Mystery Shopping Program

Executive Summary

October 2002

HPBAC Mystery ShoppingObjectives of the Program

HPBAC set out to provide its members with effective feedback to improve their businesses using an independent third party.

HPBAC hired a Mystery Shopping firm to audit and measure customer service through the use of mystery shoppers. The audits were completed in Oct. 2002.

The results from these audits provided individual store results in the context of regional and national results, as well as identifying opportunities for improvement.

HPBAC Objectives

To provide HPBAC retail members with tangible benefits to increase the value of membership

To provide HPBAC retailers with an evaluation mechanism on an ongoing basis

To demonstrate the value of Mystery Shopping to HPBAC retailers

To develop education and training programs as indicated by the Mystery Shopping results

Background

The Mystery Shopper supplier uses a scientific system to evaluate individual shopping experiences against the standards of other successful retailers – a system that has been applied in constructing the HPBAC audit.

Annual audits of the retail industry have demonstrated that Canadian retail, in general, is not meeting customer expectations.

Overall Approach

The store audit was developed by a committee of HPBAC members and staff with input from the Mystery Shopping firm, Eye on Retail (EOR)

The audit was set up with 4 categories of questions Environment and First Impressions Welcome and Wanted Professional Behaviour Valued and Appreciated

Environment and First Impression

25%

Welcome and Wanted

20%Professional Behaviour

35%

Valued and Appreciated

20%

Overview to Shopping

EOR research has established a weighting system for the four core behaviours based on statistical analysis.

HPBAC Mystery ShoppingBackground

The results of the HPBAC program indicate that the main opportunity areas for improvement are welcoming customers and selling skills.

Customer Service Benchmarks

The HPBAC service audit was constructed to reflect the four core areas of service performance and was scored to reflect the target weighting from Mosaic/Eye On Retail Overview to Shopping Research. Environment & First Impressions (31 pts) – exterior,

interior environment & displays Welcome & Wanted (24 pts) – phone answering and greeting

Professional Behaviour (42 pts) – sales skills

Valued & Appreciated (25 pts) – thanking on departure, shoppers recommending to friends/family

HPBAC Members Compared to Canadian Retail Overall

Overall, HPBAC outlets outperformed EOR Retail Industry averages (notably on “Welcome & Wanted”, and “Professional Behaviour”).

87.4

83.7%

56.3

72.3%

40.6

65.0%

84.5 75.7%

64.2

73.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Environment/ FirstImpressions

Welcome &Wanted

ProfessionalBehaviour

Valued &Appreciated

Total

Canadian Retail HPBAC Members

HPBAC Mystery ShoppingRegional Customer Service Performance

Members were provided with regional and national results, as well as the retail industry norm, for comparison purposes.

73.4%

75.7%

65.0%

72.3%

83.7%

220

Canada

64.2%

84.5%

40.6%

56.3%

87.4%

IND NORM

4428557221Sample (N)

76.6%76.3%73.7%67.4%82.5%GRAND TOTAL

79.7%76.4%76.7%68.8%87.2%Valued & Appreciated

67.2%65.6%67.5%58.3%75.9%Professional Behaviour

81.3%80.4%70.1%63.0%80.4%Welcome & Wanted

83.0%87.4%82.5%82.1%89.2%Environment/First Impressions

BCNWT

Prairies

Ontario

Quebec

Atlantic

HPBAC Mystery ShoppingCustomer Service Performance - Environment

83.7%

93.2%

83.0%

92.2%

80.4%

220

Canada

4428557221Sample (N)

83.0%87.4%82.5%82.1%89.2%Total ‘Environment’

94.3%96.4%91.8%91.0%97.6%Other

80.2%82.5%82.4%83.5%90.0%Displays

92.7%97.6%90.5%88.9%99.5%Interior

91.4%91.2%74.8%75.9%77.6%Exterior

BCNWTPrairies

Ontario

Quebec

Atlantic

Exterior Environment: Parking lot, signage, walkways, windows, doors, logos, landscaping, outdoor room, lighting;Interior Environment: Temperature, odours, cleanliness, windows, door, floors, ceilings, mirrors, cash counter;Displays: Storefront, seasonal, current, cleanliness, repair, assembled, operational etc.Other: Ease of finding store, staff grooming.

Environment and first impressions area was very strong – no glaring weaknesses but some opportunity in Exterior and Display management:

HPBAC Mystery ShoppingCustomer Service – Environment Opportunity Areas

75.0%

59.1%

58.2%

73.2%

58.2%

220

Canada

4428557221Sample (N)

77.3%82.1%72.7%76.4%61.9%Neat seasonal displays

100.0%75.0%50.0%44.4%100.0%Exterior lights on at night**

43.2%64.3%54.5%70.8%47.6%Clean outdoor room*

65.9%92.9%72.7%69.4%76.2%Tidy landscape area

68.2%78.6%58.2%41.7%66.7%Visible HPBAC/APC/WETT logos

BCNWTPrairies

Ontario

Quebec

Atlantic

Five audit areas accounted for the modest shortfall vs. customer expectations in the ‘environment and first impressions’ area:

*In most cases indicates absence of outdoor room**In most cases indicates not-applicable as store visited during daytime

HPBAC Mystery ShoppingCustomer Service – Welcome & Wanted Opportunities

72.3%

76.6%

60.4%

92.3%

90.0%

220

Canada

4428557221Sample (N)

81.3%80.4%70.1%63.0%80.4%Total Welcome&Wanted

86.6%88.2%75.5%64.4%85.2%Time to be approached*

71.4%66.1%58.2%50.3%70.5%Time for greeting*

97.7%96.4%87.3%90.3%95.2%Polite/cordial on phone

88.6%96.4%85.5%91.7%90.5%Phone answered in 3 rings

BCNWTPrairies

Ontario

Quebec

Atlantic

The key opportunity areas here relate to the speed of greeting or acknowledging customers after entry, and approaching them to begin the sales process:

Point system for greeting/approaching customers:; Greeting within 30 secs. (10 pts); within 60 secs. (5 pts), over 60 secs. (2 pts);Approaching within 3 mins. (10 pts); within 5 mins.. (5 pts), over 5 mins. (2 pts)

HPBAC Mystery ShoppingCustomer Service Performance – Professional Behaviour

65.0%

220

Canada

4428557221Sample (N)

67.2%65.6%67.5%58.3%75.9%Tot. Professional Behaviour

BCNWTPrairies

Ontario

Quebec

Atlantic

While HPBAC outperformed retail industry norms on ‘professional behaviour’, this is still an opportunity area. It can be argued that given the high value sales in HPBAC outlets that the ‘consultative sale’ is all-important and professional/selling skills are particularly key:

HPBAC Mystery ShoppingCustomer Service – Professional Behaviour Opportunities

15.5%4.5%14.3%27.3%12.5%19.0%Asked for contact info.

55.0%63.6%60.7%61.8%38.9%66.7%Explained installation

42.3%

35.5%

65.0%

46.4%

Canada

47.7%46.4%45.5%37.5%76.2%Asked for feedback on products

43.2%39.3%47.3%37.5%47.6%Mentioned warranty

36.4%50.0%38.2%25.0%42.9%Suggested related items

61.4%57.1%72.7%55.6%95.2%Provided range of fuel options

BCNWTPrairies

Ontario

Quebec

Atlantic

Sales staff:

The key areas of shortfall are not involving the customer in a dialogue (asking for feedback on product sell), fuel options, suggestive selling, warranty assurance, the value of professional installation and asking customer for contact information in follow-up:

HPBAC Mystery ShoppingCustomer Service – Value & Appreciation Opportunities

75.7%

78.2%

68.8%

84.5%

220

Canada

4428557221Sample (N)

79.7%76.4%76.7%68.8%87.2%Total Valued & Apprec.

84.1%75.0%80.0%70.8%90.5%Recommend to friends*

75.5%71.4%69.1%60.1%80.0%Comfort rating*

79.5%89.3%85.5%81.9%95.2%Thanked on departure

BCNWTPrairies

Ontario

Quebec

Atlantic

Performance in the area of ‘valuing and appreciating customers’ was strong – the high incidence of shoppers prepared to recommend the stores to friends is particularly encouraging:

HPBAC Mystery ShoppingProduct Distribution - Stoves

Gas and wood stoves are about equal in availability (a slight lead for wood in Atlantic and for gas in the Prairie provinces). Atlantic members offer greater overall variety. This practice may be a development opportunity in balance Canada. Stove Distribution

HPBAC Outlets - October 2002 Audit

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Atlantic Quebec Ontario Prairies BCNWT Canada

Wood

Gas

Pellet

Oil

Electric

HPBAC Mystery ShoppingProduct Distribution - Fireplaces

In fireplaces, Gas modestly outstrips Wood distribution (due to greater Western Canada development). Greater availability of Pellet and Oil in Atlantic and Quebec relative to other regions.

Fireplace DistributionHPBAC Outlets - October 2002 Audit

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Atlantic Quebec Ontario Prairies BCNWT Canada

Wood

Gas

Pellet

Oil

Electric

HPBAC Mystery ShoppingProduct Distribution – Fireplace Inserts

Insert distribution is modestly lower than that of fireplaces (except in Atlantic and B.C.). Distribution by type follows the ‘fireplace pattern’ except for Pellet fired inserts which enjoy better distribution in Atlantic and Prairies than full fireplace counterpart.

FP Insert DistributionHPBAC Outlets - October 2002 Audit

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Atlantic Quebec Ontario Prairies BCNWT Canada

Wood

Gas

Pellet

Oil

Electric

Barbecue DistributionHPBAC Outlets - October 2002 Audit

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Atlantic Quebec Ontario Prairies BCNWT Canada

Propane

Gas

Pellet

HPBAC Mystery ShoppingProduct Distribution – Barbecues

Barbecue distribution continued relatively high in October (expected to be “off-peak seasonality”). Propane types are in stronger distribution in Atlantic and Quebec while tied in the balance of Canada.

HPBAC Mystery ShoppingProduct Distribution – Patio Sets

As expected, the October timing found very low Patio set distribution. There was a lot of variation in furniture type although this may not be representative.

Patio Set DistributionHPBAC Outlets - October 2002 Audit

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Atlantic Quebec Ontario Prairies BCNWT Canada

Wood

Resin

Alum

Cast

HPBAC Mystery ShoppingConclusions / Next Steps

HPBAC members generally outperformed ‘industry norms’ in customer service but this may not be sufficient given that the products offered are ‘high-ticket’ in nature – requiring greater depth of relationship management and overall management of the sale.

Training, particularly in selling skills makes a lot of sense for HPBAC members.

HPBAC Audit SummaryConclusions / Next Steps

‘Environmental store conditions’ require some fine-tuning of the audit as it relates to exterior / interior cleanliness and in the use of effective displays.

A learning opportunity may lie in modifying the ‘environment audit’ to include better questions on store design, signage and organization (currently it is ‘cleanliness focused’).

Distribution information could prove to be more valuable if there was some analysis done on store revenue and profitability relative to product availability.

HPBAC Mystery ShoppingDistribution of Results

Individual audit results have been sent to each member along with the regional and national results and the Executive Summary

Distributor and manufacturer members received the Executive Summary and regional and national results

Distributors and manufacturers were offered the anonymous results for their dealers (all dealer information removed)

HPBAC Mystery ShoppingProgram Successes

12? new members joined during our promotion of the Mystery Shopping program

The Mystery Shopping Program has helped to draw xx more new members since December 2002

x Friedman Sales Training sets have been sold to Canadian members since the audits have been distributed

HPBAC Mystery ShoppingFeedback from Membership

The HPBAC board has sought input from participants to gauge the value of the program and determine when and if there should be additional programs

HPBAC members have rated the value of the program x out of 10

HPBAC will conduct a Mystery Shopping program again in 2003 and will cover a portion of the cost