Demystifying The Mystery Shopper

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By: Brian J. Meli

The mystery shopper (or secret shopper in some circles) has long been used as a way for businesses to gain real-world consumer insight into their products and services. Mystery shopping gives company decision makers a customer’s-eye view into the purchase experience of their brands, and, among other things, a practical understanding of how those brands are regarded in the marketplace. More and more though, the clandestine tactic of mystery shopping is being used to gain a competitive advantage over the competition. What better way, after all, to figure out what your chief rival’s up to than by simply asking his employees? The question is, when does snooping on the competition cross the line?

Typically the way competitive mystery shopping works is Company A’s employees go into Company B’s stores, or contact Company B’s call centers, posing as potential customers. Then they use the intel gathered on Company B’s products, services and practices to guide their own messaging and inform their own customer experiences. For instance, if Company A learns that Company B’s software doesn’t come with a warranty and isn’t compatible with earlier versions, they may develop messaging drawing attention to these facts so as to differentiate their own product. At the same time, they may instruct sales reps to emphasize these points of comparison to try to close a sale.

The practice has become so prevalent that an entire industry has developed around providing competitive mystery shopping services to companies that don’t have the time or resources to do it themselves. But even though mystery shopping is widespread, questions linger about where exactly the line is between good old-fashioned down and dirty market research, and unlawful industrial espionage? And while the short answer is that each situation is different, there are a few basic ground rules for company’s to consider when undertaking clandestine market research.

It isn’t a secret if its publicly available.

A trade secret is only a trade secret as long as it remains secret. It sounds simple enough, and it is. If a mystery shopper learns from a representative at a rival bank that they’re offering free checking for six months, or from a rival cell phone carrier that their phones can’t deliver 4G technology in a certain area, then there’s no harm in disseminating that information. If it’s information that anyone could get by simply walking in the door or calling an 800 number, then it’s not confidential, and therefore fair game.

The main exception is if the company asks the mystery shopper to sign a confidentiality agreement prior to discussing the information. While this is extremely rare in the retail setting, if a mystery shopper is asked to sign anything, it should be a red flag that there’s a trade secret involved, and that the target company is serious about protecting it. If a mystery shopper signs a confidentiality agreement and then divulges the information to her employer, both the mystery shopper herself, and the organization she represents can be sued for claims of breach of contract, misappropriation of trade secrets, and unfair and deceptive trade practices, among other things.

How you collect it vs. how you use it.

Trade secrets aren’t the only way a company can protect information. And while the kind of information a mystery shopping trip is usually looking to uncover (price points, technical specs etc.) is information typically best suited for trade secret protection, that’s not always the case. If you’re setting out to learn about a specific business model or process used by the competition, with the intention of emulating it yourself, you may be prevented from doing so, even if you obtain the information legally. That’s because companies often secure business model or process patents on the systems they create, making them proprietary during the duration of the patent term. For example, if a competitor introduces a unique new technique for handling incoming call center inquiries, and you go through the system yourself as a prospective customer in order to figure out how it works, you must confirm the company has not applied for a patent on the process before you can co-opt it for your own use.

Similarly, if you purchase a competitor’s new product with the intention of reverse engineering it to produce a similar product yourself, you must first make certain the product is not the subject of a utility patent. If it is, and you recreate it without permission, you could be facing a very costly patent infringement suit.

In both cases the unlawful activity is not how you obtained the information, but rather what you did with the information once you obtained it. But in either case a prior search by a qualified patent attorney can reveal whether a business model or utility patent exists covering the process, model or product in question, before you invest the time and money to recreate it.

Avoid using electronic recording devices. 

The use of recording devices raises a litany of state and federal privacy issues that are better off avoided. Depending on jurisdiction, the mere act of recording someone without their consent can be a violation of the law. And while the actual recording of a customer service encounter may not be illegal in itself, depending on how that recording is used, there may be various legal consequences down the road. Even the type of business the mystery shopper is in can make an otherwise legal recording illegal. For example, the FCC has certain rules governing the recording of phone conversations by phone companies. So if a telecom provider engages in mystery shopping activities, they would be subject to special recording restrictions that companies in others industries might not be.

If you’re thinking of using a recording device as part of a mystery shopping effort, you should consult an attorney familiar with the privacy laws in your jurisdiction prior to doing so. Otherwise, unless you disclose to the other party that you intend to record them, the safest course of action is to leave the recording device off and take mental notes.

Don’t do anything you wouldn’t do.

A good rule of thumb is, if the mystery shopper has to do something to obtain information which she wouldn’t normally have to if her intent were purely to make a purchase, then it’s probably not ok to do it. Obviously the same rules apply to mystery shoppers as they do any shopper when it comes to crimes such as theft, burglary or trespass. If your quest for competitive intelligence takes you down a path toward potentially committing a crime, there is simply no justification for it.

If you’re unsure about what a mystery shopper can or cannot do, or if you’re a company considering making mystery shopping part of your marketing strategy, the best course of action is to contact a lawyer in your area specializing in media and privacy laws. A little bit of planning and preparation up front can save you a lot of legal headaches and expenses down the road.

The content of this blog is intended for informational purposes only. The information provided in this blog is not intended to and does not constitute legal advice, and your use of this blog does not create an attorney-client relationship between you and Brian J. Meli. Under the rules of certain jurisdictions, the material included in this blog may constitute attorney advertising. Prior results do not guarantee a similar outcome. Every case is different and the results obtained in your case may be different.

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