There are plenty of places to buy, say, a flat-screen TV or a pair of boots online--and many retailers can match price and selection. But which offers the best customer service? Enter StellaService, a New York City-based startup that uses more than 200 metrics--including delivery speed, hold times, and refund policies--to give each online retailer an objective rating.

The company, which was founded by Jordy Leiser and John Ernsberger in 2010, has already raised $22 million in venture capital. It employs secret shoppers nationwide who buy and return items, and then rate every step of that experience. The ratings system is good for consumers, because it lets them choose the best shopping experience. And it's good for businesses (except those with subpar service, that is). In November, Google licensed the use of StellaService's data to rate retailers on its search engine. Leiser recently spoke with Inc. about how he got started. 

We wanted a system that couldn't be gamed.

Since e-commerce started, the only way to give consumers information about websites was through anonymous reviews. If Jenny posted a bad customer service experience, you had no idea who Jenny was or if she should be trusted. Some businesses hired people to write fake reviews. We wanted objective information that could not be gamed. We would help consumers decide where to buy that TV online without having to read 1,000 reviews.

Businesses could benefit, too. Even when reviews are real, people often express frustration in general ways, like, "Your shipping sucks!" What does that really mean? We could offer specific data to make specific improvements.

We identified the data points.

The beautiful thing about customer service is that it's not rocket science. We're all customers--we all test this stuff every day ourselves. My friend John [Ernsberger] and I were actually fans of certain companies--we both bought from Zappos and had American Express cards just because we loved the great service. But we wanted to remove any subjectivity, so we looked at what the data points were. Which companies give you the fastest refunds? Which answer your emails quickly? We also tapped into the work of professors who were researching this, like Francis Frei, who is currently at Harvard--and is now on our advisory board.

Once we had our data points, we raised $250,000 from angel investors. We used that money to rate a group of companies and create a website to publish the results.

We built the company around our strengths.

The best advice I ever got about starting a company was to create a company within your skill sets. If you're a very tech-minded person, it makes sense to launch a technically sophisticated company. John and I have limited technical skills, so what turned out to be a very big part of our success was that the first version of getting our company going was nothing more than buying things from companies, collecting the data, and then giving out a StellaService seal, a JPEG that companies could display on their websites. We didn't even need an engineer.

The Cream of The Crop

Below are a few companies that have received StellaService's best Elite or second-best Excellent rating. Stella tracks these metrics and others.

  NORDSTROM ZAPPOS TARGET STAPLES
Rating Elite Elite Excellent Excellent
Delivery time 3-5 days 3-5 days 5-7 days 0-3 days
Returns processed within 14 days 10 days 14 days 7 days
Returns accepted within unlimited 365 days 90 days 14 days
Email response time 3-6 hours 3-6 hours 3-6 hours 24-48 hours
Phone response time 45-90 seconds 45-90 seconds 1.5-2 minutes 3-5 minutes

 

Once Zappos had the seal, everyone wanted it.

If you see a VeriSign or TRUSTe seal on a website, you know it's secure. We wanted to do that for customer service. Companies have to achieve a certain level of performance to score in the two top tiers, Elite and Excellent. We thought if we can create a symbol that people trusted, then it could grow and be adopted very fast.

I spent the early days cold calling companies trying to persuade them to put our seal on their sites. We deliberately started with bigger brands even though it was harder to get access, because we knew smaller brands would follow the innovators.

Zappos and Diapers.com were the first companies to put our seal on their websites. In our first year, Zappos was acquired by Amazon for almost $1 billion. Twelve months later, Jeff Bezos bought Diapers.com's parent company for $550 million. Why? Customer service. From then on, every e-commerce store wanted to be the Zappos of motorcycle equipment or makeup. That really helped our company gain traction.

We built an army of secret shoppers.

The early challenge was that we wanted to buy and return millions of dollars of products in a very consistent and objective way. That had never been done before. At first, the products were being sent to our moms and their friends. As we grew, we were able to hire secret shoppers--mostly stay-at-home moms from all over the country. We don't publicly talk about how many, but it's a significant number nationwide, who are buying and returning things from their own homes. We did it at first with 20 companies, then 100. And then 1,000. Phase Two was proving that this could scale in terms of the actual operation, and then Phase Three was really, Is this valuable? How much are companies willing to pay for this information?

We sell companies their own metrics--and those of their competitors.

We make money by charging companies for access to our data on the companies that we measure--how long is a customer on hold, how many days from order to delivery, how many days to get a refund. Companies pay us up to six figures for access to the data. Pricing is based on a few things, including company size and access level.

Many executives are not in touch every day with their customers. We offer objective daily measurements. And all this data about the experience of every call and every return, they can go to a portal and see it, listen to it. Some companies only want to pay a certain amount; we can chop it up and give them access to less information, or just specific areas, like returns.

We also charge for data on competitors. And it is not anonymous. You get the same information that we have on you. You can drill into each service area: shipping, returns, social media.

We have our share of challenges.

Like any business, we have obstacles. This is a totally new data set. So we have to get consumers and businesses to grasp it and know how to use it. That requires an education on our part.

Some companies have complained, "You're costing us money by buying and returning things." For the larger retailers, we are purchasing and returning an average of one item a week. So, yes, there is a nominal cost incurred by processing an order and making the return. But the early adopters understood that communicating who is great at service is more valuable than what it costs to be tested. Plus, we were going to do it anyway.

Google wanted our data, too.

We were excited when Google said it was interested in leveraging our data to help its users make better shopping decisions. We had always thought the best consumer application of our ratings data would be to present it wherever people were buying online. If you do a shopping search for, say, hats or shoes, Google offers a selection of places to buy those things. Now, if you click on one, you will often see a Stella rating used to describe the experience.

Our ultimate vision for StellaService is pretty big. Any business that has customer service--whether it's a retailer or a financial services firm--we want to be measuring that. And we want to give customers that information to make better choices. If we're successful, we'll create an environment that forces everyone to do better.

As told to contributing writer Liz Welch.