Interview with Sensors Quality Management, Inc.

Overview: Sensors Quality Management, Inc. (SQM) is a privately owned company, headquartered in Toronto, Ontario, Canada. It was co-founded in 1993 by former Ryerson University classmates, David Lipton and Craig Henry, when they recognized a need for Mystery Shopping within the hospitality industry. Throughout the years, the company has expanded its focus and grown its reach. Today, “SQM serves clients in more than 40 countries around the world — customers that include restaurant and hotel chains, retail stores, government organizations, non-profit groups, automotive and manufacturing firms, financial companies, as well as small, independent businesses”.

MSM talks with David Lipton, President and Co-Founder:

MSM: According to the SQM website, you and Craig started the company on the proverbial “wing and a prayer”, with “zero clients, zero contracts, and zero dollars in the bank”. Which one of you convinced the other that this was a good idea and why was it a good idea?

David: Since we both have the entrepreneurial spirit, I don’t think either of us had to be convinced to run our own business. At the time, Craig and I both worked in the hospitality and tourism industry, so we were both familiar with the concept of Mystery Shopping. During the 1993 recession, we were both sitting on the curb, looking for our next act. I approached Craig with the idea of the two of us starting a Mystery Shopping company and Craig, being the logistical wizard that he is, looked at the concept inside out and upside down, and ultimately gave it the thumbs up.

MSM: We are always interested in how a new company with no business history is able to attract clients. How were you able to and what do you identity as your first big break?

David: For any company, attracting clients is always a challenge (even when you have a product or service that is better, faster, or cheaper then others in the marketplace). In the case of SQM, since we were a start-up company, we had the added challenge of having to build a high level of trust with our clients, given the types of services and the information we provide.

Our best sales tools have always been networking and the telephone, so we just started plugging away at it.

Our first break came when one of our Ryerson professors gave us the chance to do some market research for him at the CN Tower. Ironically, our first project wasn’t even Mystery Shopping, but it helped give us a confidence boost and put a few dollars into our pockets during the quiet time of the year. Since that time, we have worked for many other university colleagues, both professors and alumni, and continue to network in person, on the phone and in more recent times….on-line.

MSM: Along the way, SQM expanded beyond the hospitality industry. How and why did this happen?

David: When we started the business, Craig was 31 years old and I was 26. If we told people back then that we were going to show them how to run their business, they would have told us not to let the door hit us on the way out. Our approach was (and is) to advise prospective clients that we are here simply to let them know how their businesses are running, based on their standards and criteria. Since the clients provide the standards to monitor and measure, it is unnecessary for us to have an expertise in each particular industry. As a result, we are able to apply our services to many different types of industries, businesses, and markets around the world.

MSM: How did SQM expand its reach from solely Canada, to serving “clients in more than 40 countries around the globe, servicing markets as diverse as Australia, England, France, Germany, Hong Kong, India, South Korea and United Arab Emirates”?

David: As we grew our client base, expanding outside of Toronto and beyond was a natural progression, since many companies had multiple locations. It began with the Kenny Rogers Roasters chain, and was followed by a national program for Arby’s, which ultimately expanded into an international program. Later, we worked for global companies, such as American Express, along with the many hotel clients with locations around the world.

MSM: SQM is perhaps the only Mystery Shopping company to have a nine-step proficiency program, which requires shoppers to attain a 100% score at each level in order to qualify for the next step. According to a recent article in MSM,  “A 100% test grade must be achieved for each level, but incorrect answers are not revealed, and some questions are ambiguous…….. all nine levels can take days, and sometimes weeks to achieve.” Why was this testing instituted and, although we are confident it is very appealing to clients, do you think it might be discouraging some great shoppers with the maximum “two tries per day” and “ambiguous questions” tests?

David: SQM is not simply in the business of providing information, but we provide the truth. Along with our products/services, comes the responsibility of ensuring that the insight we provide is accurate and of the highest possible quality. As such, we only want the best of the best working for SQM, both at our office and in the field. Attracting and retaining the best of the best, takes various recruitment, hiring, training, and ongoing development programs, and our nine-level STEP (Shopper Training Educational Program) is one of many processes, which we have implemented to help us achieve this goal.

I should mention that the our representatives don’t have to complete the nine-level program to work for SQM, but not going through the program significantly limits the number of assignments to which they will have access.

MSM: We were fascinated with the compelling “Case Study” detailed on the SQM website, whereas a company-owned and franchised Canadian casual dining chain was profiled. “It was evident that up-selling and suggestive selling behaviours were not being consistently executed by frontline staff.” This was accompanied by an analysis of the dollars lost in a two-month period by the individual server and extrapolated to show the losses to the location, the region and the company as a whole. After reading this, why don’t all companies immediately sign on the dotted line?

David: While there are many benefits to implementing an effective Mystery Shopping program, it is extremely difficult to identify or establish a precise return-on-investment for the service. Training managers would argue that they improved sales through suggestive selling or up-selling; vendors will say that their products increased sales; and the list goes on. In addition, many companies have attempted to reduce expenses by replacing Mystery Shopping programs with on-line feedback. Many of them eventually find out, the on-line survey measures completely different items and can’t be compared to Mystery Shopping. And it takes more than a case study to get clients to sign on the dotted line.

We are seeing a shift to companies that now realize, in order to maximize their training dollars, they need to immediately re-enforce what was taught, or risk it being quickly forgotten. Companies are still trying to justify the investment, based on a specific use, rather than looking at the big picture.

MSM: You were interviewed on ABC’s World News with Diane Sawyer, which highlighted the benefits of being a mystery shopper in the hotel and travel industry. How did this come to be and how much impact did it have on your shopper base?

David: As I mentioned earlier, one of our greatest tools is networking, and after 20 plus years in business, we have been fortunate to build up quite a large global network. My understanding is that ABC wanted to do a segment on different ways that Americans could make or save money during these difficult economic times, and one of the researchers spoke to someone who had written a blog about SQM, and the rest as they say is history.

With over nine million nightly viewers, the segment certainly resulted in a large number of new applicants through our website, and since the segment is still available on-line, more people continue to see it even today.

MSM: The SQM website proclaims, “Today SQM boasts hundreds of clients, services every industry, maintains operations worldwide, and continues to grow.” What’s next for SQM?

David: SQM continues to expand our service offerings and the markets in which we work, around the world. The “M” in SQM, stands for “Management”, and both Craig and I hope to one day apply our services to our own businesses, by perhaps getting into the hotel, restaurant and retail industries ourselves.

MSM: Whoa, talk about a surprise ending! David, thank you for taking time out of your busy schedule to share with us “the rest of the story”.

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