Fasttrack

By SHELLY GARCIA Staff Reporter In 1968, when Dave Power first struck out on his own, there was a saying in the market research world: Torture the data until it confesses. It meant that most researchers were being paid to tell companies what they wanted to hear, not what they needed to know. And Power believed the reason was that the researchers were being funded by the very companies they were being asked to evaluate. “I wanted to provide objective, independently funded studies,” said Power, chairman and founder of J.D. Power and Associates. Today, J.D. Power is one of the best-known automotive research companies in the country. The company’s Customer Satisfaction Index Study and Initial Quality Study have become industry standards in the automotive market. And the company, with more than 600 clients, has more recently branched out to include surveys on a range of industries including hospitality, travel and home building. Last year, revenues at the Agoura Hills-based company reached $74.4 million, more than double its 1995 level of $30.3 million. It ranks No. 9 on the San Fernando Valley Business Journal’s list of the region’s fastest-growing private companies. “So many dealers are cowboys,” said Michael Lazarus, executive vice president at Amityville, N.Y.-based Long Island Automotive Group, which operates nine dealerships. “Everyone’s always saying, ‘We’re the best.’ J.D. Power was the first to come out with measures that were legitimate.” To produce its surveys, J.D. Power independently canvasses consumers of a particular type of good or service and then sells the results in the form of a report. For its Customer Satisfaction Index Study, which measures how customers perceive the quality and service they received after purchasing a car, J.D. Power sends questionnaires to a sample of recent car buyers and analyzes their responses. The report, perhaps the best known of all the J.D. Power surveys, was first issued in 1981, and helps dealers and manufacturers to isolate the reasons for customer dissatisfaction. “In those days when there were a lot of problems, the manufacturers would blame the dealers for not providing service, and the dealers would blame the manufacturers for not providing (a quality) product,” Power said. Because the J.D. Power survey was conducted independently, both manufacturers and dealers could be confident that they were being represented fairly. “That was a big breakthrough,” he said. But it took more than a decade before J.D. Power’s survey was widely recognized by the automotive industry. When the company first began issuing its reports, Detroit auto makers, reeling from quality problems and the onslaught of Japanese competition, wanted no part of the surveys. “American companies were in denial,” Power said. “(Japanese auto makers in the 1970s) knew they didn’t have the best product, and they were anxious to learn more about the American market and how to do a better job.” J.D. Power began by working mostly with Japanese companies, and through the 1970s, as the Japanese auto makers gained clout in the American marketplace, its reports continued to breed ill will among U.S. car makers. “It was tough. I used to wear a flak jacket,” Power quipped. The turnaround came in 1989, when Power’s Initial Quality Survey, a study of problems new-car buyers experienced during the first 90 days of ownership, placed Buick in the No. 5 spot, the only American-made car to land in the top 10. Buick ran an ad touting its position, and sales went up 60 percent, Power said. Since then, all car makers selling in the United States have signed on for studies like Customer Satisfaction and Initial Quality, and J.D. Power has gone on to add numerous other surveys to its group of products. Some of the company’s newest automotive surveys focus not on problems, but on what consumers like about their cars. “As defects get to smaller and smaller levels, the customer definition of quality is changing,” said Stephen C. Goodall, president and chief operating officer at J.D. Power. With most current makes and models free from significant defects, Power is surveying what customers like about their cars, in hopes of isolating characteristics that can be used by engineers in designing new models. With a format for measuring customer attitudes in hand, J.D. Power has started to apply its expertise to new industries, with mixed success. By the early 1990s, the company had begun working with the personal computer industry. But J.D. Power discovered that market research could not keep up with the rapidly changing business, and by 1994, it dropped that segment. “By the time we could get the registration information (for new-computer buyers) and do the survey and get the report back, the manufacturers would say, ‘We don’t produce that anymore. In fact, we’re three generations beyond that,’ ” said Goodall. Health care, too, has proven problematic. “It’s still very driven by the science of medicine and issues related to reimbursement,” said Goodall, areas that have a far greater impact on how the industry operates than customer attitudes. The last health surveys were produced in 1998 and, conceding that they lost money on those projects, J.D. Power officials say they have no plans to resume their work in the industry at least through the year 2000. Of the company’s newest ventures, the hotel and travel surveys seem to hold the most promise, officials said. Like the auto industry, in which dealerships are independently owned and managed but rely on products supplied by the manufacturers, big hotel chains supply their names and products to individual owners who operate under the same brand name. “There’s been a recognition in the hotel industry that tracking customer satisfaction at the individual property level is very useful,” Goodall said. “We saw the opportunity of leveraging our research technology.” Meanwhile, J.D. Power is continuing to expand its automotive franchise, introducing a number of new surveys in that area as well. One, called Power Information Network, perhaps its most ambitious survey to date, seeks to track nearly every detail of the car purchase. The idea is to offer manufacturers and dealers a complete database of customer buying patterns in the same way that supermarkets collect data on purchases for packaged-goods companies. “We generated a couple million dollars (in revenues from that survey) last year, and we’ll nearly double that this year,” Goodall said. “It’s not profitable because our cost of building the infrastructure still outweighs the revenue.” But as the company starts conducting the survey in additional geographic markets, Goodall expects subscriptions to increase. J.D. Power and Associates Year Founded: 1969 Core Business: Market research Revenues in 1995: $30.3 million Revenues in 1998: $74.4 million Employees in 1995: 319 Employees in 1998: 475 Top Executives: J.D. “Dave” Power III, chairman; Stephen C. Goodall, president and chief operating officer Goal: “To become truly global, very active in the Internet and operate in a wider range of industries and still do a good job of representing the consumers’ voice,” according to Dave Power. Driving Force: The need for accurate customer feedback to keep tabs on business performance.