Spies For Hire Wage War On Tipsy Tables, Filthy Toilets

Financial Post, Tuesday, May 25, 2004. Mitch Moxley

For Craig Henry, there is no such thing as a leisurely dinner out. When Mr. Henry sits down at a restaurant, he is focused. He takes mental notes of everything, from the greeting at the door to wobbly tables to filthy washrooms, all of which he will later document in a report. And he does it without anyone noticing.

“You have to blend in,” he says. “You have to wear the right stuff and act the right way. You’re very focused.”

Mr. Henry, 41, is a “mystery shopper,” hired by companies for objective customer service evaluations.

Eleven years ago, Mr. Henry left the hotel business to co-found Sensors Quality Management Inc., a mystery shopping provider, with his business partner, David Lipton.

SQM started in an 80-square-foot room in Mr. Henry’s basement. Today, the business occupies a 15,000 square-foot office in suburban Toronto, employs 33 people and contracts from a pool of about 7,000 mystery shoppers around the world.

SQM is a shining example of a burgeoning business, now worth as much as $50 million in Canada and $500 million in North America. Restaurants, retailers, hotels, travel agencies, government services, doctors, airports, and airlines all use mystery shoppers to evaluate customer service.

“I think you’d be hard-pressed to find a major retailer in this country or in the U.S. that does not have a mystery shopping program, or has not had one, or is not considering one,” says Sean Cavanagh, president of Tenox Appraisal Systems Inc., the pioneer of mystery shopping in Canada, first providing the service twenty years ago.

Shoeless Joe’s restaurants, a client of SQM, use mystery shoppers for over 300 visits annually at its 35 Ontario locations, each visit costing between $70 and $100, plus meal costs. Customer service is a way to stand apart amid stiff competition in the casual dining industry, says Joel Sisson, vice-president of operations for the sports-themed restaurant.

Mystery shopping “gives us an unbiased opinion of what’s going on,” Mr. Sisson says.
It’s probably the most important thing in our industry right now, ensuring that you have a very high level of customer service.”

Ten years ago, businesses such as Shoeless Joe’s had about five mystery shopping providers in Canada to choose from, Mr. Cavanagh figures. Five years ago there were ten. Today, there are about forty companies in Canada, ranging from local providers to international competitors, such as Service Intelligence of Calgary, Canada’s largest mystery shopping provider who contracts roughly 50,000 shoppers in North America.

“Is there growing competition? Absolutely,” says Mike Green, vice-president of the Texas-based Speedmark Information Services.

“Prices have come down a lot- defiantly in the last two years. Again, it’s more competition. A year ago I was bidding against three companies, now I’m bidding against five or six companies.”

Lower prices have led to underbidding as mystery shopping providers scramble for clients, forcing providers to adopt new strategies.

Companies now aggressively pursue clients by attending trade shows on a rgular basis and boosting advertising, says Mr. Green, who doubles as president of the 150-member Mystery Shopping Providers Association.

Both Tennox and SQM try to set themselves apart by using an experienced network of mystery shoppers.
SQM, for example, uses a nine-step training program: a step one shopper can evaluate a fast food restaurant and make about $10 and a free meal, while a step nine shopper can earn $150 for staying overnight at a hotel.

Byron McCann, president and chief executive of Service Intelligence, whose clients include large retailers and telecommunications firms, have shifted from simply providing objective information to analyzing the data to help his clients improve customer service.

“To compete we have to go up a food chain and provide a new service to our clients,” Mr. McCann says.
Mystery shopping providers have also implemented systems and new staff to meet growing technological demands. Five years ago, Mr. Cavanagh was delivering hard copy reports to his clients. Now he delivers them through e-mail.

“You better have some very, very technically capable staff designing these reports, designing these systems,” says Mr. Cavanagh, whose clients include 25 large Canadian retailers.
“Today it’s real time. They want reports delivered in 24 or 48 hours.”

Although technology has created a barrier to entry, Mr. Henry of SQM says business will keep blossoming. Customer service, he says, is the only way people can differentiate one company from the next when the product and prices are so similar.

“What’s the only thing that sets you apart from your competitor? It’s service,” he says. “It’s the final frontier.”

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