Communications of the IIMA


J. D. Power and Associates (JDP) conducts customer surveys and reports information on automobile quality, reliability, safety, satisfaction and buyer behavior. The Initial Quality Study (IQS) by JDP provides feedback on the quality of new vehicles during the first 90 days of ownership. This paper evaluates the quality measurements of IQS and its economic impact on the sales performance of major U.S. automakers (GM, Ford, and Chrysler) and Japanese automakers (Toyota, Honda, and Nissan) between 2001 and 2010. The following research questions are addressed: (1) Does IQS have significant impact on the customers’ purchasing behavior during the period of study? (2) Who benefits more from IQS, U.S. or Japanese automakers? (3) How can the quality information of IQS be measured and evaluated? In order to address the first two questions, the event study methodology is used to analyze the impact the IQS surveys on U.S. market sales. IQS resulted in the positive response to the market (or increasing market share) for Japanese automakers with the opposite result for U.S. auto manufacturers. To address the third question, two quality measures (IQS score and event type, i.e., positive or negative event) are defined and analyzed. The analysis shows that there is a positive relationship between IQS score and market share response. Similarly, positive news had a significant effect on the market response of IQS reports, while the effect of negative news was not significant.