Shopping Cares

Lifestyles, Spring 2002 Volume 30 Number 178. David Lipton

If anyone has really ever had a fly in his soup, or been on the receiving end of a rude bellhop, David Lipton wants to know about it – he just may ensure that it doesn’t happen again. The Toronto native is in the business of helping corporations improve customer service and through Sensors Quality Management Inc.., or SQM, the venture he founded in 1994 with his partner Craig Henry. Lipton advises service-sector industries on how to keep their patrons happy and coming back.

It’s an idea fit for the modern, competitive corporate environment. Today’s consumers have an unprecedented number of options and they tend to take their business to establishments that make them feel most comfortable. That’s where SQM steps in. Combining current marketing research and computer technology, SQM designs customized programs that determine, among other things, how well a company is adhering to its own standards of service and efficiency. For Lipton, it’s all based on the simple philosophy that a happy customer is a returning customer, and returning customers make for greater profitability.

It should come as no surprise that in only eight years Lipton and his partner have grown SQM into a $2 million a year enterprise. The entrepreneurial 34-year old began showing his business acumen as early as the second grade. After getting his first newspaper route at the age of seven, the savvy youngster scouted out, eventually took over, all the nearby vacant routes. Before long, he was delivering 500-600 papers daily to the tune of a fair bit of spending money.
As a teen, Lipton was at it again, running a lucrative valet parking service with a few friends. The business did so well that they were able to sell it several years later.

Today, Lipton spends his time developing cutting-edge marketing research techniques to help other companies succeed. Among his innovations is “Comments Café,” an online, interactive forum for customers to commend or complain about the service they have received from SQM clients. SQM’s specialty, however, is “mystery shopping,” and it is here that Lipton has carved a niche for himself in the field of management services.

Used by a growing number of consumer-orientated businesses, mystery shopping provides a third-party evaluation of service from a customer’s perspective. Businesses hire SQM to send “mystery shoppers” – SQM employees pretending to be ordinary customers – into their establishments to evaluate all aspects of their visit, from the courtesy with which they have been treated by unsuspecting staff, to the promptness of their acknowledgement, the selling behaviors of personnel, and the general appearance of the environment. Shoppers then file reports, which are shared with SQM’s clients and used as the basis for improving customer relations.

While SQM’s database now contains 5,000 active and 50,000 prospective shoppers in Canada and English-speaking countries throughout the world, Lipton and Henry had to do all the inspections themselves when the company first started out. “A local restaurant franchise was one of our first clients,” says Lipton, “and we’d always have to do the inspections on Friday and Saturday night. Sometimes we’d double up on dinners so that we could finish our assignments on time,” laughs Lipton, who admits to having put on a few extra pounds in SQM’s infancy.

As SQM grew, Lipton began to recruit mystery shoppers through his college and community networks, by word of mouth, and eventually, with the help of human resource agencies. Shoppers come from a broad demographic base of ages and racial and ethnic backgrounds. Explains Lipton, “We have to send different kinds of people to different establishments to see how they’re treated.” In Lipton’s mystery shopping days, he and Henry were known to have gone into exclusive men’s clothing stores clad in ripped T-shirts and three-day old beards, and to have disguised their voices on telephone surveys. By pushing the limits of staff tolerance, Lipton and Henry can gain a clearer sense of the extent to which personnel adhere to the company’s customer service policies. Now that they’ve “retired” from mystery shopping, they’ll send women into garages, men into lingerie stores or other unusual shoppers into unlikely scenarios.

“Mystery shopping is especially popular with women,” adds Lipton. “Women like to shop,” he quips. In exchange for their labor, shoppers are paid directly by SQM or receive discounts on purchases. Either way, it’s a win-win situation, as shoppers earn benefits in their spare time and businesses gain a valuable edge in improving customer satisfaction.

SQM’s client list reads like a who’s who of the retail and service industry, including many well-known stores, hotels, banks, auto manufacturers, airlines and even such plum locales as Club Med. “Not everyone gets an assignment like that,” says Lipton, sensing a sudden interest in mystery shopping by this interviewer. “Shoppers have to work their way up and pass an evaluation at each level.”
In the early days, communication between SQM and mystery shoppers was handled the old-fashioned way – by mail, fax and phone. Now, through an innovative Internet website created by Lipton and his team o talented webmasters, most communications is conducted on-line. Shoppers log on to retrieve their assignments to download orientation manuals and company newsletters, and to file their reports electronically. Clients can then retrieve their individualized evaluations through the site in the privacy of their own offices.

For Lipton and his partner, making customers happy is familiar territory. Both have degrees in hospitality and tourism management, and both worked extensively in hotels and restaurants before launching SQM. They know what makes for satisfies patrons, and over the years they have developed a wealth of ideas to share with their clients.

Still, their experience and creativity didn’t make for a smooth start to their joint enterprise. Sitting in his newly expanded, spacious north Toronto office, and surrounded by 25 full-time employees, Lipton recalls the bumpy road SQM took to get to where it is today.

In 1993, after the recession left them unemployed, Lipton and Henry decided the time was right to start a business of their own, even if they didn’t have the money to do so.
“We couldn’t afford a real office,” says Lipton, “so we each put about $100 into a bank account and SQM was born.”

The pair started up in Craig Henry’s house. “Our first boardroom was Craig’s bedroom,” Lipton recalls. Soon, they opened a post office box at Toronto’s Sheraton Hotel. “We chose the Sheraton because we liked the address, 123 Queen Street,” says Lipton. Coincidently or not, the hotel later became one of SQM’s first clients.

Armed with only a few dollars worth of business cards, letterhead and a phone line, Lipton and Henry began by cold calling local business to offer their services. Unable to afford postage, they delivered all of their correspondence themselves at night. Lipton does recall one advantage to SQM’s shoestring budget – since they couldn’t afford daycare, they minded Henry’s two-year old son while his wife was at work. “Sometimes potential clients would her the baby in the background when we were on the phone with them,” he says. “It worked well with the women.

While business was slow in coming, friends and family often questions Lipton’s judgment in starting his own company, especially in a period of economic instability. “People were pessimistic,” says Lipton. “They told me to ho find a job that would pay the bills. That kind of talk can wear you down.”
Still, Lipton persisted, even as he saw his friends settle into stable jobs, get married and buy their first homes, all the while he was living with his parents and devoting most of his time and energy to his nascent company.

“You can’t compare yourself to others,” says Lipton, “and I like to think I did the right thing by not following the mold.”

It took about six months before companies showed any interest in SQM, but word got out about the unique service SQM was providing. And as it did, SQM expanded – first to Craig Henry’s living room and then to his dining room. Eventually, his wife decided that the company had sprawled a bit too much into her living space, and booted her husband and his partner out, forcing them to rent a “real” office in the Toronto suburb of Richmond Hill. In its new home, SQM continued to grow and Lipton began to hire staff. Business has doubled every year since, and so too has Lipton’s excitement and enthusiasm for his venture.

Now, despite a wealth of glossy public relations materials and write-ups in newspapers and business journals, SQM’s growth continues to depend on Lipton’s aggressive campaign to recruit new clients and to ensure a steady supply of mystery shoppers. But for the “company mouthpiece,” as Lipton calls himself, it’s all part of the fun. A natural schmoozer, Lipton has an easygoing, affable style that puts people at ease. His regular office attire is jeans and sneakers in keeping with his laid back persona. “Everyone knows they can talk to me,” he says.

He likes meeting people and maintains a wide circle of friends – the guest list of his annual end-of-summer barbecue is never less than 200 and includes many of his elementary school peers with whom he has managed to stay in touch over the years. He also enjoys being involved in his community. He is active in his synagogue and in several charities and runs a hockey league in his spare time. By his own admission, he’ll try just about anything. He scuba dives and is currently looking into getting his helicopter license. He even ran for municipal office last year. He campaign started off as a joke, but ended up being an eye-opener. “They don’t pay public officials enough,” observes Lipton, “and that keeps many capable people away from politics.”

As for his own political future, Lipton keeps a wait and see approach, and in the meantime prefers to focus on growing his business. That means developing and improving their marketing research techniques, accumulating more clients in Canada and expanding into international markets. “With the global economy, companies have to think about customer service,” explains Lipton. “Everyone is fighting for consumer dollars. That bodes well for businesses like ours.”

Even the current recession doesn’t frighten Lipton, who is loath to decline a challenge. “In times of recession, companies need to provide even better customer service than before.”

A self-proclaimed “ideas person,” Lipton has a binder with over 100 business proposals that he hopes to develop some day. “There are a lot of good people out there with good ideas, but they don’t ever start their own businesses,” he says. “Some can’t take the risk of having no income. I’ve been very fortunate because I could do that.” Still, Lipton has now turned at least some thoughts to settling down a bit, getting married now that the right person has come along, and starting a family.

And what does the expert say about the state of customer service in Canada? “Canadian companies need a wake-up call. Service here isn’t nearly as good as it is in the U.S.” As more American firms enter the Canadian market, says Lipton, local companies will have to meet the challenge to survive.

And that is exactly what Lipton is counting on.