The Npd Group, Inc. Business Information, Profile, and History

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History of The Npd Group, Inc.

The NPD Group, Inc., is a global market research firm operating out of Port Washington, New York. Long reliant on the use of diaries to track consumer behavior, NPD now focuses its efforts on electronic cash register information--which is drawn from 230 retail partners--to determine product movement and online panels of consumers to track consumer behavior. NPD samples 600,000 people out of a pool of 2.5 million registered members in its online panel to conduct most studies, supplemented by follow-up surveys. Not only are panelists afforded an opportunity to have their opinions count, they are also enticed to participate by drawings of cash and prizes. NPD serves a wide range of industries, including apparel, appliances, automotive, beauty, consumer electronic, food and beverage, housewares, information technology, music, toys, travel, and video games. Data is available online to clients through Internet portals. The firm also offers clients in-depth analysis, topical reports, and proprietary research. In addition to consumer industries, NPD offers information products geared toward investment professionals to help them answer similar questions: Who is buying their products, where, why, and at what price? All told, NPD works with more than 1,000 clients, many of which are Fortune 500 companies such as Dell, General Electric, Mattel, Nike, Unilever, and Warner Brothers. Aside from its Long Island headquarters, NPD maintains offices in New York City; Chicago; Greensboro, North Carolina; Houston; and Reston, Virginia. International offices are located in Toronto, London, Madrid, Mexico City, Milan, Nuremberg, Paris, and Tokyo. NPD is owned by its chairman and CEO, Tod Stuart Johnson.

1950s Origins

NPD was founded in 1953 as Home Testing Institute by a pioneer in the market research industry, Henry Brenner. Born in New York City in 1914, Brenner grew up in Mount Vernon, New York, the son of East European immigrants. He was an ambitious youngster who grew up wanting to attend medical school in order to one day find a cure for cancer. In a 1984 Advertising Age profile, Brenner described himself as "a little fat kid completely too smart for my peers; good at math and sciences but terrible in languages." During the early years of the Depression, when money was tight, he attended college at night, including classes at Columbia University, City College of New York, and Pace Institute, but he never earned a degree. To scrape by, he took a series of day jobs, which included stints slicing bread at a Wonder Bread factory, helping a surveyor, and writing freelance sports stories for a Mount Vernon newspaper.

It was not by design that Brenner became involved in the advertising field, and in truth he showed no particular aptitude for it. By his own count he was fired by five companies in five years, including Standard Brands, Inc., where he would later return as the director of market research. "I was a lousy employee," Brenner told Advertising Age. As he also recalled, "Things were so desperate that I put an anonymous situations wanted ad in the Times and my boss answered it." Nevertheless, out of this experience, Brenner drew a valuable lesson that later served him well: Instead of criticizing, pose questions. During World War II, Brenner took a break from his frustrating advertising career, serving from 1943 to 1946 in the U.S. Maritime Service, where he was able to use his penchant for science by teaching meteorology at the U.S. Merchant Marine Academy in Kings Point, New York.

When he was discharged from the service, Brenner became involved in the new market research field, starting out as a freelance field interviewer on grocery sales. He found full-time employment in 1946 with Standard Brands, and now having found his niche he rose through the ranks to become the firm's director of market research. In 1951, he left to become merchandising manager for Columbia Broadcasting System in New York City, a position he held for two years before deciding to strike out on his own and start Home Testing Institute, which initially he ran out of the basement of his Long Island home.

Using panels of representative consumers who recorded their buying habits and other information in diaries, Home Testing began to build an extensive database of marketing information. Out of this grew the National Purchase Diary Panel, which in 1965 used the initials to become NPD Research, Inc. Aside from running these businesses, which formed the core of what was loosely called the NPD Group, Brenner also founded or bought several other market research companies, including McCullom/Spielman Research in Great Neck, New York; Marketing Evaluations in Port Washington; OPOC Statistics in New York City; Acker Retail Audits in Lyndhurst, New Jersey; Hart Systems in Garden City, New York; and Grocery Laboratory in New York City. Brenner had a major influence on the market research field and is credited with developing such important techniques as monadic product testing, in which a single product is evaluated by respondents over a certain period of time to provide a detailed analysis of its effectiveness and appeal. Brenner was also highly regarded for his willingness to help others in the field. A "one-man personnel agency," he helped scores of acquaintances to find market research jobs and he offered career advice to hundreds. Not only did he make friends in the field, he developed loyal customers. General Foods honored his 25 years of service to the company, as did Philip Morris for 30 years of market research. In 1976, the Advertising Research Foundation named Brenner one of the founding fathers of the research industry, along with the likes of George Gallup and A.C. Nielsen.

New Leadership in 1980s

Brenner was hard working and competitive, traits that led to the development of ulcers. In 1975, he suffered a heart attack. Thereafter, he made an effort to cut back on his work load and during the winter months worked from his Florida home. He retired in 1986 and sold NPD to Tod Johnson, who had been active in running this and other Brenner businesses for some 15 years. Born in Minneapolis in 1944, Johnson earned undergraduate and graduate degrees from Carnegie Mellon University, then started his business career in 1967 with Market Science Associates, Inc, in Des Plaines, Illinois. He became a vice-president, then left the company in 1971 to join Brenner. Johnson was named the president and chief executive officer of NPD Research. In 1980, he took over the same roles at Home Testing Institute, followed by the same arrangement at OPOC Computing two years later. In 1989, NPD Research, Home Testing Institute, and OPOC Computing were merged to form The NPD Group Inc., with Johnson owning the business and serving as president and chief executive officer.

Under Johnson's leadership, NPD enjoyed strong growth and continued the legacy of innovation established by its founder. One of Johnson's greatest contributions was to recognize how NPD's research could be leveraged as a marketing tool for the firm. People liked to read about their own spending habits, and NPD became adept at packaging its data into factoids that hundreds of newspapers and magazines either reprinted or used as the basis for feature articles. During Johnson's first 20 years at the helm, NPD also accomplished a number of firsts. In 1978, it launched the first point-of-sale tracking system for toys. Also during that year, it expanded the concept of syndicated databases beyond packaged goods to other consumer products. In 1981, NPD revolutionized market research in the packaged goods area by introducing the handheld scanner. The company then licensed its scanner technology to A.C. Nielsen in 1987. Along the way, NPD expanded the number of industries it served. It added foodservice in 1975, apparel and toys in 1978, and consumer electronics in 1987. NPD became involved in athletic footwear in 1990, cosmetics and fragrances in 1996, cookware and bakeware in 1996, and fashion footwear in 1997.

The 1990s saw NPD in the vanguard of measuring Internet usage and, more importantly, using the Internet as a tool to conduct market research. In 1995, NPD created the PC Meter (the first tool capable of measuring consumers' Internet usage), created the first online consumer panel, and conducted the first online research. PC Meter grew out of work NPD was doing in tracking computer software sales. Company researchers realized that it was possible to follow the activity of America Online subscribers, leading NPD to develop the PC Meter to monitor users' mouse clicks and plot their Internet activity. A panel of 40,000 representative consumers was formed and the PC Meter was employed to determine how many and what kind of people were turning to cyberspace, measuring traffic on America Online as well as on Web sites throughout the Internet. A subsidiary was formed using the PC Meter name, and data was compiled on a daily, weekly, and monthly basis, provided online to Internet, technology, media, and finance companies who subscribed to the service. Like most startups, it was a money-losing proposition, but because NPD was a private company it was free of the pressures a public company would face in taking a hit to the bottom line over an extended period of time. Johnson and his management team sensed the potential impact of the Internet, in general as well as on the future of market research, and were determined to become involved at an early stage. In 1997, PC Meter changed its name to Media Metrix and merged with its main rival RelevantKnowledge.

Media Metrix made an initial public offering in May 1999 at the height of the demand for Internet-related stocks and within a matter of months the price of its shares increased to the point that the company was worth an astounding $1 billion, this for a company that had yet to make any money and had lost some $20 million since its founding. In 2000, Media Metrix, which Johnson also headed, merged with Jupiter Communications, Inc., becoming Jupiter Media Metrix, which Johnson claimed was "poised to redefine the landscape of Internet information services." Despite the company's ambitious goals and technical expertise, it soon fell victim to the dot-com meltdown that claimed so many Internet ventures during this period. The company was dismantled in September 2002, with the Media Metrix Internet Audience Measurement service that grew out of NPD's PC Meter venture being sold to com-Score Networks for just $1.5 million.

During the rise and fall of Media Metrix, NPD made progress on other fronts. In 1996, it entered into a joint venture with two market research companies, GfK of Germany and SOFRES of France, to combine their existing consumer panels to help clients who needed to examine consumer behavior across countries. The company also began offering marketing research for e-commerce ventures and in 2000 offered online tracking services for the apparel, foodservice, and footwear industries. In that same year, it aligned itself with Information resources to bolster its retail sales tracking capabilities for the U.S. automotive aftermarket.

A Break with the Past in the 21st Century

Even as the price of Internet stocks were beginning to tumble, NPD made a greater commitment to cyberspace. It had become increasingly difficult to find enough statistically representative consumers willing to serve as diary panelists whose online behavior NPD tracked and recorded for little or no compensation. In 2001, the company decided to make a break from the past, electing to use the Internet for both consumer sampling and the delivery of its product. In keeping with this new approach, NPD sold off its custom research operation--testing clients' concepts, brands, and advertisements--to a French research firm, Ipsos, for $120 million. The business accounted for about $65 million of NPD's total revenues of $160 million in 2000, but Johnson was confident that NPD would be better off in the long run if it concentrated on its new approach to business. By leveraging the power of the Internet, NPD hoped to collect even more market information across more industries, allowing it to attract more clients and provide even greater detail because of the increased size of the sample. In addition, by putting the data online, it would be available more quickly to clients. The first of its portals soon opened, NPD Foodworld and NPD Fashionworld. They would be followed by NPD Funworld, NPD Techworld, and NOPD Houseworld. To support this new direction, NPD invested some $40 million in technology. The company had clearly reached a major turning point in its history, but there was every reason to believe that even with its new sampling and delivery mechanisms it would remain a major market research company in the years to come.

Principal Competitors: Information Resources, Inc.; Taylor Nelson Sofres plc; VNU N.V.

Chronology

• Key Dates:
• 1953: Henry Brenner founds Home Testing Institute.
• 1971: Tod Johnson is named CEO of NPD Research.
• 1986: Brenner retires and sells NPD Group to Johnson.
• 1995: PC Meter is introduced.
• 1999: Media Metrix is spun off.
• 2001: Custom Research is business sold off.