Lessons learned from the J. D. Powers story

  • By James McCusker Business 101
  • Friday, February 28, 2014 12:55pm

The J. D. Power and Associates firm is still best known for its work in the automobile industry and its reports on car buyer satisfaction, but it is a large, international market research organization, now a part of McGraw Hill, surveying consumers in many industries, countries, and languages.

Like many successful companies, though, it began as a kitchen-table startup with not much more going for it than a great idea.

The idea seems obvious to us today, but it was a ground-breaking one at the time: let the consumer data speak for itself.

James David Power, known within his family and his company as Dave, had grown up during the automobile industry’s primacy in the American economy. Detroit’s “Big Three” — General Motors, Chrysler, and Ford — dominated not only the market for cars but also how America thought about the manufacture and marketing of all products. Together with Detroit, they epitomized success, just as, later, their shortcomings would define failure.

Dave’s experience with the automobile industry, though, starting with his work at Ford Tractor Division and later at Marplan, the market research arm of the advertising firm McCann Erikson, convinced him that the consumer data they were working with wasn’t giving the automakers the accurate picture they needed.

The industry’s market research was affected, shaped, and often limited by the questions the automobile companies asked and the “happy talk” answers they were often looking for. What the customers really thought about the product was not always the centerpiece of the research, especially by the time corporate committees were finished with the questionnaire design.

Dave began thinking about a different kind of market research that would compile and analyze genuine consumer opinions, experiences, preferences, and other behavior-affecting forces. It would look for the truth, even when it hurt.

It was a great idea, but it really didn’t fit into the existing corporate structure of how market research was underwritten and conducted. It would take a new type of market research company, one that would conduct independent research and whose reports would be purchased by production firms.

By 1968, armed with his great idea, the full support of his family, and broad experience in the automobile and other industries, Dave started his own market research business, J. D. Power and Associates. It was a family affair from the start; the kitchen table providing the workspace for Dave’s wife, Julie, to tabulate and analyze consumer responses and for the kids to stuff envelopes with questionnaires.

Dave’s new firm faced a cost structure which in many respects resembled a manufacturing company’s business model more than a traditional market research firm’s operation.

He was underwriting the cost of the consumer surveys in the belief that the results could be sold — to companies who directly or indirectly produced products for those consumers.

It was a very different business model, but the increasing credibility of Dave’s survey data helped the firm stay afloat and gain customers. It was slow going, as is often the case with new business ventures, but that would change suddenly.

The little company had funded a fairly broad survey of automobile buyers. And it was Julie who first discovered in the survey data that customers who had driven Mazda rotary engine models for over a year had experienced an unusual number of engine failures.

The cause turned out to be the O-ring seals, which became a near-insoluble engineering problem that eventually gave a black eye to Mazda and consigned rotary engines to the dust bin of automobile history.

Meanwhile, Dave’s report on the issue, although confidential to subscribers, was leaked to the news media and it became a huge national story.

The unintended consequence was that J. D. Power and Associates was transformed overnight from an obscure market research startup to a firm whose name everybody in America recognized. It opened doors for the company, and even Mazda became a believer, and a customer. Dave’s concept of letting the consumer data speak for itself was on its way.

What can we learn from this about starting a successful business? First, there is no substitute for a great idea. Great ideas ignite a passion that will get you and your business through the storms and keep your sails filled in the doldrums.

Second, if at all possible get your family involved. This is not only rewarding for everyone involved but also avoids the destructive loneliness and alienation that so many entrepreneurs go through.

Third, position yourself and your company to take advantage of opportunities. You can prepare for this by expanding your dream for the business: don’t just imagine success; imagine the events that will propel you and the route you will take to get there.

James McCusker is a Bothell economist, educator and small-business consultant. He can be reached at otisrep@aol.com.

To learn more

If you would like to learn more about the J. D. Power and Associates story, a recent book, “Power,” by Sarah Morgans and Seattle-based writer, Bill Thorness, (Fenwick Publishing: 2013) provides details and perspectives that are especially valuable to anyone starting or joining a new business.

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