THE recent sale of data group JD Power, which values the company at around $2 billion, is a massive accolade for the Los Angeles family that gathered around a kitchen table in the 1960s and decided to do something about the terrible quality cars that were being sold in America at the time.
Dave Power, or James David Power III, saw that there was money in lousy cars.
To say that Dave Power and his customer satisfaction surveys were one of the most hated developments to ever to be foisted on the car industry at the time is something of an understatement.
In the late 1960s, when car quality was still a disaster, Mr Power, working from his kitchen table with his wife Julia and with his children sealing survey envelopes, began mailing car owners in their thousands about the quality and dependability of their cars. He then made the results public.
If Ralph Nader, who wrote ‘Unsafe at Any Speed’ in 1965, was not bad enough for an industry which liked to keep its problems under wraps, here was another “busybody” not only highlighting the quality mistakes, but pointing out which company made the most of them and which companies made the fewest.
His method was to mail questionnaires containing a one dollar note to 40,000 owners of cars. The dollar bills were to encourage Americans to fill out the answers, and it worked.
Mr Power was able to publish results on the quality of cars when they were first handed over to buyers, the quality and reliability of cars after their owners had used them for a year and another important survey of what was going wrong for those still in the car after four years. The last survey was a key indicator of the potential reliability of a car in the used-car market.
Detroit hated it. So did all the others with the possible exception of Toyota which consistently topped the polls. The reputations of sacred cows from those days like Jaguar, Mercedes-Benz, BMW and Range Rover were shredded.
It was not easy. The trouble for Mr Power was that gathering and rating the data was expensive and he needed subscribers, albeit mostly car-makers, to buy his detailed surveys.
It was common knowledge that the car-makers put their heads together and agreed they would be able to freeze these troublesome surveys from the market if their did not subscribe to them.
But the media loved them and kept the flame alight.
At the same time, the industry was beginning to find the surveys helpful internally. JD Power had begun linking the survey answers for each model to the factory that built that car. It highlighted that some plants within the same company were producing very different levels of faults and this caught the attention of senior management. Some models were more troublesome than others.
The reports also showed differences between the same models made in different countries and suddenly different plants had their reputations scorched internally. Plant and production managers wanted to buy the surveys to see where they stood. Suddenly, careers were at stake and the revenue started flowing in.
As a measure of the success Dave Power was having over the quality performance of the car-makers, the scoring system eventually had to be changed from faults per car to faults per 100 cars because the number of faults per car was getting so low.
JD Power had also began giving awards at gala industry ceremonies where bragging rights were front and centre.
The irony was that the industry that tried to starve Dave Power out now had to pay JD Power a licence fee for the right to use the JD Power name if the car-maker wanted to use an accolade it won in any publicity, advertising or promotion.
But it was not until 1984 that the wall of resistance around Dave Power broke down when Subaru became the first car-maker to mention that it had won a JD Power award in a commercial at that year’s Super Bowl. The awards have since been mentioned in more than two billion advertisements.
One of the jewels in the crown, and what is being said is a significant reason for the very high premium price just paid for the company, is the data that resides within the Power Information Network (PIN).
PIN was a simple concept to gather data from dealer management systems. JD Power sent dealers a CD containing software which interrogated the DMS every month and sent it to JD Power. The system then produced wide-ranging reports marrying customer profiles including income levels and education standards (from financing applications) to makes and models and time in stock against margins and colours and body styles, etc.
JD Power supplied the dealers with their own exclusive monthly analysis reports, for nothing in return, for aggregating the total data across all dealerships in towns, cities, regions, states and nationally.
Dealers were able to see what colours on certain body styles were making the best margins. They could see what groups of customers (eg. tertiary educated) generated the best margins or best repeat sales or repeat service.
One example I recall was data that showed that black cars attract the highest margin in Sunbelt States like Texas. The reason was that no dealers stocked black cars in the hot states but there was always someone who wanted one so they paid a premium for a colour that was in such short supply.
JD Power is now worldwide and when Dave Power decided in 2005 to retire he said goodbye to his great achievement by handing it over to McGraw Hill (the publisher of ‘Business Week’ magazine) for an undisclosed sum, although it was believed to have been $US400 million.
The company was sold again in 2016 to a private equity investor, XIO Group, for $US1.1 billion. XIO Group added a finance and insurance sales system for US car dealers in 2017.
And now another private equity firm Thoma Bravo has announced that it will buy JD Power for what Reuters is saying is $US1.9 billion.
Thoma Bravo recently acquired Autodata Solutions, which provides a wide range of services to the automotive industry for OEMs from Acura to Volvo, to dealerships, online portals, finance and insurance companies, digital agencies and fleet management organisations.
The company claims its products support 90 per cent of US vehicle sales transactions, that 95 per cent of online vehicle shoppers interact with its content and services and that its inventory description services receive more than 12 billion calls a year.
Combined with the resources of Autodata, the Power Information Network data should be priceless.
By John Mellor on 8th August 2019 Comment, Free Access Articles $2 Billion, Comment, JD Power
THE recent sale of data group JD Power, which values the company at around $2 billion, is a massive accolade for the Los Angeles family that gathered around a kitchen table in the 1960s and decided to do something about the terrible quality cars that were being sold in America at the time.
Dave Power, or James David Power III, saw that there was money in lousy cars.
To say that Dave Power and his customer satisfaction surveys were one of the most hated developments to ever to be foisted on the car industry at the time is something of an understatement.
In the late 1960s, when car quality was still a disaster, Mr Power, working from his kitchen table with his wife Julia and with his children sealing survey envelopes, began mailing car owners in their thousands about the quality and dependability of their cars. He then made the results public.
If Ralph Nader, who wrote ‘Unsafe at Any Speed’ in 1965, was not bad enough for an industry which liked to keep its problems under wraps, here was another “busybody” not only highlighting the quality mistakes, but pointing out which company made the most of them and which companies made the fewest.
His method was to mail questionnaires containing a one dollar note to 40,000 owners of cars. The dollar bills were to encourage Americans to fill out the answers, and it worked.
Mr Power was able to publish results on the quality of cars when they were first handed over to buyers, the quality and reliability of cars after their owners had used them for a year and another important survey of what was going wrong for those still in the car after four years. The last survey was a key indicator of the potential reliability of a car in the used-car market.
Detroit hated it. So did all the others with the possible exception of Toyota which consistently topped the polls. The reputations of sacred cows from those days like Jaguar, Mercedes-Benz, BMW and Range Rover were shredded.
It was not easy. The trouble for Mr Power was that gathering and rating the data was expensive and he needed subscribers, albeit mostly car-makers, to buy his detailed surveys.
It was common knowledge that the car-makers put their heads together and agreed they would be able to freeze these troublesome surveys from the market if their did not subscribe to them.
But the media loved them and kept the flame alight.
At the same time, the industry was beginning to find the surveys helpful internally. JD Power had begun linking the survey answers for each model to the factory that built that car. It highlighted that some plants within the same company were producing very different levels of faults and this caught the attention of senior management. Some models were more troublesome than others.
The reports also showed differences between the same models made in different countries and suddenly different plants had their reputations scorched internally. Plant and production managers wanted to buy the surveys to see where they stood. Suddenly, careers were at stake and the revenue started flowing in.
As a measure of the success Dave Power was having over the quality performance of the car-makers, the scoring system eventually had to be changed from faults per car to faults per 100 cars because the number of faults per car was getting so low.
JD Power had also began giving awards at gala industry ceremonies where bragging rights were front and centre.
The irony was that the industry that tried to starve Dave Power out now had to pay JD Power a licence fee for the right to use the JD Power name if the car-maker wanted to use an accolade it won in any publicity, advertising or promotion.
But it was not until 1984 that the wall of resistance around Dave Power broke down when Subaru became the first car-maker to mention that it had won a JD Power award in a commercial at that year’s Super Bowl. The awards have since been mentioned in more than two billion advertisements.
One of the jewels in the crown, and what is being said is a significant reason for the very high premium price just paid for the company, is the data that resides within the Power Information Network (PIN).
PIN was a simple concept to gather data from dealer management systems. JD Power sent dealers a CD containing software which interrogated the DMS every month and sent it to JD Power. The system then produced wide-ranging reports marrying customer profiles including income levels and education standards (from financing applications) to makes and models and time in stock against margins and colours and body styles, etc.
JD Power supplied the dealers with their own exclusive monthly analysis reports, for nothing in return, for aggregating the total data across all dealerships in towns, cities, regions, states and nationally.
Dealers were able to see what colours on certain body styles were making the best margins. They could see what groups of customers (eg. tertiary educated) generated the best margins or best repeat sales or repeat service.
One example I recall was data that showed that black cars attract the highest margin in Sunbelt States like Texas. The reason was that no dealers stocked black cars in the hot states but there was always someone who wanted one so they paid a premium for a colour that was in such short supply.
JD Power is now worldwide and when Dave Power decided in 2005 to retire he said goodbye to his great achievement by handing it over to McGraw Hill (the publisher of ‘Business Week’ magazine) for an undisclosed sum, although it was believed to have been $US400 million.
The company was sold again in 2016 to a private equity investor, XIO Group, for $US1.1 billion. XIO Group added a finance and insurance sales system for US car dealers in 2017.
And now another private equity firm Thoma Bravo has announced that it will buy JD Power for what Reuters is saying is $US1.9 billion.
Thoma Bravo recently acquired Autodata Solutions, which provides a wide range of services to the automotive industry for OEMs from Acura to Volvo, to dealerships, online portals, finance and insurance companies, digital agencies and fleet management organisations.
The company claims its products support 90 per cent of US vehicle sales transactions, that 95 per cent of online vehicle shoppers interact with its content and services and that its inventory description services receive more than 12 billion calls a year.
Combined with the resources of Autodata, the Power Information Network data should be priceless.
Comment by John Mellor
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