Who Exactly Is J.D. Power?

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It feels like every car commercial you see touts the vehicle’s sterling showing in a J.D. Power and Associates survey. The awards are bandied about as if their origins are common knowledge. But who exactly is J.D. Power, and who are his much-discussed associates? Let’s take a look at the man behind the car ads.

Who is this Power fellow?

To answer your first question, yes, the name J.D. Power is too terrific to be anything but real. James David Power earned his MBA from Wharton in the late 1950s and went on to work in finance for Ford before taking a job in advertising. On the inauspicious date of April 1, 1968, “Dave” Power and his wife/romantic associate, Julie, started a market research firm at their kitchen table.

Starting a market research company in your kitchen sounds like a longshot, but within a year Dave Power had convinced Toyota to buy his market research, and other large companies like Carnation soon followed. By 1981, the firm was conducting its U.S. Automotive Customer Satisfaction Index Study.

Super Bowl XVIII in 1984 turned out to be a big game for Power, and it wasn’t because he was a big fan of the victorious Los Angeles Raiders. Subaru ran an ad during the game that boasted of its cars’ impressive showing in the J.D. Power rankings. Although the honchos at Subaru probably didn’t realize it, the ad was a watershed moment for car advertising. The Subaru spot was the first car commercial to mention an automaker’s J.D. Power performance, and it started quite a trend. According to the J.D. Power website, over 350,000 television commercials have mentioned their ranking since that first Subaru ad.

What do the numbers mean?

One metric that constantly worms its way into car ads is J.D Power’s survey of “initial quality.” Aren’t all non-lemon cars high on initial quality? Perhaps not. Although the survey’s name doesn’t do much to tell you what it’s measuring, the actual methodology seems fairly sensible. The firm surveys new car owners after they’ve had their rides for 90 days to see what kind of problems they’ve had with their vehicles. The study provides a metric called PP100, or problems per 100 vehicles, and J.D. Power presents awards for the vehicles in each segment with the fewest problems.

J.D Power and Associates publishes four other major auto surveys each year, but the other one that seems to consistently come up in commercials is the group’s ranking of vehicle dependability. Like the initial quality survey, the Vehicle Dependability Study surveys a large group of car owners, but it doesn’t ask its questions until the cars are three years old. At that point, the survey asks what problems the car has had in the previous 12 months.

Where’s the money in these rankings?

It’s nice for consumers to know which cars are more likely to break down in their first 90 days on the road, but how does J.D. Power and Associates make any money? According to a 2004 U.S. News and World Report profile on the company, the auto rankings aren’t really all that lucrative. Automakers and other companies pay a licensing fee to use the awards in their ad campaigns, but the bulk of the firm’s revenue comes from selling its market research to curious companies. The survey rankings we hear about on TV are just a tiny portion of the data collected in the customer surveys, and the rest is placed in corporate hands.

This business model enabled J.D. Power himself to cash in for a nice chunk of money. In 2005 publisher McGraw-Hill acquired J.D. Power and Associates for an undisclosed sum. Although the name J.D. Power and Associates most frequently appears in car ads, the company tracks all sorts of industries, from healthcare to banking to telecommunications.

March 9, 2011 - 6:55pm
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