StellaService, Backed By Big NY Investors, Looks to Recognize E-Tailers For Star Customer Service with Zagat-Style Marks

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Jordy Leiser and his friend John Ernsberger left their jobs in the financial industry in 2008 with an appetite for starting a company around the subject of transparency. But that inspiration didn’t turn itself into a company right away. “We spun our wheels for a long time,” says Leiser.

So they did what any self-respecting mid-twenty-somethings would do when they ran out of money: left their Brooklyn dwellings and went back to their college (Bucknell in Lewisburg, PA) to figure it out. The pair was passionate about online retailers with really great customer service, like Zappos.com. So after months of consulting with academics at Bucknell, they settled on a strategy.

“We put together this idea to create the richest, most extensive robust methodology to evaluate service,” Leiser says.

Anyone can put up a description on their website touting their amazing service, but there was virtually no objective third-party rating system or mark for vetting that, like Zagat (restaurants), or JD Power and Associates (automobiles) Leiser says. So his startup, StellaService, developed a testing method and asked big online retailers if they’d be willing to purchase the data that testing produced. And, to touch back on that transparency theme, online stores that passed the customer service test could display a seal from StellaService—named for the Italian word for “star”—signifying they had been vetted by a third party and were considered tops in customer service.

“The hypothesis was maybe we if launched some website that had bunch of ratings for companies, the guys that did really well would be willing to take a chance to display some kind of signal,” says Leiser, the company’s CEO.

StellaService secured Diapers.com as an early customer. The company collected $250,000 in angel funding in December 2009 from Bucknell alum and LendingTree.com founder Doug Lebda, and a crop of other angel investors who are friends with him, Leiser says. The money got Leiser and Ernsberger back to New York City in early 2010, and allowed them to take the website live that March. StellaService’s website offers a public database of e-tailers its guerilla force has tested, offering its summary of the service experience, service contact information, and basic shipping information. It also lists retailers with the top customer service in a number of categories.

The company’s aim was to test every angle of an online retailer’s customer service, using roughly 300 different metrics on things like shipping time periods, speediness at answering customer questions, product knowledge, and much more. “The beauty is that we don’t need their permission to do it,” Leiser says. “We just go and become customers.”

It’s hired a legion of two dozen people—what Leiser calls “mystery shoppers on steroids” to test websites using StellaService’s methodology, by doing things like sending e-mails in Spanish, and calling morning, noon, and night, to ask questions on the products, delivery methods, return processes, and beyond. It relies on this consistent, ground up approach to rate businesses, beyond the polls and user-submitted reviews that sites like BizRate use to grade online stores.

The startup, based in NYC’s Flatiron district, set out to get 10 to 15 of top 150 retailers it evaluated to display the StellaService seal last year, Leiser says. It pulled in closer to 50, including Zappos.com, Diapers.com, and 1-800 Flowers.com. The company also tested the impact of the mark had on consumers who visited the sites displaying them, and found that the seal “did tell a story that influenced buyer behavior,” Leiser says.

“For a company that had spent zero dollars on marketing, our brand was actually influencing behavior,” he says.

Leiser says there’s a host of ways StellaService could bring in cash—from affiliate marketing, selling the customer service data, and allowing highly rated businesses to use the seal in display advertising—but for now he’s focused on doing “everything we can to makes sure that what we’re doing is the perfect solution,” he says.

Last summer StellaService raised $1.75 million in venture funding (announced last month) on top of its angel round. The round was led by New York-based DFJ Gotham Ventures, and Battery Ventures, a firm with offices in Boston, Silicon Valley, and Israel, and the only non New York-firm in the bunch. The deal also included angel investors, RRE Ventures, and Consigliere Brand Capital, a firm founded by two-time NBA MVP player Steve Nash and Michael Duda, of the ad agency Deutsch.

“If I had to do it all over again I would do it in New York City,” Leiser says of starting the company in the Big Apple, pointing to the city’s wealth of big brands and commerce and media-focused startups.

StellaService, now a seven-person team (not counting the steroided secret shoppers), updated its website last week, with added features for both shoppers and businesses. Consumers can submit anecdotes on great customer service experiences they’ve had online (something StellaService found that visitors were doing even without the site’s prompting, Leiser says), and StellaService will display it on the company’s profile on its site. Because the StellaService is focused on its consistent, objective, methodology for testing sites, these reviews won’t actually influence StellaService ratings for a merchant, though.

Businesses that have scored high on the StellaService system can request code to update their websites with the seal. And those who haven’t been rated yet can nominate themselves to go through the rating process and attract the support of customers who want them to get tested. (There are roughly 70 companies on the wait list at this point.)

StellaService has also been inking partnerships with comparison-shopping sites, like TheFind.com “The whole rationale for ecommerce today is that prices are converging,” says Leiser. “The only thing now that companies can really use to differentiate is service.”

The Stella mark could help customers decide which site to buy their next camera from, when retailers’ prices for the products are all within a few dollars of each other, he says. “That’s what I think a lot of the comparison shopping sites need now. Is it worth it going to a site knowing StellaService has been to it?”

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