In this episode you will learn about JD Power.  Started over a kitchen table on April Fools and sold later for $400M USD this is the story of how to make your consulting service more valuable.

David Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I'm Stephen's sidekick and business partner, Dave Young. Before we get into today's episode, a word from our sponsor, which is... Well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.

[No Bull RV Ad]

David Young:

Stephen, today we're going to talk about a company that almost everybody's heard of. Maybe? Not because the company's advertising to them, but because other companies are using their name in their own advertising. That seems confusing. Right? We're talking about J.D. Powers.

Stephen Semple:

J.D. Power. And a couple of interesting things on J.D. Power: J.D. Power was founded by James David Power. J-D-Power. But before we get into it, a couple of interesting things. He founded the business in 1968 on April Fool's Day, sitting over the kitchen table with his wife and they decided to call it J.D. Power and Associates. And in 2005, they sold this business to McGraw-Hill for $400 million.

David Young:

That's a lot of million dollars.

Stephen Semple:

That's a lot of million dollars. Now in case you think McGraw-Hill was silly to pay that much money, McGraw-Hill, 11 years later, sold the very same business for $1.1 billion.

David Young:

That's even more million dollars.

Stephen Semple:

That's even more million dollars. Many, many more millions, thousands more millions.

David Young:

That's amazing. And so from when to 2005... When did he start it?

Stephen Semple:

He started the business in 1968. So, it did very well. But here's where the idea came from. So David graduated from the Wharton School of Business in the 50s. And he went and he worked in finance for Ford and then moved over to advertising. And when he was in advertising, they discovered claims would be better if it came from the owner than Ford saying, "Hey, we're great." Claims are, of course, much more powerful when somebody says, "I love my Ford." But in terms of customer satisfaction, what he really felt was that auto companies were not asking the right questions. So they really didn't understand whether customers were satisfied or not. And so he started this whole idea of surveying the owners of the automobiles. In 1968, he decided to form this company that was going to survey the owners of the automobiles and sell that information to the auto manufacturers, so the auto manufacturers could ultimately make better vehicles.

David Young:

So really just sort of a little company that probably none of us would ever hear about because they just do kind of insider work for a specific industry and they're doing it as sort of a marketing service and a customer satisfaction service.

Stephen Semple:

Yeah.

David Young:

What happened? I mean, because most of those companies they're still obscure. We still don't know who they are, but they exist, they're out there.

Stephen Semple:

Yeah. So what ended up happening, first of all, their first customer was Toyota in terms of buying research. But the turning point happened in the 70s when The Wall Street Journal published a story about Mazda and its survey results in terms of how Mazda was suddenly becoming significantly higher ranked in this J.D. Power survey. And then in 1979, Chrysler became the highest rank domestic company and they decided to run a two page ad in BusinessWeek saying "we are the highest ranked domestic auto manufacturer, according to J.D. Power." And the competition hated it, hated it. In fact, Ford threatened to never use J.D.