MYSTERY SHOPPING – THE SOURCE OF INFORMATION FOR COMPETITIVE INTELLIGENCE
Ľubica Štefániková
INTRODUCTION
Competitive intelligence allows managers to make the right decisions on anything from marketing, research and development to long-term strategies. The benefits of competitive intelligence is the ability to formulate strategies by understanding the industry, competition, and the company itself and help to identify areas for the improvement, as well as for the opportunities and minimize the performance gap in relation to the competition. By the time when the competition is intense in each industry the quality of service is crucial to acquirement of customers. Each company has its own methods and techniques to control the required customer care. Nowadays there are a number of standardized procedures which companies can use. One of the research methods is the mystery shopping in other words the secret shopping.
1 COMPETITIVE INTELLIGENCE
The early awareness of enterprises about what is happening around them, what realize their competitors is necessity of today. In this context, the concept of competitive intelligence is mentioned increasingly. Competitive intelligence has established itself as a new branch of management, primarily associated with the development of strategic work in the conditions of competition, i.e. in terms of the usual (and still significantly affecting the business). (Jirásek, 2003) Competitive intelligence focuses broad view data and information that allow enterprises predict future events and use them for effective strategies in relation to the competitive environment, because every decision, especially strategic, is based on certain assumptions. Lesáková (1994) identifies with this characteristic which argues that competitive intelligence is creating of effective information system of competition and it is the basis of quality competitive analysis processing. Society of Competitive Intelligence Professional (SCIP) can be regarded as authority of the competitive intelligence issue and they defined the competitive intelligence in 2003 ‘as a systematic and ethical program gathering, analysing and managing external information that can affect your company's plans, decisions, and operations.‘ Bill Weber, former president of the SCIP defines competitive intelligence as a ‘dynamic business discipline for gathering, analysing, communication and managing of knowledge about business environment, and for comprehension of competitive intelligence in the company strategy to ensure and sustain the competitive advantage‘. (Kopec, 2003, s. 8) Competitive intelligence is a cross-discipline, which seeks to achieve competitive advantage by targeted collection and analysis of partial (various locations) information about the market and competition. (Tomek, Vávrová, 2011) Organized data is changed to the information. If the information is analysed, it become the intelligence. Based on this finding competitive intelligence process can be divided into four stages: • identifying needs and goals that the company wants to achieve through competitive intelligence, • gathering information about events in the competitive business environment from various sources, • analysis and synthesis of the information, • making decisions based on competitive intelligence. In other words, competitive intelligence is the process of increasing competitiveness through exhaustive but ethical recognition of competition and competitive environment. This is a legal collection and analysis of information concerning the capabilities, vulnerabilities and intentions of competitors, using databases and other publicly available sources of information such as the method of mystery shopping.
2 MYSTERY SHOPPING
Mystery shopping goes by many other names, including secret shopping, service evaluation, service check and others. No matter what it is called, mystery shopping is an important tool for business that cares about how they are perceived by customers. Mystery shopping method began to use in the 40th years of the last century in the U.S., mainly as a tool of employee reliability and loyalty control. Mystery shopping was initially private detectives technique utilized to prevent and avoid theft by employees, primarily in banks and retail chains. Further development came in the 90 years, when it was associated mainly with the extension of internet. This method verifies customer standards and penetrates into other sectors of the economy, mainly due to balancing competing offer in each area. Currently this method is mostly applied in market research in order to improve the quality of customer service and the level of provided services. It can be applied in banks, hospitals, hotels and restaurants, in the automotive industry, in government, as well as everywhere, where employees come into contact with external customers. In the Slovak Republic mystery shopping method is mainly used in networks of retail chains, banks, hotels and car industry. Because of its advantages, the smaller companies begin to use mystery shopping too. ‘Mystery shopping is a technique increasingly used in service organizations to measure intangible service experiences. Since a service experience exists only as a memory in the person who had the experience, measuring how good it was is a challenge for service organizations. Instead of being able to rely on the quality inspectors that manufacturing firms use to ensure product standards are met, services must invent other measurement techniques to assess the quality of their customers’ service experience. Of the many techniques service organizations might use, one of the most useful is the mystery shopper ‘ (Ford et al., 2011, p. 159) ‘Mystery shoppers are well trained individuals used to anonymously evaluate and monitor customer satisfaction and quality of the service in different sectors. They act as normal or potential customers and make unannounced visits to the company. Through the use of mystery shoppers it is possible to monitor, not only the quality of the service, but also the efficiency of the process and the procedure followed to deliver the service‘. (Tarantola et al., 2012, p. 3) At present, this method is mainly applied to improve the quality of customer service and provided services, and increasingly is being used as a tool for obtaining information about the competition. The principles of mystery shopping are: • The fact that the examined object may not have known that it is surveyed. It is therefore important the natural behaviour of the observer. • Observers must ensure confidentiality, the findings should not disadvantage or damage researched subject in his work. • Mystery shopping should always correspond to current legislation on data protection. • Data may not be available to unauthorized persons. A number of authors look very differently on mystery shopping area and its integration into the wider marketing framework is therefore difficult. Hague (2003) classified mystery shopping as an independent area of marketing research and identifies it as a relatively new and rapidly growing industry sector marketing research. Kotler (2003) also understands mystery shopping as research with using secret client. The companies use these secret customers to verify how the seller can respond to difficult questions of customers. According him this method is used especially for detection of enterprise or competition marketing efficiency. In contrast Kozel (2006) classifies mystery shopping in the field of marketing research, but only as one of the methods of the experiment, thus as part of three basic methods (interviews, observation, experiment). Specifically he refers it to a landscaping experiment. Authors Kotler and Keller (2007) rank mystery shopping outside of the marketing research and identify it as one of the tools of quality management services. According to them it falls into monitoring systems that seek to determine customer expectations. Horník (2006) also does not include mystery shopping to a part of the marketing research, but he presents it as one of the methods of employee evaluation. Agency MSPA (Mystery Shopping Providers Association) even named the specific differences between marketing research and mystery shopping. MSPA is the largest and most significant global association of companies involved in mystery shopping. MSPA aims to improve performance, reputation and use of mystery shopping worldwide. It has more than 300 members, including companies engaged in marketing research and organizations that specialize in providing of services in the field of mystery shopping. MSPA provides that mystery shopping is a related method of marketing research, and may be accompanied by a marketing strategy. Mystery shopping is more realistic to use than marketing research. It is more often used for training and motivational purposes. Marketing research includes the views and demands of actual customer perceptions, of their needs and expectations while mystery shopping complements the information gap between the actual performance of business and marketing But all authors agree that if the range of product, the price and location is not original or monopolistic for a long time, the quality customer service is often the only key to success or failure in a competitive environment. Mystery shopping helps companies to offer a unique and superior customer care, gain new customers, strengthen the loyalty of existing customers to spread positive and laudatory assessment from satisfied customers, promote brand, differentiate the company from competitors, streamline sales processes and achieve goals and increase sales. Vendors by this technique try to eliminate the exit of existing customers to competitors. Several surveys have been performed to determine why customers do not give a particular company repeat business. Le Boeuf in 1987 cited reason why customer quit their relationship with particular supplier. These are: ‘3 per cent move away without giving a reason, 5 per cent develop other supplier relationships, 9 per cent leave for competitive reasons, 14 per cent are dissatisfied with the product, 68 per cent quit because of an attitude of indifference towards the customer by the owner, manager or some employees‘ (Le Boeuf, 1987, p. 87). Similar research by Ford (2009) conducted the American Society for Quality and the Quality and Productivity Centre. According to this research shown in figure 1, the biggest reason for decline in the number of customers is an attitude of indifference on the part of a company employee.
Fig. 1: Reasons for decline in the number of customers
Source: self-processed by Ford, 2001, p. 6
The research of the MSPA has reached similar results. The survey was initiated by the Mystery Shopping Providers Association and implemented from March 2009 to January 2010. Mystery shoppers during their secret mission visited 832 stores in the U.S. and Europe. They found several shortcomings primarily in accuracy of service. Some vendors try to get rid of customers earlier. Sellers often do not seek to identify customer needs. They are often not able to offer solutions. They do not have good arguments for any customer objections. The survey shows that the most common reason for leaving American and European customers to the competition are death (1 %), moving away (3 %), other (5 %), competitive reason (9 %), poor product quality (13 %) and poor customer service even 69 %. Despite this fact the mystery shopping for competition research is using very little, as shown by the research of McKinsey Company. The McKinsey Quarterly conducted the survey in April 2008 and received 1,825 responses from a worldwide representative sample of business executives. Half (914) responded to questions about major innovations by a competitor, and the other half (911) to questions about pricing changes. One of the research questions were: What kinds of information do you typically gather about competitors? Responses from the research are shown in Figure 2. These findings suggest that companies aren’t conducting an ongoing, sophisticated analysis of their competitors’ potential actions. That view is supported by the executives’ responses to questions on how they gather information about what competitors might do. Executives most often say they track information from news reports, industry groups, annual reports, market share data, and pricing data Far fewer respondents obtain information from more complex sources, such as the reverse engineering of products or mystery shopping.
Fig. 2: What kinds of information do you typically gather about competitors?
Source: McKinsey&Company, 2008
Mystery shopping is getting progressively more world widely and we can be expected its development especially in the area of gathering information about competitors as an important source of data for competitive intelligence because mystery shopping is among the most powerful tools available to companies seeking to improve their service. Providing objective data about service execution across a broad range of locations and delivery channels allows managers and company owners to identify specific areas that need improvement. The need for this research will only increase a customer demand for high-quality, efficient service grows. With today`s current economy, businesses cannot afford to lose customers because according to Van der Wiele et al. in Wágnerová, Baarová (2008): • A satisfied customer buys more and is loyal to the organization. • A satisfied customer purchases additional goods and services. • A satisfied customer builds reputation of the organization. • A satisfied customer leaves with less impact on advertising of competition. • A satisfied customer is coming with good ideas and suggestions. The need for mystery shopping increases so as the competition grows in businesses.
CONCLUSION
Mystery shopping has many forms in which there are put into effect. For example, offering information about the competition, its offer, terms and conditions, price comparison, sales channels, motivation or means of communication with the market. It records only knowledge that can identify any common customer visiting the store. This information will become a part of business competitive intelligence and enable a particular person in a particular situation make the necessary decisions in order to gain or maintain a competitive advantage.
REFERENCES
[1] A LSBURY, A., Jay, R. Marketing to nejlepší z praxe. Brno: Computer Press, 2002. ISBN 8072266179 [2] COYNE, K., HORN, J. How companies respond to competitors: A McKinsey Global Survey . [online] 2008. [cit. 2012-21-9] Dostupné z:
Address of the author: Ing. Ľubica Štefániková, Žilinská univerzita v Žiline, Fakulta prevádzky a ekonomiky dopravy a spojov, Katedra ekonomiky, [email protected]
MYSTERY SHOPPING – THE SOURCE OF INFORMATION FOR COMPETITIVE INTELLIGENCE
Abstract Today`s business environment is extremely competitive. Companies that fail to provide excellent service will not survive. Studies show that a satisfied customer will tell three other people about his experience. A dis-satisfied customer will tell ten to twelve people. By the time when the competition is intense in each industry the quality of service is crucial to acquirement of customers. Each company has its own methods and techniques to control the required customer care. Nowadays there are a number of standardized procedures which companies can use. One of the research methods is the mystery shopping in other words the secret shopping.
Key words Competitive intelligence, mystery shopping, marketing research
JEL Classification M20, M31