1. Mystery Shopping Program Executive Summary October 2002

2. HPBAC Mystery Shopping HPBAC Mystery Shopping Objectives of the Program HPBAC set out to provide its members with effective feedback to improve their businesses using an independent third party. HPBAC hired a Mystery Shopping firm to audit and measure customer service through the use of mystery shoppers. The audits were completed in Oct. 2002. The results from these audits provided individual store results in the context of regional and national results, as well as identifying opportunities for improvement.

3. HPBAC Mystery Shopping HPBAC Objectives To provide HPBAC retail members with tangible benefits to increase the value of membership To provide HPBAC retailers with an evaluation mechanism on an ongoing basis To demonstrate the value of Mystery Shopping to HPBAC retailers To develop education and training programs as indicated by the Mystery Shopping results

4. HPBAC Mystery Shopping Background The Mystery Shopper supplier uses a scientific system to evaluate individual shopping experiences against the standards of other successful retailers – a system that has been applied in constructing the HPBAC audit. Annual audits of the retail industry have demonstrated that Canadian retail, in general, is not meeting customer expectations.

5. HPBAC Mystery Shopping Overall Approach The store audit was developed by a committee of HPBAC members and staff with input from the Mystery Shopping firm, Eye on Retail (EOR) The audit was set up with 4 categories of questions  Environment and First Impressions  Welcome and Wanted  Professional Behaviour  Valued and Appreciated

6. HPBAC Mystery Shopping Overview to Shopping EOR research has established a weighting system for the four core behaviours based on statistical analysis.

7. HPBAC Mystery Shopping HPBAC Mystery Shopping Background The results of the HPBAC program indicate that the main opportunity areas for improvement are welcoming customers and selling skills.

8. HPBAC Mystery Shopping Customer Service Benchmarks The HPBAC service audit was constructed to reflect the four core areas of service performance and was scored to reflect the target weighting from Mosaic/Eye On Retail Overview to Shopping Research.  Environment & First Impressions (31 pts) – exterior, interior environment & displays  Welcome & Wanted (24 pts) – phone answering and greeting  Professional Behaviour (42 pts) – sales skills  Valued & Appreciated (25 pts) – thanking on departure, shoppers recommending to friends/family

9. HPBAC Mystery Shopping HPBAC Members Compared to Canadian Retail Overall Overall, HPBAC outlets outperformed EOR Retail Industry averages (notably on “Welcome & Wanted”, and “Professional Behaviour”).

10. HPBAC Mystery Shopping HPBAC Mystery Shopping Regional Customer Service Performance Members were provided with regional and national results, as well as the retail industry norm, for comparison purposes. 73.4% 75.7% 65.0% 72.3% 83.7% 220 Canada 64.2% 84.5% 40.6% 56.3% 87.4% IND NORM 4428557221Sample (N) 76.6%76.3%73.7%67.4%82.5%GRAND TOTAL 79.7%76.4%76.7%68.8%87.2%Valued & Appreciated 67.2%65.6%67.5%58.3%75.9%Professional Behaviour 81.3%80.4%70.1%63.0%80.4%Welcome & Wanted 83.0%87.4%82.5%82.1%89.2%Environment/ First Impressions BCNWTPrairiesOntarioQuebecAtlantic

11. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service Performance - Environment 83.7% 93.2% 83.0% 92.2% 80.4% 220 Canada 4428557221Sample (N) 83.0%87.4%82.5%82.1%89.2%Total ‘Environment’ 94.3%96.4%91.8%91.0%97.6%Other 80.2%82.5%82.4%83.5%90.0%Displays 92.7%97.6%90.5%88.9%99.5%Interior 91.4%91.2%74.8%75.9%77.6%Exterior BCNWTPrairiesOntarioQuebecAtlantic Exterior Environment: Parking lot, signage, walkways, windows, doors, logos, landscaping, outdoor room, lighting; Interior Environment: Temperature, odours, cleanliness, windows, door, floors, ceilings, mirrors, cash counter; Displays: Storefront, seasonal, current, cleanliness, repair, assembled, operational etc. Other: Ease of finding store, staff grooming. Environment and first impressions area was very strong – no glaring weaknesses but some opportunity in Exterior and Display management:

12. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service – Environment Opportunity Areas 75.0% 59.1% 58.2% 73.2% 58.2% 220 Canada 4428557221Sample (N) 77.3%82.1%72.7%76.4%61.9%Neat seasonal displays 100.0%75.0%50.0%44.4%100.0% Exterior lights on at night** 43.2%64.3%54.5%70.8%47.6%Clean outdoor room* 65.9%92.9%72.7%69.4%76.2%Tidy landscape area 68.2%78.6%58.2%41.7%66.7% Visible HPBAC/APC/WETT logos BCNWTPrairiesOntarioQuebecAtlantic Five audit areas accounted for the modest shortfall vs. customer expectations in the ‘environment and first impressions’ area: *In most cases indicates absence of outdoor room **In most cases indicates not-applicable as store visited during daytime

13. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service – Welcome & Wanted Opportunities 72.3% 76.6% 60.4% 92.3% 90.0% 220 Canada 4428557221Sample (N) 81.3%80.4%70.1%63.0%80.4%Total Welcome&Wanted 86.6%88.2%75.5%64.4%85.2%Time to be approached* 71.4%66.1%58.2%50.3%70.5%Time for greeting* 97.7%96.4%87.3%90.3%95.2%Polite/cordial on phone 88.6%96.4%85.5%91.7%90.5% Phone answered in 3 rings BCNWTPrairiesOntarioQuebecAtlantic The key opportunity areas here relate to the speed of greeting or acknowledging customers after entry, and approaching them to begin the sales process: Point system for greeting/approaching customers:; Greeting within 30 secs. (10 pts); within 60 secs. (5 pts), over 60 secs. (2 pts);Approaching within 3 mins. (10 pts); within 5 mins.. (5 pts), over 5 mins. (2 pts)

14. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service Performance – Professional Behaviour 65.0% 220 Canada 4428557221Sample (N) 67.2%65.6%67.5%58.3%75.9% Tot. Professional Behaviour BCNWTPrairiesOntarioQuebecAtlantic While HPBAC outperformed retail industry norms on ‘professional behaviour’, this is still an opportunity area. It can be argued that given the high value sales in HPBAC outlets that the ‘consultative sale’ is all- important and professional/selling skills are particularly key:

15. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service – Professional Behaviour Opportunities 15.5%4.5%14.3%27.3%12.5%19.0%Asked for contact info. 55.0%63.6%60.7%61.8%38.9%66.7%Explained installation 42.3% 35.5% 65.0% 46.4% Canada 47.7%46.4%45.5%37.5%76.2%Asked for feedback on products 43.2%39.3%47.3%37.5%47.6%Mentioned warranty 36.4%50.0%38.2%25.0%42.9%Suggested related items 61.4%57.1%72.7%55.6%95.2%Provided range of fuel options BCNWTPrairiesOntarioQuebecAtlantic Sales staff: The key areas of shortfall are not involving the customer in a dialogue (asking for feedback on product sell), fuel options, suggestive selling, warranty assurance, the value of professional installation and asking customer for contact information in follow-up:

16. HPBAC Mystery Shopping HPBAC Mystery Shopping Customer Service – Value & Appreciation Opportunities 75.7% 78.2% 68.8% 84.5% 220 Canada 4428557221Sample (N) 79.7%76.4%76.7%68.8%87.2%Total Valued & Apprec. 84.1%75.0%80.0%70.8%90.5%Recommend to friends* 75.5%71.4%69.1%60.1%80.0%Comfort rating* 79.5%89.3%85.5%81.9%95.2%Thanked on departure BCNWTPrairiesOntarioQuebecAtlantic Performance in the area of ‘valuing and appreciating customers’ was strong – the high incidence of shoppers prepared to recommend the stores to friends is particularly encouraging:

17. HPBAC Mystery Shopping HPBAC Mystery Shopping Product Distribution - Stoves Gas and wood stoves are about equal in availability (a slight lead for wood in Atlantic and for gas in the Prairie provinces). Atlantic members offer greater overall variety. This practice may be a development opportunity in balance Canada.

18. HPBAC Mystery Shopping HPBAC Mystery Shopping Product Distribution - Fireplaces In fireplaces, Gas modestly outstrips Wood distribution (due to greater Western Canada development). Greater availability of Pellet and Oil in Atlantic and Quebec relative to other regions.

19. HPBAC Mystery Shopping HPBAC Mystery Shopping Product Distribution – Fireplace Inserts Insert distribution is modestly lower than that of fireplaces (except in Atlantic and B.C.). Distribution by type follows the ‘fireplace pattern’ except for Pellet fired inserts which enjoy better distribution in Atlantic and Prairies than full fireplace counterpart.

20. HPBAC Mystery Shopping HPBAC Mystery Shopping Product Distribution – Barbecues Barbecue distribution continued relatively high in October (expected to be “off-peak seasonality”). Propane types are in stronger distribution in Atlantic and Quebec while tied in the balance of Canada.

21. HPBAC Mystery Shopping HPBAC Mystery Shopping Product Distribution – Patio Sets As expected, the October timing found very low Patio set distribution. There was a lot of variation in furniture type although this may not be representative.

22. HPBAC Mystery Shopping HPBAC Mystery Shopping Conclusions / Next Steps HPBAC members generally outperformed ‘industry norms’ in customer service but this may not be sufficient given that the products offered are ‘high- ticket’ in nature – requiring greater depth of relationship management and overall management of the sale. Training, particularly in selling skills makes a lot of sense for HPBAC members.

23. HPBAC Mystery Shopping HPBAC Audit Summary Conclusions / Next Steps ‘Environmental store conditions’ require some fine-tuning of the audit as it relates to exterior / interior cleanliness and in the use of effective displays. A learning opportunity may lie in modifying the ‘environment audit’ to include better questions on store design, signage and organization (currently it is ‘cleanliness focused’). Distribution information could prove to be more valuable if there was some analysis done on store revenue and profitability relative to product availability.

24. HPBAC Mystery Shopping HPBAC Mystery Shopping Distribution of Results Individual audit results have been sent to each member along with the regional and national results and the Executive Summary Distributor and manufacturer members received the Executive Summary and regional and national results Distributors and manufacturers were offered the anonymous results for their dealers (all dealer information removed)

25. HPBAC Mystery Shopping HPBAC Mystery Shopping Program Successes 12? new members joined during our promotion of the Mystery Shopping program The Mystery Shopping Program has helped to draw xx more new members since December 2002 x Friedman Sales Training sets have been sold to Canadian members since the audits have been distributed

26. HPBAC Mystery Shopping HPBAC Mystery Shopping Feedback from Membership The HPBAC board has sought input from participants to gauge the value of the program and determine when and if there should be additional programs HPBAC members have rated the value of the program x out of 10 HPBAC will conduct a Mystery Shopping program again in 2003 and will cover a portion of the cost