Q: It seems nearly every time I hear a car commercial, it’s touting that its brand has won some kind of award from J.D. Power. Just who or what is J.D. Power and how did it become so prominent in carmakers’ efforts to show that their products are superior to their rivals?
C.A., of Caseyville
A: If you’re a true football fan, Super Bowl XVIII likely still has at least a few special memories for you.
It was Jan. 22, 1984, when the Los Angeles Raiders shanghaied the Washington Redskins, 38-9. It featured a stellar performance by running back Marcus Allen, who fought for a record (at that time) 191 yards, including a 74-yard scoring scamper, the longest TD run in Super Bowl history up to that point. You might also remember quarterback Jim Plunkett joining in the fun by setting career marks in passer rating (122.8) and highest pass completion percentage (63.0 percent).
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But while the Raiders were constantly dancing in the end zone, J.D. Power likely would come to feel that he had walked off with the advertising equivalent of the Vince Lombardi Trophy. During the game, Subaru had become the first carmaker to use TV advertising to brag about its impressive showing in the annual J.D. Power rankings.
It was a watershed moment for the marketing information services company, which steadily had been building a client base for 16 years — not only in cars, but also food, health, computers and other consumer goods as well. In the 33 years since, more than 350,000 TV spots and more than 2 billion print ads mentioning those awards have helped turned J.D. Power and Associates into an international household name.
According to Mr. Power himself, it all started in his kitchen. In the late 1950s, James David “Dave” Power earned an MBA from the prestigious Wharton School of the University of Pennsylvania. For the next decade, he worked in finance at Ford before going into advertising. Then, on April Fools’ Day, 1968, of all days, Power says he and his wife, Julie, were sitting at their kitchen table when he decided to take a huge gamble and start a marketing research firm.
It was obviously one gutsy decision. Just how does one individual with little experience in the business go about convincing the biggest companies in the world that his research could be valuable to them? Yet soon after incorporating on Feb. 7, 1969, Power convinced Toyota Motor Co. to buy his information. By the end of the year, such well-known names as McCulloch (power tools), Ampex, U.S. Borax, Carnation and MSI Data Systems had followed suit.
Power was on a roll that has never stopped. Remember the problems Mazda had with its Wankel rotary engines in 1973? Well, it came to light in the Wall Street Journal based on data from one of the first J.D. Power independently funded surveys. As a result, the firm won national prominence for its customer data. Three years later, Power launched the first Dealer Attitude Study, which gave the firm credibility on retail and distributor issues while establishing a strong rapport with auto dealers.
Then in 1981 came the U.S. Automotive Customer Satisfaction Index, which became the cornerstone for the firm’s plan to vastly expand its independently funded studies within the auto industry. In 1989, Acura was given Power’s first actual trophy for earning the highest ranking on this index.
Now Power’s surveys often play a vital role in consumer behavior and company strategy. Among the most popular is the Initial Quality Study, begun in 1987, in which vehicles are compared by the number of problems they have during the first 90 days of use. Also widely followed is the company’s Vehicle Dependability Survey, which asks owners of 3-year-old cars to describe the problems they’ve had during the previous 12 months.
So how in the world does a company make any money doing this? Naturally, automakers and other companies do have to pay J.D. Power and Associates a licensing fee to mention the awards in their advertising, but this isn’t all that lucrative, according to a report in a 2004 issue of U.S. News and World Report.
Instead, most of the company’s revenue still comes from conducting and selling consumer market research to companies for their internal use. Now 750 analysts in 17 offices around the world provide vital data for companies that run the gamut from Hyundai and Nissan to American Express, State Farm, Delta Air Lines and Walmart. So the survey rankings you see on those TV ads are just a tiny part of what the company collects.
Power’s original one-man firm, by the way, has now changed hands twice. In 2005, it was acquired by McGraw-Hill (on April Fools’ Day, appropriately enough) before being sold to the XIO Group, based in London, just last year. And the company is no stranger to being the subject of surveys itself. Last year, the American Marketing Association put it 10th on its gold list of the top 50 marketing firms. As you might suspect, Nielsen, founded in 1923 and probably best known for its TV ratings, continues to hold down the top spot.
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