The 1M/1M Deal Radar: Market Force

Market Force develops customer intelligence solutions that are designed to enable large, multi-location businesses to see their stores through their customers’ eyes and act faster with confidence, thus increasing the bottom line. The company provides a variety of customer intelligence solutions, including mystery shopping, customer satisfaction, price auditing, merchandising services, and analytics to help companies better manage their retail locations and products.

CEO Karl Maier, board member Paul Berberian, and vice president of products and communications Rushton McGarr founded the Boulder-based company in 2005. In his prior experience as a CEO for organisations such as the Bank of Boston, Maier was responsible for consolidating and turning around multi-acquisition companies. At the conclusion of his last successful venture, he decided he was too young to be a “turnaround guy” and began looking for an opportunity where he could use his experience to grow a business. He identified the mystery shopping business as one that was ripe for transformation. It was an under-the-radar industry that had many small providers yet was used by most of the largest consumer-facing companies in the world. It was Berberian who suggested the mystery shopping industry when Maier was outlining his idea for a new venture; Berberian’s father-in-law was a mystery shopper.

The company’s product suites consist of two main types of services: on-site, and data and analysis. On-site services include competitive evaluation; quick service restaurant (QSR) price tracking; crisis management; on-floor setup solutions; theatre checks to verify the showing of pre-feature advertising, gauge audience reaction to advertising, or confirm the presence and location of lobby displays; and movie film print checking. Data and analysis reports help companies to improve “return on information” gathered from sources such as mystery shopping programs, and also include training and rewards programs, text mining, and loyalty calculations. Other products include merchandising solutions, customer feedback surveys, brand and location audits, and a customer intelligence platform to tie all of the information together. The average contract is $250,000, and more than 80% of Market Force’s revenue is recurring with 1- to 3-year contracts. The goal for the next two to three years is to have the customer intelligence solution embedded in the C-suites of Market Force’s top 25 clients, who spend an average of $3 million a year with the company.

Market Force competes in various related markets. The market for merchandising is $1.6 billion and growing at 4% per year, according to industry associations, with several large providers. The market for mystery shopping is approximately $700 million, with relatively flat growth. Market Force is the largest provider following several acquisitions (e.g., Shop ‘N Chek and Certified Marketing Services), but the industry is still very fragmented. The market for customer feedback (also known as C-Sat) is approximately $1 billion, and according to Gartner, growing at 39% per year; it is also fragmented. Finally, the market for auditing is approximately $500 million and is growing moderately, but no outside research vendor tracks this market independently.

In general, the competition is also fragmented by market. In mystery shopping, competitors include Service Intelligence, Corporate Research International, and BestMark. Empathica, Medallia (featured in Deal Radar), and Maritz are competitors in customer satisfaction, and Advantage and Crossmark in merchandising services. Market Force aims to offer a fuller breadth of service than its competitors and to develop technologies that can consolidate multiple types of customer intelligence into a decision support platform that quickly identifies problem locations and the analytics to help determine where companies should focus their attention. Further, the company is trying to use its size in mystery shopping in particular, and the expertise of its clients, to create a new market space it calls customer intelligence, which it defines as “business intelligence that business-to-consumer companies need to delight their customers.”

Some of Market Force’s acquisitions came with marquee accounts such as General Mills and Sony, and today it has more than 200 clients including McDonald’s, Panda Express, Einstein Bros. Bagels, Target, Sears, Benjamin Moore, McCormick, Coca-Cola, PepsiCo, Kroger, Aldi, Warner Brothers, 20th Century Fox, HSBC, Jackson Hewitt, Verizon, and T-Mobile. Its top target segments are restaurants (quick serve, fast casual); retail (mass, specialty, fashion); consumer packaged goods; entertainment; grocery/convenience; financial services; and wireless/telecom.

Market Force has raised a total of $43 million in equity since its founding: an angel round from Centennial Ventures, followed by a Series A by Colorado venture firms Centennial Ventures, Boulder Ventures, and Vista Ventures to finance the first acquisition. Monitor Clipper joined as a major investor in the Series B to finance the final acquisition, with coincident funding from original investors. Market Force is profitable, with revenues of more than $50 million.

For 2011 and beyond, the company plans to grow in three ways. First, organic growth to new clients: it has invested in sales and marketing to acquire new accounts for customer intelligence in the targeted verticals. Second, organic growth to expand with existing clients: its new customer intelligence platform will be coming to market this year, and it will provide new revenue growth from existing and new clients. Finally, growth through acquisition: Market Force expects to make at least one acquisition, if not two, to add to its client base.

Management’s plan is to grow over the next two to three years to be at least a $100 million business, growing organically at least 15% a year with profit margins at 20% EBITDA. At that point, they believe they will have several options, ranging from a lucrative acquisition to the possibility of growing to an IPO if the market is right.

In the 1M/1M Deal Radar series, we celebrate entrepreneurs who have reached at least $1 million in annual revenue. It is part of theĀ One Million by One Million (1M/1M) global initiative.

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