J.D. Power and Associates
As the founder and chairman of the most prestigious marketing information firm in the world, when J. David Power III (best known as J.D. Power) speaks, businesses and consumers listen. He founded his company, J.D. Power and Associates, in the late 1960s based on the idea that consumers should be given a way to express their opinions about the automobiles for sale to U.S. drivers. Power's company now has offices in several major cities around the world. The list of clients requesting its surveys of customer satisfaction data have expanded to include not only every automobile manufacturer or importer catering to the U.S. market, but also the telecommunications, passenger airlines, car rental, health care, financial, and hotel industries.
Born in 1931, J. David Power III attended the College of the Holy Cross, graduating in 1953. After serving in the U.S. Coast Guard as a line officer aboard an icebreaker traveling the Arctic and Antarctic for four years, he went back to school and, in 1959, earned a master's degree in business from the University of Pennsylvania's Wharton School of Finance. He worked for a decade for both Ford Motor Company and General Motors, as well as for other gas-engine equipment manufacturing companies, then founded his marketing company in 1968. J.D. Power and Associates' Customer Satisfaction awards are prized by manufacturers and relied on by consumers. Since their inception in the late 1980s, they have become highly visible components of thousands of advertisements for cars and trucks sold in the United States.
Known for his strong advocacy of U.S. consumers, Power was recognized for his leadership role in documenting customer satisfaction within the auto industry in 1992, when he received the Distinguished Service Citation from the Automotive Hall of Fame. Rejecting countless offers of merger or acquisition over the years, Power would be joined by three of his four children in the business. He continued to play an active role until the late 1990s when, contemplating retirement from the firm, he expressed his intention to sell the company he had founded three decades ago.
Before setting up his market research company, Power had a career within the automotive industry. He began in 1962 as a financial analyst for the Detroit-based Ford Motor Company, and then worked for seven years for another of the "Big Three," after signing on with General Motors as a marketing research consultant for that company's Buick and GMC Truck divisions. Other jobs Power held included a marketing research executive position with construction and farm equipment manufacturer J.I. Case and director of corporate planning for McCulloch Corporation, a Los Angeles-based engine manufacturer.
In 1968 Power decided there was a need for an independent method of collecting information on car quality, which could be supplied to potential purchasers before they bought a car. This need had become especially apparent, Power believed, with the increasing number of foreign cars reaching U.S. dealers in the 1960s—not only those from Saab, Volvo, Mercedes-Benz, and Volkswagen in Europe, but a whole new group of smaller, competitively priced cars from Japan. Attracted by the gas savings offered by these smaller cars, U.S. consumers viewed with increasing criticism the lack of design innovation coming from the Big Three (Ford, General Motors, and Chrysler). Large, heavy bodies and overpowered, high-performance engines made American-made cars costly to operate, particularly during the Arab Oil Embargo in the early 1970s, when gasoline prices reached ridiculous heights and gas was rationed at the pump.
Deciding to target the cars marketed by Japanese auto maker Toyota first, Power (with the help of his wife, Julie) prepared survey questionnaires, stuffed them into envelopes that contained a quarter to encourage return of the survey, and tabulated the results. He then began marketing these survey tabulations to the auto industry, revealing significant results even in the first years that proved to the industry how useful Power's work would be. By means of the surveys of the early 1970s, consumers expressed their preference for front-wheel drive cars over the traditional rear-wheel drive. They also voiced their frustration with parts that consistently failed, such as the O-rings on Mazda's revolutionary "Wankel" rotary engine marketed in 1971-72. While Mazda publicly decried Power's survey results, the engine was soon discontinued.
Chronology: J.D. Power
1952: Began four-year service with U.S. Coast Guard.
1959: Earned MBA from University of Pennsylvania's Wharton School of Finance.
1962: Joined Ford Motor Company as a financial analyst.
1968: Founded J.D. Power and Associates and begins consumer survey process.
1972: Early J.D. Power survey results cut short the career of Mazda's Wankel engine.
1987: Began J.D. Power Customer Satisfaction Index.
1992: Receives Automotive Hall of Fame Distinguished Service Citation.
1996: Appointed chairman of the board of J.D. Power and Associates.
1998: Announced plans to sell the company.
Surveys for Power's five major consumer studies are distributed annually to 100,000 car owners obtained from vehicle registration lists. Before Power began conducting and publicizing these surveys, there was no measurable way to compare one automaker's product against another's. Other than reading car enthusiast magazines or skimming issues of magazines such as Consumer Reports, consumers had to rely primarily on dealer promises and the recommendations of friends. When he established point-by-point comparisons through surveys, Power became the hero of consumers and the bane of the Big Three, whose cars did not always stack up well against the new Japanese competition. Even manufacturers lucky enough to earn the number one spot in his surveys were upset by his requirement that they pay fees to use the J.D. Power Customer Satisfaction ranking in advertising. But Power did not care about popularity as much as he believed in remaining independent of the auto industry as a way to gain credibility. As one industry analyst noted in Business Week, Power's "genius was not to depend on companies to finance proprietary studies, but to do independent studies and publish the results."
In the early 1990s J.D. Power and Associates began to expand its services to other industries, including such travel-oriented areas as hotel chains, rental car companies, and credit card services. As finding a health care provider has become a daunting task to many consumers, and the break-up of AT&T has caused a proliferation of telephone service providers, Power's company also has stepped into these areas to survey consumer contentment. However, non-automotive rating services accounted for only 15 percent of the company's $42 million in revenues in the mid-1990s. By 1997, the company took in over $61 million in annual sales.
Recent years have seen changes in the competitive awards and micro-surveys that characterized the marketing information desired in the 1970s and 1980s when Power was establishing his enterprise. The company's Initial Quality Study (or IQS), established a number of years ago and released each May, asks new-car purchasers to list defects noted within the first 90 days of purchase. The IQS has become a force to be reckoned with by auto manufacturers; as Paul A. Eisenstein noted in Automotive Industries, "Scoring well in the IQS charts almost always brings a rise in sales, while a poor performance sends a manufacturer scrambling for answers and fixes." In later years the survey was criticized by manufacturers who claimed that such new-car "defects" reducing product ratings were often insignificant, due to the drastic improvements in quality over the last several decades. As a result, the survey was revamped in 1997. As Andrea Adelson explained in the New York Times, automobiles "don't have the kinds of glaring faults they had in the 1970s and early 1980s. That is a change for which many inside and outside the industry give Mr. Power much credit." In response, J.D. Power and Associates has increasingly focused other surveys on customer service. For example, in 1997 the company began offering awards to new-car dealerships, which number over 21,000 across the United States.
Social and Economic Impact
In an era of increasing consumerism characterized by high expectations and a desire for immediate gratification, Power and his company provided a way for potential customers to intelligently weigh their options before making such a major life purchase as a car. Most significantly, the company's 30 auto industry clients take these consumer judgments equally seriously, paying J.D. Power and Associates millions of dollars each year for long, detailed comparisons between everything from transmissions to owners' manuals. These products are in contrast to the company's Customer Satisfaction awards, which are generally positive and contain no specifics.
Because of the Power reports, auto manufacturers are now able to plan future design and technology changes by understanding the changing needs and expectations of the car-buying public through an objective lens, without relying on information gathered inside the company. In recent years, automobile manufacturers around the world have requested surveys similar to those performed in the United States as a way to gauge their own auto-purchasing markets.
Power initially planned to release his survey results only within the industry, but his business changed radically in 1983, when Subaru ran the first print add mentioning a J.D. Power IQS result, showing Subaru ranked second behind Mercedes-Benz in customer satisfaction. The use of Power ratings in print advertising helped to build the company's reputation as a consumer advocate, without requiring the publication of detailed reports. It also has spurred the company's growth into other industries where no objective measurement standard as yet exists. Some critics, however, believe that the practice of allowing manufacturers to use the Power name in their advertising creates a conflict of interest for J.D. Power and Associates and compromises its independence.
Marketing the survey results to businesses for use in advertising had generated a significant amount of revenue, allowing the company to expand beyond its original vision servicing U.S. consumers. By 1998 J.D. Power and Associates had offices not only in the United States, but also in such cities as Toronto; Tokyo; London; Seoul, Korea; and Sao Paulo, Brazil. Success, as always, has spawned competition; but, because of Power's reputation as a consumer advocate, his company has continued to be the leader in rating customer satisfaction.
Sources of Information
Contact at: J.D. Power and Associates
30401 Agoura Rd., Suite 200
Agoura Hills, CA 91301
Business Phone: (818) 889-6330
Adelson, Andrea. "People Buy the Cars He Says They Like." New York Times, 16 October 1997.
Armstrong, Larry. "Rating J.D. Power's Grand Plan." Business Week, 2 September 1996.
Eisenstein, Paul A. "Behind the Power." Automotive Industries, May 1997.
Sharfman, Bill. "The Power of Information and Quality." Automobile Magazine, February 1996.
"About J.D. Power and Associates." J.D. Power and Associates. Agoura Hills, CA: J.D. Power and Associates, 1998. Available from http://www.jdpower.com.