On a sunny Melbourne morning, Phil Prosser admires the beach view, surfboard strapped to the car roof, notions of his profitable international business in mind. It’s days like these he must feel like he’s won Lotto.

How else could you explain this charmed life? In 1994, Prosser walked away from a highly paid job as New Zealand Lotteries Commission marketing manager and leapt into the obscure world of mystery shopping. Thirteen years on, his company, Gapbuster, earns up to $50 million a year, harnessing the observation powers of more than 250,000 people in 40 countries. Like all successful companies, his is not without controversy — Gapbuster is a target of bloggers, the modern-day chattering classes.

But for a company that lists as clients some of the world’s biggest brands — McDonald’s, Shell, Starbucks, for starters — not much is known about Gapbuster. It’s the nature of the business that it operates by stealth; there’s no such thing as a company uniform emblazoned with advertising. Anytime, anywhere, a Gapbuster shopper could be secretly queuing ahead of you.

“It’s very exciting but it’s taken us a fair bit of time to get to this stage,” says Prosser, 46. “I started with the view that we wanted to be a global player. I hoped it would get to this point but it has certainly been a major challenge.”

About the only time mystery shopping has had a profile in New Zealand was several years ago when Caltex television ads featured a man making clumsy attempts in bad disguises to spy on staff. The idea behind the Caltex mystery shopper was accurate, if not the execution. Mystery shopping is a way of measuring customer service. A company like Gapbuster sends people to client companies to assess the way they get dealt with (no wigs or fake noses, sorry).

Philip Calvert, from Victoria University’s school of information management, has studied mystery shopping and thinks it will grow in popularity because it is widely applicable in almost any type of service or retail setting.

“The justification for mystery shopping is that it provides one method for assessing the quality of services that are, by their nature, harder to assess than manufacturing processes or end-of-year profitability,” he says.

More than 150 companies belong to the Mystery Shopping Providers -Association, an international industry body. In New Zealand, there are at least 15 mystery shopping companies, according to the Association of Market Research Organisations. Some are broad-based market research companies while others specialise. One of the leading New Zealand companies is Market Pulse, based in Auckland but with offices in the US, Australia, Thailand, Brazil and South Africa. Founded in 1989 and headed by Philip Mercieca, Market Pulse offers “retail performance evaluation”.

Gapbuster calls itself a “customer engagement agency” — well, Prosser does have a marketing background. Slipping easily into marketing speak, Prosser describes his point of difference: “We look at loyalty drivers and how to engage staff and customers. That’s really where we have shown most leadership. It’s evolving into a very different type of business than what it was five years ago. It’s far more customer-centric.”

Translation: Gapbuster finds the five or six factors which make its clients’ customers happiest — the things that will guarantee their return. Five years ago, mystery shopping tended to be like a shop checksheet: was it clean? Did the staff smile? But now it’s more concerned with what matters most to the customer.

Prosser recites the example of a retailer. “It might be that the organisation wanted to know if the assistant asked two product-knowledge questions, for example. But then you’re just coming at it from an organisation compliance point of view. The questions might be irrelevant. What you need to know is, did the customer feel that the assistant tried to understand their needs?”

He says if a customer is completely satisfied, there’s an 80% chance they’ll return. When they slip from being anything but completely satisfied, the return rate slips to less than 23%. That’s the gap in Gapbuster, and what it seeks to close.

For all Prosser’s smooth talk, nothing could be achieved without his army of mystery shoppers, a fickle workforce of casuals and part-timers. Cracking the network of shoppers for information is tough; they’re a secretive bunch, governed by a tough confidentiality clause. But one of Prosser’s 250,000 shoppers spoke to Unlimited anonymously. She was impressed by what she saw of how Gapbuster operated.

Company costs are low. Mystery shoppers earn as little as $10 reimbursement for the shopping assignment, plus $5 pay. “The business model is zero for the [mystery] shopper,” she says, since the payment covers the time to register, accept an assignment, shop and report back. But Gapbuster, she believes, must be doing well for itself. New Zealand clients include -McDonald’s, Shell, Foodstuffs, Sunglass Hut, House of Travel and, unsurprisingly, the Lotteries Commission. With Foodstuffs alone having 170 supermarkets just in the upper North Island, that’s a lot of mystery shopping. “The numbers must be staggering,” says the mystery shopper.

Interestingly, given Prosser’s insistence his company probes beyond organisation compliance-type topics, the mystery shopping source questions whether Gapbuster gathers enough qualitative data.
“I would question the quality of their results because I know the nature of the shopping experience is most important, not so much whether the shop assistant says thank you and goodbye,” she says. Online reports require shoppers to fill in set answers and observations, with minimal room for general feedback.

But Gapbuster clients seem happy. Shell New Zealand general manager of retail Mark Forsyth says mystery shopping is an important tool. It uses other mechanisms, too — direct customer feedback, or sifting data from the Fly Buys database, for example. “But some customers will tell you directly what they think — many won’t,” says Forsyth. Mystery shoppers are “another set of eyes”. Gapbuster reports allow Shell to find out which regions, service stations and even sales assistants are performing best and why. Results are factored into the performance bonus scheme, says Forsyth, who firmly believes in a direct relationship between customer satisfaction and the bottom line.

McDonald’s also uses results to reward staff, but they enable the company to focus national training where it’s needed as well, says training and QSC manager Leigh Parker. “For example, speed of service over counter results might show there are opportunities to improve, so focus can be placed on retraining or developing new operational techniques.” Kiwi stores can also benchmark themselves internationally, particularly against Australia.

Working for megabrands is one of Gapbuster’s biggest advantages. Its international reach and global contracts make it the biggest mystery shopping company in the world, with a turnover of $40 million to $50 million. Prosser says the company has grown 226% in two years. “A lot of companies have been US-centric whereas we take a global look. We can provide solutions in Japan, Taiwan, Europe … we are in 40 countries — that gives us a major advantage.”

Prosser went to the world via Wellington, where he was born and bred. His time at St Patrick’s College, Silverstream, was so pleasurable he returned for last year’s reunion. Trips home are frequent since his wife is from Wellington, too, and two of their boys (there are three, aged 19, 14 and nine) were also born there.

Prosser breezed into Victoria University aged 16 and left with a Bachelor of Commerce and Administration. A natural at marketing, he worked for seve-ral companies before joining New Zealand Lotteries in 1987 as divisional manager, marketing. Young, talented and ambitious, he scooped up awards on the way to hooking New Zealanders to Lotto and Instant Kiwi.

Chief executive then was David Bale, who says he was lucky to have Prosser at his side. “Phil drove the development of the franchise concept — a world first for a state-owned lottery — the brand values, and customer service delivery with a passion,” says Bale. “He is a very action-oriented and passionate person.”

By 1994, Prosser, 33, was seeking a new challenge. He had schooled up on US mystery shopping business Shop’n Chek (first learning of it in a book called The Service Edge — 101 Companies That Profit from Customer Care), and convinced the company to let him open a franchise here.

It was a risky move; he mortgaged his house and poured $100,000 into his new venture. It was two years before he got paid again. Things have changed since then. Last year, according to Companies Office records, he received $360,000 remuneration as director of holding company Gapbuster Systems. And that doesn’t include his shareholder profits, of course.

Prosser describes the early days, particularly, as tough. But along the way he got some good breaks.
In 1996, he went across the ditch pitching for business from BP Australia. Winning the contract doubled Gapbuster’s revenue overnight. At the same time, he recruited Australian IT contractors. Those two things convinced him to move from Wellington to Melbourne, his launching pad to the world.
Under the new company name Gapbuster Asia Pacific, he bought Shop’n Chek UK in 2000. It was not a profitable business, but it enabled him to entrench in Britain and Europe.

That was the only acquisition he made, and, until two years ago, all the expansion has been funded from the company’s own balance sheet. In 2004, Chicago private equity firm First Analysis paid US$8 million for a 49% share of the business while Prosser remains the majority owner with 51%.

Prosser says the capital enabled him to establish a firm foothold in the US and Japan. He hasn’t stopped expansion yet, eyeing up China next. Where his clients go, he goes.

You can’t get as big as Gapbuster without making enemies, and Prosser finds his on the internet. Some of them are harmless enough: mystery shoppers grizzling about the pay, and there’s even a UK shift supervisor who quibbles about the unfair bonus scheme built around Gapbuster reports.

More dangerous was a group of anarchists targeting McDonald’s. When they encouraged followers to become mystery shoppers to file malicious reports about the burger giant, Gapbuster became entangled in a nasty battle, the results of which are splayed across the web. Threats were made against directors; the company’s name was run down.

But while the internet is a source of anxiety, it is undoubtedly also the making of Gapbuster. As Unlimited’s mystery shopper source points out, all contact with the company is via its website — from registration, to -filing of reports. “It’s a company which optimises the best of the internet for its business,” she says. Prosser says it was an early strategic decision to embrace the internet, a choice that enables its 250 full-time staff, speaking 35 languages, to efficiently deal with shoppers around the clock.

He also credits as critical his management team, including four headhunted former New Zealand Lotteries staff. One, Simon Mangos, has been with Gapbuster for ten years and heads the Europe division. “So we’ve still got our little Lotto club,” Prosser laughs.

Many workplaces have Lotto clubs, but they’re usually syndicates for people hoping for a big win some day. The world’s full of dreamers — and then there are those who make their own luck.