technology for people
c. Standardization of the process and service provided
d. High employee autonomy in task execution*
2. One advantage of reduced divergence is
a. quicker response to market demands.
b. greater efficiency.*
c. maximization of revenue per customer.
d. the ability to command higher prices.
3. Service processes can be classified according to each of the following, except the
a. degree of customer satisfaction.*
b. degree of customer contact.
c. object of the service activity defined as goods, information or people.
d. degree of divergence ranging from standard to customized service.
4. Which one of the following is not an example of a high customer contact service?
a. Dry cleaning*
b. Banking
c. School
d. Hotel
5. The term "customer contact" refers to the
a. handling of the product by the customer.
b. influence the customer has on service design.
c. amount of time spent waiting in the system.
d. physical presence of the customer in the system.*
6. A service with a low degree of divergence allows a manager to consider all but one of the following
options?
a. Hire workers who have little technical skills.
b. Substitute automation for repetitive tasks.
c. Empower workers with decision-making authority.*
d. Incorporate a "production-line" approach to service.

7. The most interactive element in the service blueprint of a fitness facility is the
a. choice of music played.
b. amount and type of exercise equipment.
c. attention given to prospective members on their initial visit.*
d. cleanliness of the locker rooms.
8. A service blueprint can be used for all but one of the following:
a. Educate customers.
b. Identify areas of service improvement.
c. Maintain the level of service complexity and divergence.*
d. Identify points where moments of truth will occur.
9. For companies offering customized services, which one of the following is true?
a. A comprehensive employee hiring process is very important.*
b. Employee tasks are low on divergence.
c. A production-line approach to service is desirable.
d. Information processing plays a minor role.
10. Which of the following is not an increase in service complexity?
a. A supermarket adds a florist shop.
b. A supper club opens for Sunday brunch.*
c. A restaurant switches from “house salad” to a salad bar with 40 items.
d. A health spa hires a massage therapist.
11. Which of the following is not an advantage of reducing the divergence of a service process?
a. Improved productivity
b. Uniformity
c. Greater flexibility*
d. Reduced costs
12. A service blueprint with a large number of intricate steps is considered to have a
a. high degree of divergence.
b. low degree of complexity.
c. high degree of complexity.*
d. low degree of divergence.
13. The new service development process cycle contains all but one of the following activities:
a. Engineering*
b. Analysis
c. Development
d. Full launch
14. Which of the following is not an incremental service innovation?
a. Service line extension
b. Service improvements
c. Style changes
d. Service quality initiative*
15. Which of the following is not a service design element?
a. Capacity planning
b. Managing capacity and demand
c. Market research*
d. Information
16. Which of the following features does not illustrate a contribution that the customer can make
in the delivery of services?
a. Substitution of customer labor for provider labor
b. Smoothing service demand
c. Service standardization *
d. None of the above
17. Only exceeded the United States in percent non-manufacturing share of total business
R&D expenditure in 2001.
a. a. Japan
b. b. Norway*
c. c. Sweden
d. d. United Kingdom
18. Internet shared the highest customer satisfaction score with Express Delivery.
a. search engines
b. auctions
c. brokerage
d. retail*
19. is not a source of technology-driven service innovation.
a. Power/energy
b. Material
c. Location*
d. Facility design

20. In service design, to promote sales opportunity is preferred to .

a. Phone Contact, Face-to-face Customized
b. Onsite Technology, Website*
c. Website, Onsite Technology
d. None of the above.
21. is not one of the categories of intellectual property.
a. A trademark
b. A trade secret
c. Industrial design.
 d. Process layout*

22. Check processing is an example of a process with

a. indirect customer contact and low divergence.
b. direct customer contact and low divergence.
c. c. no customer contact and high divergence.
d. d. no customer and low divergence.*

CHAPTER QUIZ QUESTIONS

True/False
1. The corporate culture of a firm does not significantly influence the quality of the service
it provides because the culture is internal and, therefore, not perceived by the customer. (F)
2. Flexibility in meeting customer needs is the main reason that some service firms have
empowered contact personnel. (T)
3. A self-service gasoline station that is equipped with a credit card reader is an example of
a customer-dominated service encounter. (T)
4. Conducting a pre-employment interview that requires the applicant to answer a question
regarding a specific episode is called a situational vignette. (T)
5. The majority of difficulties in customer/employee interactions are caused by unrealistic
expectations of the customers. (T)
6. In the service encounter triad, the potential conflict between the service organization and
its contact personnel is one of efficiency vs. satisfaction. (F)
7. The effectiveness of an online encounter can be measured using E-S-QUAL. (T)
8. The Disney organization refers to its employees as cast members in order to promote its
organizational culture. (T)
9. When the customer's role is built into the service delivery system, he or she is said to be a
coproducer. (T)
10. Informal ethical controls are necessary to set boundaries for what is considered
acceptable behavior (F)
11. The service profit chain argues that internal quality drives leads to profitability and
growth. (T)
12. An organization can standardize service delivery by effecting strict operating procedures
in order to follow a cost leadership strategy. (T)
13. Situational vignette, role playing, and direct questioning all have been used in evaluating
potential front-line employees. (F)
14. Internet banking is a service that would appeal to the economizing customer, the
personalizing customer, and the convenience customer. (F)
15. Efficiency- versus-satisfaction is the possible source of conflict in the relationship
between the customer and the service organization. (T)
16. A customer who does not clear his or her table at a fast-food restaurant has violated his
or her script. (T)
17. Easy access is a success factor that is common to both human-to-human service
encounters as well as machine-to-machine service encounters. (F)
18. Southwest Airlines delivered high service value because of employee retention and
productivity. (T)
19. Acceptance of new technology by customers is hampered because a new script must be
learned. (F)
20. Empowerment begins with delegation. (F)
21. Delegation is acting on another’s behalf. (T)
22. Serving a disabled person is an example of an unreasonable demand. (F)
23. A visit to a psychiatrist represents a technology-free service encounter. (T)
24. Some organizations use a website for internal communications only. (T)
25. Self-service has evolved from machine-assisted to Internet-facilitated. (T)
26. Customer and server interact face-to-face in technology-mediated service encounters.
(F) Multiple Choice
1. A customer who is interested in the self-service option would find which of the following
dimensions of service most important?
a. Risk involvement
b. Customer's control of the situation*
c. Amount of time involved
d. Efficiency of the service process
2. Which interviewing technique would be appropriate to determine how a potential employee
would react in a service encounter?
a. Situational vignette*
b. Abstract questioning
c. Direct questioning
d. Acting as a customer
3. The most common reason for difficulties during the interaction of customers and contact
personnel is:
a. unreasonable demands.*
b. a technical breakdown in service delivery.
c. incompetent contact personnel.
d. a lack of attention to detail by contact personnel.
4. All of the following are characteristics of a service organization with an inverted "T" structure,
except:
a. the layers of supervision are reduced.
b. contact personnel are trained, motivated, and supplied with timely computer-based
information.
c. the service encounter is managed at the point of delivery.
d. limiting discretion of contact personnel.*
5. A person who drives 100 miles to a factory outlet once a month to buy clothing for the family
is:
a. an economizing customer.*
b. an ethical customer.
c. a personalizing customer.
d. a convenience customer.
6. A "moment of truth" is not:
a. an opportunity to influence a customer's perception of the service quality.
b. critical in achieving a reputation for superior quality.
c. when the customer is forming an opinion about the efficiency of the service.*
d. an interaction between a customer and a service provider.
7. The most important attribute of customer-contact personnel is:
a. education.
b. sales related knowledge.
c. intelligence.
d. empathy for the customer.*
8. In an organization that has empowered its front-line employees, the middle managers become:
a. obsolete.
b. facilitators.*
c. inspectors.
d. supervisors.
9. Consider the following vignette. Aboard the cruise ship Royal Majesty, a breakfast diner
complains to the waiter that the meal is cold. The waiter sends the meal back to the kitchen
and returns shortly with a plate of steaming eggs and bacon. The customer refuses the meal.
Rattled, the waiter expresses his confusion to the maitre d'. This breakdown in customer
interaction can best be described as:
a. unacceptable service.
b. slow performance.
c. unacceptable treatment of employees.
d. unreasonable demands.*
10. A service organization’s culture is communicated by all but one of the following methods?
a. Choice of language.
b. Use of stories.
c. Motto
d. Manual*
11. Which of the following is not a classification of shopping attitude for a service customer?
a. Personalizing customer
b. Convenience customer
c. Goal-seeking customer*
d. Ethical customer
12. Jiffy Lube, a franchised oil change and lubrication service, is an example of a service
encounter dominated by
a. the organization.*
b. contact personnel.
c. the customer.
d. corporate culture.

13. Three elements (the service organization, the contact personnel and the customer) interact in
the service encounter triad shown below. Which position represents the customer?
a
Efficiency Efficiency
vs. vs.
Autonomy Satisfaction

b c *
Perceived
control

14. Employee empowered service companies have committed to all but one of the following:
a. investment in people
b. use of information technology
c. linking compensation to performance*
d. development of training programs for employees
15. Which of the following occurrences would be considered a “moment of truth” in a restaurant
setting?
a. A diner considering the amount of tip to leave.
b. A child telling his parent what item on the menu looks good.
c. A waiter telling the cook what he really thinks of the manager.
d. A receptionist assigning a table to a customer.*
16. Which of the following is the least likely source of difficulty with interactions between
customers and contact personnel?
a. poor employee selection and training
b. customers not understanding their role in the process
c. customers having no money to pay the bill*
d. unrealistic customer expectations
17. In the context of the service encounter triad, the trade-off between the service organization
and the contact personnel is one of
a. efficiency-versus-satisfaction.
b. Efficiency-versus-autonomy.*
c. perceived control.
d. Autonomy-versus-satisfaction.

18. Which one of the following is not a factor for success in a machine-to-machine service
encounter?
a. Easy access*
b. Automatic verification
c. Transaction security
d. Fail-safe operation
19. In the service profit-chain model, which one of the following was not listed as a component
of the internal service delivery system?
a. Job design/decision-making latitude
b. Selection and training
c. Pay and compensation*
d. Information and communication
20. Which of the following firms has an encounter not dominated by the service organization?
a. Enterprise Rent-A-Car *
b. H & R Block
c. McDonald’s
d. Jiffy Lube

21. is not one of the dimensions of the E-S-QUAL Web site survey instrument.
a. Fulfillment
b. System availability
c. Navigation*
d. Privacy

22. A customers who becomes intoxicated and disruptive is an example of:

a. unreasonable demands.
b. abusive or hostile attitude.
c. inappropriate behavior.*
d. demands contrary to policies.
23. is not an example of unethical customer-contact behavior.
a. Creating a need for service*
b. Performing unnecessary services
c. Sharing customer information with third parties
d. Giving away a guaranteed reservation
24. Self-service falls into the Technology - service encounter category.
a. assisted
b. generated*
c. facilitated
d. mediated

CHAPTER QUIZ QUESTIONS

True/False
1. The servicescape can influence perceived quality. (T)
2. The design of facilities is dependent entirely on the construction and operating costs of
the facilities. (F)
3. A well-conceived servicescape can communicate desired customer behavior. (T)
4. Heuristic algorithms not only are appealing intuitively, but they also guarantee optimal
solutions. (F)
5. Servicescapes are most important in their affect on customers. (F)
6. In a product layout, the bottleneck operation defines the capacity of the service. (T)
7. The product layout often requires special equipment and special skills to deal with high
volume of demand for service that is anticipated. These factors create a very inflexible
layout. (T)
8. The line-balancing problem attempts to resolve the inconsistencies in the capacities at
various stages in a product layout. (T)
9. A process layout, done correctly, promotes standardized service. (F)
10. The relative location problem deals with the problem of allocating n departments to n
locations. Complete enumeration is time consuming because there are a total of n! possible
arrangements. (T)
11. A well-balanced line would have all jobs of nearly equal duration to avoid unnecessary
idleness in work assignments. (T)
12. The physical complexity of the servicescape for L.L. Bean is categorized as lean. (F)
13. A fixed sequence of steps that all customers must experience is characteristic of process
layouts. (F)
14. The procedure to improve flow distance in a process layout by arranging the relative
location of departments is known as operations sequence analysis. (T)
15. A product layout affords some degree of customization. (F)
16. Mid-Columbia Medical Center has a special employee-only entrance to enhance security.
(F)
17. The automobile driver’s license office is an example of a product layout. (T)
18. At a roadside snake farm, both customer and employee perform within the servicescape.
(T)
19. Signage is not an environmental dimension of the servicescape. (F)
20. Bottlenecks usually are associated with process layouts. (F)
21. Rush order flow time and throughput time are identical when the system is empty. (T)
22. Capacity utilization of individual operations is a dangerous performance metric. (T)
23. The entire system capacity is measured by the inverse of the bottleneck CT. (T)
24. Cycle time is the average time to complete a service operation. (F)
25. The swim lane flowchart highlights the handoffs between functional activities. (T)
26. The bottleneck activity of a process is shown as an unbroken bar in a Gantt chart. (T)

Multiple Choice
1. Which one of the following is not a major factor that could influence facility design?
a. Objectives and nature of the service
b. Flexibility in operations
c. Availability of land
d. Site location*
2. A product layout would facilitate the concept of:
a. service in series.*
b. service in parallel.
c. a first come, first served policy.
d. balanced flow.
3. Which of the following is not a method service facilities use to provide orientation for
customers?
a. Signs and color codes to indicate direction
b. Use of walled cubicles to ensure privacy*
c. Use of artifacts
d. Franchised services that use formula facilities
4. The line balancing problem arises because of:
a. mismatched capacities of the various operations.*
b. mismatched labor inputs required at various operations.
c. large waiting lines.
d. inflexibility of the line.
5. The CRAFT program for facility layout uses an initial solution to:
a. be tested for improvement.*
b. arrive at a feasible solution.
c. provide an analytical solution.
d. define the layout problem.
6. One of the advantages of a product layout approach to service design is:
a. the elimination of bottlenecks.
b. achieving equal division of labor.*
c. the ease of customization.
d. increased flexibility.
7. Identify the bottleneck operation in the following exclusive hairdressing salon.
Activity Average time, min.
a. Pre-counseling 15
b. Shampoo 10
c. Haircut* 30
d. Manicure 20
8. The inability of a jewelry store to expand its current operations to include, for example, an in-
store repair and manufacturing facility in response to customer demands, is neglecting which
factor of service facility design?
a. Land availability and space requirements*
b. Flexibility
c. The nature and objectives of the service organization
d. Community and environment
9. A batch type of service process has the characteristic of
a. many specialized departments.
b. a group of customers treated simultaneously.*
c. uninterrupted delivery.
d. a one-of-a-kind engagement.
10. The customer is a(n) in the service process and his/her impression of the service
quality is influenced by many .
a. observer/perceptions
b. observer/observations
c. participant/perceptions*
d. participant/observations
11. What defines the capacity of a service product layout?
a. The activity requiring the most time per customer.*
b. The size of the queue.
c. How tasks are allocated among servers.
d. Ability of workers to change the process speed.
12. In the design of a fitness center, where would be the most advantageous location of a juice
bar? Consider such factors as traffic flow, impulse buying, and orientation/visibility.
a. At the back of the gym near the aerobic equipment.
b. Near the entrance/exit of the gym.*
c. In a small alcove set to one side of the gym.
d. Upstairs in a separate enclosed room marked by a sign.
13. Which of the following retail servicescapes would support an upscale store image best?
a. stark tile floors.
b. exposed, bright lighting.
c. store personnel waiting at cash registers.
d. well-spaced, lightly stocked shelving.*
14. In order to reduce disorientation, Richard Wener argues that the following features should be
incorporated into a facility design: previous experience, design legibility, and one of the
following:
a. a formula design.
b. orientation aids.*
c. adequate lighting.
d. an entry atrium.
15. Facility layout is discussed with attention to traffic flow, space planning, and one of
the following:
a. need to avoid unnecessary travel*
b. eliminating bottlenecks
c. aesthetic factors
d. cost of providing service
16. Which one of the following is an example of a process layout?
a. fast-food restaurant
b. cafeteria
c. hospital*
d. none of the above
17. The advent of the “hub and spoke” airline network following deregulation is an example of:
a. nature and objectives of service organizations.
b. flexibility. *
c. aesthetic factors.
d. land availability and space requirements.
18. All but one of the following impacts the user friendliness of the facility and the ability
to serve customers effectively:
a. floorplan
b. layout of equipment
c. equipment design
d. time of day *
19. Which among the following choices might not be representative of security measures
taken by retail stores?
a. reducing the number of extremely valuable items sold *
b. a row of bollards outside the entrance
c. doing away with big windows
d. none of the above
20. is the time it takes to complete a process from time of arrival to time
of departure.
a. Rush order flow time
b. Cycle time
c. Throughput time*
d. Direct labor time

CHAPTER QUIZ QUESTIONS

True/False
1. The concept of quality service deployment is based on the belief that services should be
designed to reflect customer requirements. (T)
2. Being meaningful and easy to invoke are important elements of a good unconditional
service guarantee. (T)
3. A process is said to be in control when all the variation that is noticed can be assigned to
specific causes. (F)
4. The first stage or rung of the service quality ladder is cost of quality. (F)
5. The average business hears only from 10 percent of its dissatisfied customers. (F)
6. The systematic-response approach to service recovery uses a protocol to handle customer
complaints. (T)
7. The term "producer's risk" refers to the probability that a sample will indicate an
acceptable quality incorrectly. (F)
8. A service guarantee becomes a service winner when it covers all aspects of the service.
(T)
9. When customer expectations are confirmed by perceptions, service quality is considered
satisfactory. (T)
10. According to the SERVQUAL quality assessment instrument, responsiveness is the most
important dimension of service quality. (F)
11. Serving complimentary drinks on a delayed flight is an example of empathy being shown
by the service personnel to the irate customer. (F)
12. In the service quality gap model, GAP1 arises because of the management’s lack of
understanding about how customers formulate their expectations. (T)
13. Setting goals and standardizing service delivery tasks will help close GAP3, the service
performance gap. (F)
14. The most important function of SERVQUAL is to keep a record of service quality trends
through periodic customer surveys. (T)
15. Managing evidence of information is the key to closing the gap between customer
perception and service delivery. (T)
16. Severity of failure, speed of recovery, service guarantee and perceived service quality are
all factors governing service recovery expectations. (F)
17. A customer’s failure to remember the process steps is an error that falls in the preparation
category. (F)
18. Juran identified internal failure costs, external failure costs, detection costs, and
prevention costs. (T)
19. Fixing service-process problems before they affect the customer could be classified as
another component to the systematic-response approach. (T)
20. The Walk-through Audit focuses on the effectiveness of each stage in the service
delivery process (T)
21. The Club Med example illustrated the creative initiative by staff to implement a pre-
recovery. (F)
Multiple Choice
1. Which of the following dimensions of service quality is most important to customers?
a. Empathy
b. Assurance
c. Reliability*
d. Tangibles
2. Which of the following is not an advantage of offering a service guarantee?
a. It acts as a mechanism to differentiate the firm from its competitors.
b. It advertises the firm's commitment to quality.
c. It allows employees to interpret broadly the firm's service standards.*
d. It acts as a means of receiving feedback from customers.
3. Which of the following is a poka-yoke method?
a. Adopting a checklist to help an employee avoid making a mistake*
b. Designing a service to reflect the customers' needs and requirements
c. Designing a service in a robust manner that can withstand abuse by customers
d. Comparing a firm's quality performance to the performance of others that
are considered "best in class"
4. Which one of the following is not an approach to service recovery.
a. case-by-case
b. systematic-response
 c. unconditional guarantee*
d. early intervention

5. The costs of quality for services include all of the following except:
a. failure costs.
b. prevention costs.
c. control costs.*
d. detection costs
6. A gap in service quality is not the difference between:
a. customer expectations and management's perceptions of customer expectations.
b. the service delivery and the results that are communicated externally to the customer.
c. customer expectations and management's perception of the delivered service.*
d. the perceptions of the delivered service that are translated into service
quality specifications and the actual service delivery.
7. Which one of the following is not an example of detection costs?
a. Rework*
b. Collecting quality data
c. Process control
d. Periodic inspection
8. Which of the following is not considered effective in achieving and maintaining service
quality?
a. Encouraging service providers to be highly visible in dealing with customers.
b. Establishing peer groups among service providers to foster teamwork and a sense
of pride.
c. Installing a system of incentives that emphasizes quality.
d. Increasing supervision of service providers.*
9. Which of the following is not part of a good service guarantee?
a. It is unconditional.
b. It is easy for the customer to understand.
c. It is meaningful to the customer.
d. It is difficult for the customer to invoke.*
10. All of the following are examples of “detection costs” of quality except
a. Quality planning.*
b. Periodic inspection.
c. Process control.
d. Collecting quality data.
11. Which quadrant in the matrix below represents attributes of a good service guarantee?
No Conditions Many Conditions
Complex (a) (b)
Detailed
Clear (c)* (d)
Precise

12. Which of the following is a strategy for closing the gap between customer expectations
and management perceptions of customer’s expectations (GAP 1)?
a. Standardization of service delivery.
b. Improved market research.*
c. Employee empowerment.
d. Investment in training.
13. Which of the following statements is not true concerning a service guarantee?
a. A well designed and implemented service guarantee can help a firm gain control
over its operation
b. Fear of customer cheating inhibits some mangers from adopting a service guarantee.
c. Managers are likely to worry about the costs of a service guarantee, but for the
wrong reasons.
d. Managers who seek control over the financial consequences of a service
guarantee should require customers to meet various conditions.*
14. There are five dimensions that customers use to judge service quality. The willingness
to help customers and to provide prompt service is
a. assurance.
b. empathy.
c. reliability.
d. responsiveness.*
15. Shigeo Shingo is credited with which of the following quality ideas?
a. robustness
b. quality is free
c. poka-yoke*
d. quality function deployment
16. When a process appears to be functioning properly when, if fact, it is out of control, the
type of error and injured party is identified as:
a. Type I error, producer’s risk
b. Type II error, consumer’s risk*
c. Type I error, consumer’s risk
d. Type II error, producer’s risk
17. The difference between a customer’s of a service and the of the service
delivered is called GAP 5.
a. perceptions; perceptions
b. perceptions; expectations
c. expectations; perceptions*
d. expectations; expectations
18. Which of the following is not a reason that a service guarantee works?
a. Encourages individual employees to set their own standards.*
b. Generates reliable data on poor performance.
c. Builds customer loyalty.
d. Forces a firm to identify failure points.
19. Which of the following is not true of a Customer Satisfaction Survey?
a. Survey can be completed at customer convenience.
b. Survey usually is conducted by operations personnel.*
c. Primary focus of survey is on overall impression of service.
d. Survey is designed around common service dimensions.
20. Which of the following is not possible using SERVQUAL?
a. Record customer expectations.
b. Track service quality trends.
c. Measure the quality of competitors.
d. Identify dimensions of service quality.*
21. Which of the following is not true of a Walk-through Audit?
a. Focuses on five dimensions of service package.
b. Emphasis is on evaluation of each stage of service delivery.
c. Survey is completed at customer convenience.*
d. Survey usually conducted by operations personnel.

CHAPTER QUIZ QUESTIONS

True/False

35. DEA circumvents the need to develop standard costs for each service when comparing
the efficiency of multiple service units that provide similar services. (T)
36. Data envelopment analysis (DEA) is best used in an environment of low divergence and
high complexity. (F)
37. Data Envelopment Analysis (DEA), when used repeatedly, can facilitate the competitive
strategy of cost leadership. (T)
38. Continuous improvement is a valuable concept, but it lacks measurement techniques. (F)
39. The Malcolm Baldrige Quality Award measures the quality of products manufactured or
services delivered. (F)
40. Benchmarking measures a firm's quality performance by comparing it to the performance
of other companies that are known for being "best in class." (T)
41. Pareto chart is an arrangement of data where the causes of a problem are arranged in
ascending frequency of occurrence in order to highlight the most likely cause. (F)
42. ISO 9002 does not apply to organizations that perform design and service activities. (T)
43. The fishbone chart offers a structured approach for a team to identify, explore, and
display graphically all of the possible causes of a problem. (T)
44. The Deming wheel is a repetitive cycle where quality improvements result from
continuous incremental turns of the wheel. (T)
45. The objective of Six Sigma is to eliminate variation in process performance. (F)
46. Process capability index measures the variability in a process. (F)
47. A process capability index of two centered on the mean just meets Six Sigma standards.
(T)
48. Lean service is based upon the Toyota Production System. (T)
49. The objective of lean service is a purposeful flow of satisfied customers. (F)
 Multiple Choice
1. Data Envelopment Analysis (DEA) is a method for:
a. measuring a firm's quality performance by comparing it with other companies that are
recognized as "best in class."
b. determining the feasibility of technological innovations in service operations.
c. analyzing the gap between the service customer's expectations and perceptions.
d. comparing the efficiency of multiple service units that provide similar services.*
2. What are the two dimensions in the DEA strategic matrix?
a. Efficiency and profit*
b. Efficiency and quality
c. Profit and quality
d. Profit and location
3. Which pair of parameters describes the “candidates for divestiture” quadrant in the DEA
strategic matrix?
a. Low efficiency, low profit
b. Low efficiency, high profit
c. High efficiency, high profit
d. High efficiency, low profit*
4. Which of the following is not an element of a Quality Improvement Program?
a. Emphasizing subjective data over difficult-to-analyze objective data*
b. Maintaining SOPs for routine and crisis situations
c. Assuming employees are self-motivated and innovative
d. Focusing on customer satisfaction
5. Because customers participate directly in the service process, the success of technological
innovation is dependent upon:
a. the user-friendliness of the innovation.
b. the ability of customers to pay for the service.
c. customer acceptance.*
d. market research.
6. Which of the following categories carries the highest point value on the examination paper for
the Malcolm Baldrige National Quality Award?
a. Leadership
b. Strategic quality planning
c. Management of process quality
d. Customer focus and satisfaction*
7. Which of the following statements is not part of Deming's 14-point philosophy?
a. Create constancy of purpose for improvements of product and service.
b. Promote numerical goals for the workforce.*
c. Constantly and forever improve the system of production and service.
d. Cease dependence on mass inspection.
8. Which one of the following is not a principle of Deming’s philosophy?
a. Customer satisfaction
b. Management by facts
c. Employee loyalty*
d. Respect for people
9. Which among the following is not a category that is eligible for the Malcolm Baldrige
National Quality award?
a. Manufacturing companies
b. Service firms
c. Small businesses
d. Government agencies*
10. Planning, control, and are the three-component cycle required for ISO 9000
implementation.
a. Reporting
b. Documentation*
c. Testing
d. Budgeting
11. All but one of the following are quality tools for analysis and problem solving.
a. Run chart
b. Control chart
c. Flow chart
d. Bar chart*
12. Which one the following is not a guiding principle of lean philosophy?
a. Satisfy the needs of customers by doing only value-added activities.
b. Be flexible in response to customer demands.*
c. Define the value stream by flowcharting the process.
d. Eliminate waste.