Test Bank ― Chapter 6 Page 1
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
Chapter 6
Setting Prices and Implementing Revenue Management
GENERAL CONTENT
Multiple Choice Questions
1. ____________ refers to the practice of price discrimination.
a. Critical ratio pricing
b. Dynamic pricing
c. Collective pricing
d. Fixed pricing
e. Classical pricing
2. Which of the following is NOT an objective for service pricing?
a. Build supply.
b. Build demand.
c. Seek profit.
d. Cover costs.
e. Build a user base.
3. ____________ recognizes that resource expenses are linked to the variety and
complexity of goods and services produced and not just on physical volume.
a. Break-even analysis
b. Variable cost
c. Fixed cost
d. Activity-based costing
e. Semi-fixed cost
4. ____________ is defined as the sum of all the perceived benefits minus the sum of all
the perceived costs of service.
a. Net value
b. Consumer surplus
c. Gross value
d. Moderate value
e. Consumer demand
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
5. Which of the following intensifies price competition?
a. Non-price-related costs of using competing alternatives are high.
b. Wider distribution of competitor and or substitution offers.
c. Personal relationships have been established.
d. Switching costs are high.
e. Customer need for time and location specificity.
6. Which of the following reduces price competition?
a. Increasing the number of competitors.
b. Increasing the number of substituting offers.
c. Wider distribution of competitor and/or substitution offers.
d. High switching costs for consumers.
e. Increasing surplus capacity in the industry.
7. Revenue management is the most effective when applied to firms characterized by all
the following conditions EXCEPT ______________.
a. perishable inventory
b. relatively fixed capacity
c. varying customer price sensitivity
d. fixed inventory
8. Price elasticity is computed as ____________.
a. percentage change in demand / percentage change in price
b. percentage change in price / percentage change in demand
c. percentage change in supply / percentage change in price
d. percentage change in demand / percentage change in supply
e. percentage change in price / percentage change in supply
9. Which of the following is NOT an example of a non-physical fence?
a. Time or duration of use.
b. Group membership.
c. Service level.
d. Flexibility of ticket usage.
e. Location of reservation.
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
10. Putting service pricing into practice includes thinking of all the following questions
EXCEPT ____________.
a. What should be the specified basis for pricing?
b. How much to charge?
c. What kind of customers should be charged more?
d. Who should collect payment?
e. When should payment be made?
True/False
11. Pricing is less complex in services than it is in manufacturing.
12. Customers will often pay more for services than they think they are worth.
13. Because quality is subjective, all customers have the expertise to assess the quality
and value they receive.
14. Business owners often fail to recognize the fixed costs that need to be recouped when
providing service.
15. Customers often incur significant financial costs in searching for, purchasing, and
using a service, above and beyond the purchase price paid to the supplier.
16. Shopbots collect price and product information from multiple electronic vendors and
provide it to consumers.
17. Psychological costs relate to unpleasant sensations affecting any of the five senses.
18. Firms do not need to consider post-purchase costs, as they occur after the firm has
already secured a purchase.
19. Firms that are always reacting to competitors’ price changes run the risk of pricing
higher than might really be necessary.
20. Shopbots help consumers combat dynamic pricing online.
Short Answer
21. What three components are considered in a pricing strategy?
22. What are the four distinct categories of non-monetary costs?
23. Under what situations can price competitions be reduced?
24. What are rate fences? Provide examples to aid your explanation.
25. How can firms have revenue management practices and yet still have customer
satisfaction, trust and good will?
Test Bank ― Chapter 6 Page 5
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
Essay
26. Discuss how service firms can minimize non-monetary purchase costs.
27. Describe the concept of price elasticity and draw a graph comparing consumers with
high and low elasticity.
APPLICATION CONTENT
Multiple Choice Questions
28. Which of the following is NOT a firm that uses dynamic pricing?
a. Eagles
b. Yahoo.com
c. Tickets.com
d. Priceline.com
e. All of the above firms use dynamic pricing.
29. The amount of seats reserved for each class of American Airlines passengers on a
flight is referred to as a ____________.
a. field
b. row
c. column
d. bucket
e. gamble
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
30. Which of the following is the best example of a service industry that utilizes price
complexity?
a. Fast food
b. Education
c. Cellular phone
d. Moving/transportation
e. Roofing
31. Which of the following is the best example of a service firm that attracts customers
with low base prices and then piles on additional fees.
a. Rental cars
b. Fast food
c. Education
d. Roofing
e. Consulting
32. Which of the following is NOT listed in the chapter as a firm that uses online reverse
auctions?
a. Priceline.com
b. Hotwire.com
c. eBay.com
d. Lowestfare.com
e. All of the above use online reverse auctions.
True/False
33. Airlines, hotels, and car rental firms are not very good at varying prices in response
to the price sensitivity and needs of different market segments.
34. Yield management computers can determine who is likely to not show up or take
other flights.
35. Amazon.com is a good example of a firm that aggravated its customers with dynamic
pricing.
36. Tickets.com is a good example of a firm that successfully generated more revenue by
implementing dynamic pricing.
Essentials of Services Marketing, 2nd Edition
Jochen Wirtz, Patrica Chew and Christopher Lovelock
37. Freight companies often use a combination of distance and weight or shape of parcel
as a basis to price their services.
Short Answer
38. Give an example of a tradeoff between monetary and non-monetary costs associated
with patronizing a dental clinic.
39. Describe how rate fences should be used in a hair salon service.
40. Draw a graph of the relationship between price per seat on an airline and demand for
seats. Label each price bucket.
41. Relate fairness perceptions to DVD rental late fees.
42. Name two e-tailers that utilize traditional auction models.
Essay
43. Describe how airlines utilize revenue management to enhance profitability.
Revenue management involves setting prices according to predicted demand levels
44. Give an example of a service firm that uses service recovery to compensate for
overbooking and discuss how the firm compensates.
A Westin beach resort frees up capacity by offering guests who are departing the
45. Discuss how a health club could strategically manage capacity via payment
schedules.