NEW YORK - Barry Leeds & Associates, the premier mystery shopping firm studying bank compliance, has taken a Darwinian approach to success.

Adapt or run the risk of becoming extinct.

Observers said the firm's evolution - offering new services and accommodating new trends and technologies - has kept it at the top of the mystery shopping industry. But an ever-growing group of competitors is trying to close the gap.

Still, Mr. Leeds remains confident of his firm's staying power.

"We don't think there's going to be any problem for us surviving another 18 years," Mr. Leeds said. "We think compliance will always be there."

About 60% of Leeds & Associates' work involves compliance research, including extensive fair-lending testing. But the firm got its start in 1977 analyzing the quality of bank sales and service. The advice doesn't come cheap. Banks frequently pay more than $10,000 for a mystery shopping study.

Back in the late 1970s, Leeds & Associates was being hired to help banks develop a sales culture in their branches. Later, the firm studied the quality of service banks provided. Then, fair-lending surfaced, and Leeds & Associates added that to its repertoire. Currently, mystery shopping is all the rage among the firm's customers as a way to test investment product disclosures.

Mr. Leeds and his competitors are scrambling to figure out what role mystery shopping will play as electronic banking grows and banking becomes increasingly impersonal.

But Mr. Leeds does not expect new technologies to remake the industry, an opinion formed in the early 1970s when as director of marketing with Chase Manhattan Bank he tried unsuccessfully to launch a debit card.

"I lived through what was supposed to be the checkless society and the cashless society," Mr. Leeds said. "Well, we still have plenty of checks and we still have plenty of cash."

And there are still plenty of mystery shopping issues as well, even as the industry becomes less personal. Disclosure and fair-lending compliance issues aren't going away, Mr. Leeds said, although methods of tracking and shopping will be forced to change.

No one is sure what form those changes will take, but one thing is certain: Leeds has more competitors than ever before, including Market Trends Research in Bellevue, Wash.; Meyers Research Center in New York; and huge accounting firms such as Price Waterhouse.

Jeffrey Liekhus, vice president of marketing at Market Trends, said the newer firms are gaining steadily on Leeds & Associates. Market Trends, founded in 1982, has not lost out to Mr. Leeds in bidding for an account in more than nine months, Mr. Liekhus said.

"The captivation the industry once had with his firm is slipping," Mr. Liekhus claimed.

He called Leeds & Associates "a well-oiled marketing machine," and said Mr. Leeds is more adept at self-promotion than owners of other mystery shopping firms.

Bert Wayne, senior vice president and Community Reinvestment Act administrator at Wachovia Bank, Winston-Salem, N.C., said Mr. Leeds' experience and reputation played a major role in the bank's decision to hire his company.

But Mr. Wayne said he observed shopper training sessions and was impressed by Leeds & Associates' ability to keep the studies objective. He said the shoppers are "trained like they don't know what they're there for," focusing on certain aspects of service but not on the overall mission of the study. He said this keeps shoppers from entering a study on a witch hunt, looking for any small issue that could be construed as discriminating or misleading.

Jeff Friedlander, vice president of Meyers Research, said the job of loosening Leeds & Associates' grip on the market is tough because banks are reluctant to leave the company they've chosen.

"From a historical point of view, you take a chance of losing the trendability of the statistics when you switch firms, so it becomes harder to measure your performance," Mr. Friedlander said. "And again most banks are focused on the bottom line. They tend to stay with their current firm, but they take bids every time to help drive down the price."

However, Mr. Leeds said price is no longer a stumbling block.

"The price is getting easier to justify these days," Mr. Leeds said. "The outcome of the studies is doing more than just giving them information on how they treat minorities. It generally comes down to a service issue in most cases."

Jean Nugent, consumer research director at Home Savings of America, Irwindale, Calif., said the institution hired Leeds & Associates even after doing its own mystery shopping.

"It's a question of value," Ms. Nugent said. "You're paying for all of their experience and time and effort. I know what a large task it is."

Mr. Liekhus said many of Mr. Leeds competitors have followed Leeds & Associates' by broadening the array of services offered. Many newer firms now include sales and service tests, along with investment product and fair-lending compliance.

Bankers are as nervous as ever about those two issues, according to Mr. Leeds. There has been no noticeable drop-off in fair-lending studies by his firm.

"It's just as hot a topic with banks now as it was two or three years ago," Mr. Leeds said. "But it becomes part of the norm. You don't read about it everyday on the front page. Now you usually only hear about it if (Department of Housing and Urban Development Secretary Henry) Cisneros or (Comptroller Eugene) Ludwig issues a statement or there's a big Justice Department case."

Banks will always be curious about their performance, Mr. Leeds said.

"There are always forms of research you can do," he said. "Even if you're dealing with electronics, banks are going to want to know the number of customers they have, how many transactions they do. And you're still going to want to know how (your customers) feel, and what they perceive is important so you know what to deliver."

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