Mystery Shopping Improves Bottom Line For Businesses

by Daniel Dullum
March 08, 2006

Keeping a satisfied, repeat customer is an ongoing challenge that all retail outlets face, especially when it comes to building a solid bottom line.

Many factors – positive and negative – can influence bottom line performance, so quantifying the financial return on investment of any new initiative can be difficult. One solution for maintaining customer loyalty is the implementation of a solid mystery shopping program.

“Most companies create a mystery shopping program around a singular need, like an employee incentive or franchisee compliance program,” Matt Wozniak, president and CEO of National Shopping Service, said. “The department responsible for administering the mystery shopping program gathers the field observations and disseminates the information to their group. However, there is a plethora of data that can be extracted and utilized by almost every department within an organization.”

The behavioral return on investment in mystery shopping programs can be readily measured, though, provided the results are effectively used to change employee behavior.

For example, if a mystery shopping program reveals that employees fail to acknowledge customers when they enter the store 50 percent of the time, the company might take specific steps to ensure that employees understand that it is expected of them to greet customers within 30 seconds of arrival. Subsequent mystery shopping might reveal that customers are greeted within 30 seconds 95 percent of the time. Thus, the return for the company is that a specific expected employee behavior has improved by 45 percent.

The financial value of that improvement may be hard to gauge, but consider the benefits of customer retention: a customer who is made to feel welcome and valued is far more likely to do business with a company than a customer who is ignored.

“Customer turnover and defection is a killer for businesses,” said Wozniak. “Keeping a customer for three to six months probably won’t be long enough to recover your initial acquisition expense (advertising, promotions, etc.) for that customer.”

There’s no end to the ways a business can subtly build its bottom line, such as suggestive selling, soft selling, or add-ons. To an extent, all of it works. And it works even better when combined with the goal of maintaining a satisfied repeat customer.

“The numbers can be staggering when you look at how minute changes in frontline staff behavior can influence revenues into millions of dollars,” Wozniak said. “If done correctly, companies can generate a happier, better informed and more satisfied repeat customer.”

As a hypothetical example, Wozniak says that at a store averaging 7,000 transactions per week in a 100-store chain, motivating the frontline staff with incentive programs, actionable mystery shopping feedback and refresher training on suggestive selling can improve bottom line numbers dramatically.

“Just increasing the frequency of suggestive selling on items valued at $1 from the typical 10 percent to 11 percent of transactions, the annual gross revenue can increase by $364,000,” Wozniak explained. “The trick is discovering how managers can motivate frontline employees to consistently and effectively offer revenue-increasing items or services to the daily customer flow.”

Implementing a non-biased monitoring tool like a mystery shopping program, along with enhanced training and constructive feedback, is a step toward the goal of maintaining customer loyalty.

“Most staff members at a convenience store, for example, are initially uncomfortable selling because they’re cashiers, after all, not salespeople,” Wozniak said. “They feel as though they are bugging the customer or are being forced by management to sell something the customer didn’t want in the first place. And at peak customer flow times, suggestive selling becomes just another task that slows down queue times.

“If frontline staff understands effective and unobtrusive selling techniques and has feedback tied to incentive on their performance, the end result will be happier customers, staff receiving positive reinforcement for a job well done, and greater revenue – a win-win-win.”

Mystery shopping programs produce valuable information about customer expectations for a business’s product or service, and how the staff follows company directives. It’s all about the perception of brand performance and how it affects the bottom line.

“Contrary to popular belief, most customers don’t want an exceptional, over-the-top experience during every interaction,” Wozniak said. “They want a routine, pleasant, stress-free, predictable interaction. Exceeding the customer’s expectations every visit is not realistic and is not obtainable for any period of time.

“The key is to identify the correct opportunities for exceptional service and then execute your plan flawlessly and exceptionally.”

To determine which customer behaviors affect a business’s revenue and expenses, Wozniak suggests making a list of four steps.

Step 1: Outline what you want your customers to do more often or less often. Wozniak emphasizes that each item must be “measurable” and something “to be observed.”

“This list would not include customer feelings, opinions or attitudes. Only things that can be measured and observed,” Wozniak said.

Step 2: Wozniak suggests reviewing the list created in Step 1 and remove any items that cannot be influenced by staff interaction or equipment speed. The new list should only include items where specific staff behavior (or equipment performance) can influence customer behavior.

Step 3: Determine how the staff will need to be trained to affect each customer behavior modification, how it will be measured, how the incentives to perform will be implemented, and what equipment needs to be upgraded, refurbished or replaced – plus the cost to implement each part of the step.

Step 4: Create a potential revenue generation (or savings) for each customer behavior alteration process. These will be estimates.

In addition, historical references can be gleaned from mystery shopping providers based on an industry’s specific needs.

“For example, ‘What will we save if we reduce returns by 2 percent?’ or ‘What will we save if we can reduce shrinkage by 4 percent?’” Wozniak suggests. “Or to implement suggestive selling, a retailer could ask, ‘What would the affect be on gross revenue if we increase 10 percent of all sales by $2.50?’ or ‘What will the savings be if our 800 complaint line receives 7 percent fewer calls?’

“By comparing the costs in Step 3 to the potential additional revenue or savings in Step 4, a list of viable staff and equipment changes can then be put into place.”

Wozniak points out that covert operatives – or mystery shoppers – are typically a business’s existing customers. These shoppers are ideal for research because “they retain their individual perceptions of quality, service and cleanliness, but have been given fundamental client-based expectations.”

“Mystery shop data is best viewed over time, taking the aggregate picture as a more accurate representation of how your customers see you and your operation,” Wozniak said.

The theory is: Though customers generally are not experts in the businesses where they shop, they do know good service when they receive it, a quality product when they purchase it, and a maintained facility when they see it.

“Customers want to be comfortable with a business and know that they’ll always be treated right,” Wozniak concluded. “Customers also know that on those occasions when a business falls short – and they will – they’ll make an ‘exceptional’ recovery to show that they’re needed, and they want their business.”