People who know him call him Dave. You probably know him by the eponymously-named company, J.D. Power and Associates, which I used to think was fake. It is not. It is extremely real and, I have learned, one of the most hilarious threads running through the multi-trillion-dollar auto industry.
J.D. Power awards have been in car ads for as long as I can remember, but, this year, they became especially prominent, thanks to a series of particularly grating ads Chevrolet produced. You must have seen at least one of them. The ads purport to show “real people” reacting to the amount of J.D. Power awards a given Chevy model had won. The underlying premise of the whole ad is that (a) people know what J.D. Power awards are and (b) people care how many J.D. Power awards a given make and model has won.
[The spokesman] was asking us all these buzzword questions, and then after a while he was like, “Do you know what a J.D. Power And Associates Award is?” And we all go, “No.” Because we all know they don’t really matter because nobody really knows what they are.
Anyway, he goes, “Did you know that J.D. Power And Associates gave us the most awards this year for these four cars?” When people see these commercials or talk about these commercials now, they’re like, “I’m not impressed by that at all.” But I was actually kind of impressed because I didn’t think Chevy—I mean, awards don’t really mean anything if I don’t understand them. I didn’t think they were actually decorated at all, and I guess it is something to say you have the most meaningless awards over all the other car brands in terms of meaningless awards.
What and who is J.D. Power, exactly? I have been on a quest to find out.
We should probably start with James David Power III himself, who is real and 86-years-old and, as of this writing, still alive, though he’s no longer with the eponymously-named company, which was sold to McGraw-Hill in 2005 for around $400 million.
Decades before all that, Power was just a young Wharton graduate trying to make his way in the auto industry. He was born on May 30, 1931. He grew up in Worcester, Massachusetts, and later graduated with a literature degree from Holy Cross, completing a senior thesis on Don Quixote.
He started at Ford in 1959, in its tractor division, auditing dealers, before moving on to the research division of McCann-Erickson, one of the biggest advertising agencies in the world. He left there for a stint doing market research at a chainsaw manufacturer, before finally started his own company in 1968. He called the company J.D. Power and Associates, the associates being his wife, Julie, and their children.
Based in California, Power was convinced that he knew more about automotive market research than “anyone west of the Mississippi.” From his experience working with automakers, he also knew how much they knew about market research, which is to say not much at all, and especially not the kind of detailed research that Power had in mind.
To take one example, here was the state of affairs at AMC in the 1960s, according to Power: How J.D. Power III Became the Auto Industry’s Advisor, Confessor, and Eyewitness to History:
To the extent it was interested in drivers, AMC sent out a small customer satisfaction postcard survey to new owners with only a few questions. The most important question basically asked, “How do you like your car?” The postcard asked for responses on a three-point scale: excellent, fair, or poor. “In practice, we rated out performance on only how many people said AMC cars were excellent. We didn’t do much with the rest,” [Charles Hughes, a former market researcher for AMC] said.
(I should note now that Power is one of the few sources for information on the man and his company and it reads like a hagiography. The preface was written by J.D. himself, and the publisher specializes in “corporate history” books. I mean, I don’t have any reason to think anything in the book is made up. It’s too boring for that.)
In any case, Power’s research would go far beyond what AMC or the auto industry in general was doing. J.D. Power asked new car buyers a variety of questions that were designed to get at the real experience of owning the car. Finding the owners, it turns out, was one of the easy parts, in the U.S. at least, since vehicle registration information here is generally a public record.
Which meant, in the early days, a shit ton of mail, with Power’s wife helping him tabulate the results from their kitchen table. His approach finally hit paydirt in 1973, when owners of the Mazda R100 told the company that its Wankel rotary engine was failing at an alarmingly high rate. Specifically, a fifth of all buyers surveyed said that the engine failed somewhere between 30,000 and 50,000 miles, because of bad O-ring gaskets. On May 7, 1973, the company’s report made the front page of The Wall Street Journal and, overnight, J.D. Power became an industry name, if not a household one just yet.
Mazda had previously not been a J.D. Power customer, though it would quickly become one. Or, as a Mazda company executive later told Power after the WSJ story: “Next time, I want you on my side.”
Indeed, in the ensuing years after the R100 story, almost every major automaker bought into J.D. Power’s market research—except GM, in keeping with its reputation for corporate insularity. GM finally caved though, too, in 1988, thanks to a fax that found its way in front of Roger B. Smith, the company’s powerful chairman. The fax announced that GM had fared well in the that year’s Initial Quality Study.
“This looks very interesting,” Smith said. “Do we have this study?”
“We’re getting it,” GM President Lloyd Reuss assured Smith.
The automaker’s initial distrust of J.D. Power—before eventually welcoming it into the fold—was, by that point, a familiar pattern for Power, who had already completed the same awkward dance with numerous other automakers. The distrust wasn’t specific to GM, even if GM harbored more of it than the rest.
Take this scene, in 1981, when Power found himself making a speech before 40 Pontiac executives, a couple years after J.D. Power had issued a report outlining catastrophic failures in diesel engines in Oldsmobile 88s and 98s.
Attendees began to show up at about four in the afternoon, loosening their ties and easing into cocktail hour, which Dave recalls stretched to about three cocktails before dinner was served.
The dinner progressed at an equally leisurely pace, and it was ten at night before Dave was asked to step to the lectern to present his slides. He pointed out some of the quality problems confronting GM in general and Pontiac in particular. Then he got to the last slide, showing GM market share projected ten years into the future. “By 1990, I had GM’s market share below 30 percent, a ten-point drop,” he recalls. This was too much for the Pontiact head of sales and marketing, sitting at a table just below the dais. He stood up and started arguing, in an emphatic, alcohol-fueled way, that Dave was not just mistaken but out of touch with reality. The executive sitting next to him—the head of Pontiac public relations—also stood up and joined the howling. Soon the room was filled with hoots and catcalls.
The executives were eventually calmed by Bill Hoglund, who would go on to become GM’s Chief Financial Officer and a Power devotee.
“When he talks about market share, I want you to know that back in early 1980, he projected that GM would reach the 30 percent market share in ten years, and he was rebuffed for saying it” Hoglund later told a different group of GM executives. “You know, Dave was wrong. The market share was below 30 percent in eight years.”
What do companies get out of paying J.D. Power good money? A lot of things, but the main thing they get is access to the company’s market research, some of which you can check out on J.D. Power’s website, but the bulk of which you can’t. Dave Sargent, the company’s vice president of global automotive, said that the company has a track record at this point, and that automakers buy into it because, Sargent says, the research has turned out to be accurate.
The company’s list of current and former clients range from BMW to Yugo, and Power says it has helped raise production quality at automakers like Hyundai, Volvo, GM, and a host of others. (Yugo, Daewoo, and Peugeot are among the manufacturers that J.D. Power has also advised in which the results didn’t turn out so swimmingly.)
“There’s also the external horse race element to it,” Sargent said, “that everyone wants to win.”
Sargent, of course, was talking about the awards, which were inspired in part by the Deming Prize, a Japanese award for industry quality named for an American mathematician who helped rebuild Japan after World War II.
There are two key measures J.D. Power uses to judge quality and, hence, the award winners: the Customer Service Index, and the Initial Quality Study. CSI asks car owners about problems in the first three years of ownership, while IQS asks owners about problems in the first 90 days of ownership. Of the two, IQS is far and away most prominent.
“That’s the one [automakers] would give almost anything to win,” Sargent says. “They take it extremely seriously.”
J.D. Power’s measures have been around for decades, but the awards tied to them weren’t formalized until 1990, even though automakers had been using J.D. Power ratings for their own uses long before that. In 1979, for example, Chrysler was among the first to put the information in a print ad, taking out two pages in Businessweek to trumpet the fact that they were the highest-ranking domestic automaker, according to J.D. Power. The ad infuriated competitors, but foreshadowed the rise of J.D. Power in advertisements.
“If you ever allow the Italian to use your data,” one Ford executive told Power after the ad ran, referring to Lee Iacocca, the CEO of Chrysler, “you’ll never do business with Ford again.”
Just five years later, the first TV ad featuring J.D. Power appeared. It was from Subaru and played in between college football games.
“According to J.D. Power and Associates, Subaru is second only to Mercedes in customer satisfaction,” white text on a black screen read at the beginning.
The ad was an immediate success for both the company being studied and J.D. Power itself.
“The ad gave us instant credibility with the public and with the industry,” Tom Gibson, the executive vice president of operations for Subaru of North America, says in Power. “But it was even more successful for Dave.”
At the time, Subaru wasn’t very well-known, but J.D. Power was even less well-known. Subaru’s seven stars were certainly already rising as all-wheel drive gained popularity, but for the latter company, things ramped up very quickly. Numerous ad agencies approached the company about using their research, forcing them to quickly put down some rules. Advertisers couldn’t use phrases like “winner” for one thing, since that implied a loser; language like “most reliable” and “top-ranked” was preferred instead. Advertisements also had to be vetted by people at J.D. Power before they’re aired—restrictions which persist today, though ones that lead to some extremely low stakes if extremely high drama battles behind the scenes.
Here’s an early example, from Power:
Chrysler’s ad agency sought to run a full-page newspaper ad that said one of its cars was better than five other models it supposedly “beat.” The ad was rejected. Chrysler responded that it paid for the data, the campaign was factually accurate, and that J.D. Power had no say in the matter. Dave responded that if Chrysler ran the ad in question, he would run an ad that put the satisfaction scores of Chrysler in the context of all the cars, not just the five the ad agency had cherry-picked. Chrysler backed down.
At first, the ads were just free publicity for J.D. Power, but the company quickly realized that it could also be a lucrative revenue stream. The initial cost of using the J.D. Power name in advertising was $350, which allowed automakers to use the name for 10 months, a number which later rose to $750, and much more than that by the early aughts, when, according to Power, those fees “contributed substantially to the bottom line.” (Sargent declined to say how much J.D. Power currently charges automakers to use the J.D. Power name.)
The awards can also be lucrative for employees of carmakers, many of whom have some part of their compensation tied to winning.
One of the inherent tensions of a company like J.D. Power, is that, sometimes, it finds itself to be both cop and coach.
Or, as Pete Marlow, a vice president at the company, says in Power:
“The carmakers that were ranked highest wanted to stay ahead and would engage us for best practices and continuous improvement to stay ahead of the competition,” [Pete Marlow, a vice president at the company] says. “Carmakers who did not do well would hire us to better understand how to drive their performance forward.”
All of which is nice work if you can get it, of course, though the company says it maintains strict firewalls between its licensing and consulting sides. In 2017, this formula has them positioned possibly stronger than ever. The company sold last year to the private equity firm XIO Group for $1.1 billion, or about triple what it was worth just 10 years prior.
And while—perhaps because of this success—J.D. Power was happy to talk to Jalopnik on the record, the automakers themselves weren’t so forthcoming. Some initially said that they’d “look into” my request, others never replied at all, and still others straight up declined.
“We will pass at this time,” a spokesman for Toyota said when asked, saying that the company “rarely” uses J.D. Power in its advertisements.
Meanwhile, the marketing people I wanted to talk to the most—those at Chevy—also opted out, with a spokesman telling me as much when I sent them questions regarding the “Real People” ads.
All of which struck me as odd, since Sargent says automakers tend to use the awards to project quality: why would a manufacturer hide from their own campaign?
Maybe because, by the time I came knocking, the Chevy ads had become their own sort of talking point, even if they were absurd and annoying. They got me to write this story, after all, which is all you can really ask for when shelling out millions of dollars for an ad centered around an industry award.