Ratings ruler seeks subjects
If you've spent big money on it, chances are J. D. Power & Associates has rated it. The California-based market research firm, which made its name in the 1980s by ranking--to Detroit's dismay--the quality of automobiles, is fast becoming a ubiquitous presence in the consumer marketplace. The company now evaluates everything from bass boats to hospitals to Internet service, and the coveted J. D. Power award is a frequent sight in ads of those companies lucky enough to have earned top honors.
Expect to see more of those: J. D. Power is aggressively moving into new industries and strengthening its grip on old ones. But as the $130 million, privately owned firm branches out into unfamiliar terrain, its identity as one of America's classic mom and pop success stories is being challenged. A few of its ventures have flopped, thanks to bad timing or a mistaken read of a particular market. Expanding into product lines where it lacks the expertise it boasts in the auto industry has brought new scrutiny of the validity of its survey results. And company executives worry that the firm's increasingly unwieldy size could stifle the entrepreneurship that has been its hallmark. "It used to be I could shout down the hall and find out what's going on," says founder J. D. "Dave" Power, 72, who gave up day-to-day control over the company about five years ago but is still chairman. "Now I have to sneak around and poke into all these offices."
Most consumers know J. D. Power for its customer service and quality evaluations of various products and services. But that's just a sideline. The firm earns virtually no money on its product ratings, except for the licensing fees paid by companies that use a J. D. Power endorsement in their marketing campaigns. The bulk of the firm's revenue comes from the sale of detailed data culled from its consumer surveys. J. D. Power sells the comprehensive research to firms, then carves out small slices of data, say, a list of the top hotels, for public consumption. That helps build J. D. Power's brand image, but the profit motive limits the information the firm can offer the public. The company ceased rating airlines after the September 11 terrorist attacks, for instance, because cash-strapped carriers stopped paying for research.
But the company is clearly riding high on the information wave. Dave Power's particular gift, in fact, seems to have been grasping the value of data long before it was trendy. After earning his M.B.A. at Wharton in 1959, Power worked in finance for Ford Motor Co.'s tractor division, then as a market researcher for a Detroit advertising agency. At the time, the big carmakers had little interest in market research. Power found a more receptive audience at Case Tractor in Racine, Wis., but one brutal winter in a drafty duplex prompted him to seek greener pastures. The ad agency wooed him back with a job in Southern California, and for the next several years he worked on accounts for Borax, Carnation, and Ronald Reagan's 1966 gubernatorial bid.