When people think of mystery shopping, they often conjure up images of customer service monitoring: undercover shoppers visiting a business to evaluate the overall consumer experience. And for good reason.

As the Chief Operations Officer or Chief Marketing Officer, it’s imperative to know if employees are providing world class customer service and accurately explaining company products. They also want to know if their employees are driving sales by communicating promotions, and what consumers’ think and say about their brand versus competitors’.

But as enterprise risk management grows in adaptation, other members of the C-Suite – from the CEO to CFO, CHR, and Chief Counsel – are also turning to mystery shopping as there can be millions of dollars’ worth of lost revenue, profit and brand equity, as well as exposure to liability waiting in the answers that mystery shopping experts provide.

What is mystery shopping?

Mystery shopping, or undercover shopping, as it’s also called, is a powerful tool to protect an enterprise’s assets by identifying and measuring all areas that contribute to risk and loss. By widening the scope of mystery shopping to encompass more risk categories, the enterprise is better able to identify, understand and ultimately mitigate risks due to operational process gaps, systemic flaws, legal and regulatory noncompliance, brand integrity erosion, and inadequate staff training – to mention just a few of the risks that cost corporations billions of dollars every year.

So, what’s a security company got to do with mystery shopping?

Security is all about mitigating risk, and as a security company, our path into mystery shopping is atypical for the industry. Unlike many mystery shopping partners, our approach is formed by an extensive background in loss prevention and investigations, together with practical customer service expertise.

Customer service is more than a smile and common courtesies. Specializing in loss prevention, and as a long-time member of MSPA Americas (formerly known as the Mystery Shopping Providers Association of North America), we believe that customer service is one of the best proactive steps in preventing shoplifting. By training staff to proactively approach customers, and re-approach often, it sends the message that the staff is alert, aware of surroundings and on top of their game. Its role in mitigating the risk of shoplifting is undeniable, and training staff to make this a natural part of their jobs delivers excellent return on investment. Also, as a company focused on safeguarding our clients’ people, assets and reputations, we also know the importance of business intelligence solutions that help mitigate the risks.

Beyond basic customer service monitoring

Perhaps the best way to illustrate how mystery shopping informs better enterprise risk management decisions is to look at actual examples of how undercover shoppers have supported and benefited the C-suite:

Legal and regulatory compliance

  • Controlled sales (alcohol, tobacco, firearms): Undercover shoppers helped companies monitor compliance with local and state laws by verifying if proper legal protocols for age verification, accurate completion of legal forms, and restricted access to products were followed.
  • Chemical/illegal substance sales: To ensure compliance with regulations governing products that can be used to produce illegal street drugs, undercover shoppers monitored and measured how much of these controlled substances were being sold.
  • Food safety: Undercover shoppers checked for cleanliness and hygiene rule compliance, as well as use of Personal Protective Equipment (PPE), proper food temperature, allergen notifications, and more. This allowed managers to proactively address the issues and avoid potential problems.
  • Contractual compliance: For clients that use third-party vendors to merchandise products, manage offsite displays or serve as brand ambassadors at offsite locations, undercover shoppers evaluated contract performance by observing whether the vendor promotes products as agreed, provided accurate pricing and product information, and completed paperwork for new accounts or product rentals correctly.

Financial

  •  Financial loan compliance: Undercover shoppers monitored how employees validate proper documents for new loans and credit card applications and carry out proper controls with personal identifiable information (PII) guidelines.
  • Investor and franchise royalty assurance: Undercover shoppers made large or specific purchases to report to clients if a franchisee is reporting the sale properly.
  • Unauthorized discounts: All discounts erode margins, but unauthorized discount abuse can contribute to significant loss if not monitored and stopped.
  • Improper coupon validation is one example. Military, senior, student, and employee discounts given without proper validation are another. We recently finished a yearlong program that monitored the accuracy of transactions of meal purchases and discovered that nearly 30% of our undercover shoppers’ (none of whom were staff!) receipts reflected inaccuracies. Either they received employee discounts without asking for them – and without ever showing proper ID during the transaction, or they were not charged for all their meal items.

HR and loss prevention

  • Location or employee integrity shopping and investigations: In some cases, a clients’ loss prevention and fraud departments will use undercover shoppers to help gather evidence to support an integrity investigation. For example, if a location has high shrink, undercover shoppers covertly look for anything out of the ordinary.
  • Another example is when an employee is flagged for high cash refund rates, or maybe there’s a pattern of processing many refunds when working alone. Undercover shoppers can re-create everyday opportunities that can be carefully documented and monitored to confirm dishonest activity.
  • New technology implementation: Undercover shopping programs have helped identify training issues or gaps after new technology has been placed at a business. For example, self-check-outs: are they being monitored appropriately, are there gaps in transaction accuracy, are large or open products being inspected for hidden items inside?

Marketing and brand integrity

  • Marketing compliance: Undercover shopping helps to quickly identify where new materials might be missing, not placed properly, or where additional employee training is needed.
  • Brand integrity shopping: We are often asked to use our undercover shoppers to help support and gather evidence, en masse, regarding brand integrity. One client, for example, has us visit nearly 500 locations each year to ensure the authenticity of their products and look for signs of counterfeit product. We have also done this for many other companies who suspect that counterfeit products under their brand name are being sold to consumers.

Better enterprise risk management doesn’t have to be a mystery

As the examples above show, undercover shopping is helping companies mitigate risks in many ways. Whether the concern is measuring customer service or business risks, often just a single visit by an undercover shopper will garner actionable intelligence that will benefit multiple stakeholders. That’s why we believe the role of mystery shopping in enterprise risk management will continue to grow in new and innovative ways and serve even more stakeholders.

About Author: Bob Larkin

After a lengthy career in security and operational management at Macy’s, Mr. Larkin founded Asset Protection Associates (APA) to assist retailers with shrink management and proactive solutions to increased sales and profitability. After APA joined SOS Security in 2014, Mr. Larkin joined the executive team as Executive VP for Global Retail and continues consulting with retailers on matters such as organized retail crime, royalty assurance and profit maximization for retailers with franchised based operations and security officer standards. Notably, Mr. Larkin provided for the retail operations consulting at the 1996 Summer Olympic Games in Atlanta, where he helped forecast physical security needs such as locking hardware, lighting, and CCTV requirements. He also assisted with crowd control management, crisis response planning, liaison with law enforcement on safety and terrorism-related incidents and training the security staff on emergency preparedness.

About Author: Kendra Parker

Kendra helps clients improve operational processes and supports critical business strategies by managing the development, implementation, and maintenance of applications systems. She has more than 25 years of experience in security and loss prevention and specializes in Mystery Shopping, including regulations, best practices, concepts, KPI metrics and delivery. She works closely with clients to help define business processes and implement technical solutions to manage critical company performance data and develop technical roadmaps. Kendra joined SOS Security from Macy’s East, where she was recognized for investigative successes and using technical skills to uncover and resolve large company loss issues.