Mystery Shopping as a Strategic Management Practice in Multi-Site Firms

Sidney T. Block (), Guido Friebel (), Matthias Heinz () and Nick Zubanov
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Sidney T. Block: University of Cologne
Guido Friebel: Goethe University Frankfurt
Matthias Heinz: University of Cologne

No 15599, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Anonymous and unannounced site inspections known as "Mystery Shopping" (MS) are common in multi-site service firms, but little is known about the strategic importance of this practice. We conceptualize MS as a monitoring tool firms use to implement the optimal allocation of site resources between sales- and service-related activities in the presence of cross-site reputation spillovers, which is to maximize sales while maintaining service standards. Consistent with this view, data from three retail chains reveal (i) low variation in MS scores, (ii) little correlation of MS scores with sales, and iii) high correlation of sites' MS scores with the likelihood of their supervisors receiving incentive bonuses. Our findings are robust to different estimation specifications, and shed new light on a ubiquitous yet little-studied management practice.

Keywords: mystery shopping; monitoring; reputation spillovers; incentives; service standards (search for similar items in EconPapers)
JEL-codes: L10 M31 M41 M52 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2022-09
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