What Is JD Power?
J.D. Power Explained
J.D. Power is a marketing research firm that analyzes consumer data to produce rankings, reviews, and reports for a variety of industries. The company has been in business for more than 50 years and is well-known for its car and truck ratings.
In this article, you’ll learn what J.D. Power is, what it does, and why the company matters.
What Is J.D. Power?
J.D. Power is a global marketing research firm that analyzes customer feedback regarding products and services across many different industries, including automotive, credit cards, and insurance. The company’s team of experts then translates that information into reports it sells to corporate clients, and free surveys and studies it publishes for consumers.
The automobile industry is the most notable industry in which J.D. Power works. The firm’s Initial Quality Study (IQS) and Vehicle Dependability Study (VDS) are popular ones you may have heard of.
In 1984, Subaru became the first automaker to mention J.D. Power rankings in a commercial.
Though the company is best known for its work in the automotive industry, J.D. Power analyzes many other industries, including:
- Financial services (banking, credit cards, etc.)
- Media, technology, and telecom
- Travel and hospitality
The Balance includes J.D. Power survey results in its reviews of credit cards and insurers, among other things. For instance, we look at the J.D. Power Credit Card Satisfaction Study for our credit card reviews, and the company’s auto insurance and claims satisfaction surveys for some of our insurance reviews.
What Does J.D. Power Do?
J.D. Power is known for its benchmark studies, which it creates based on analysis of consumer surveys. J.D. Power then ranks the competitors and designates awards for the highest-performing companies.
The firm’s ratings take into account a variety of customer-based factors, depending on the product or service. For instance, J.D. Power’s yearly credit card satisfaction study rates credit-card issuers in the following areas:
- Credit card terms
- Benefits and services
- Key moments (applying for a card, resolving problems, handling possible fraud, etc.)
The consumers J.D. Power chooses for its analysis are verified owners or users of the products and services. As part of its research, J.D. Power interacts with millions of consumers every year.
J.D. Power’s surveys and research take many different forms, too. The Auto Insurance LoyaltyIQ report, for example, is intended for industry players and measures shopping and company-switching behaviors among customers of the top 50 auto insurers in the U.S.
Why People Care About J.D. Power Rankings
J.D. Power’s popularity among consumers is likely due to its marketing and methodology. Automakers tend to feature J.D. Power awards in commercials, which makes the company’s rankings and awards more well-known than its competitors. For example, a 2019 commercial from Chevrolet devotes its entire 30 seconds to J.D. Power’s studies, noting that more than 440,000 people responded to a survey about vehicle quality that resulted in Chevy winning more awards than any other car manufacturer in the past four years.
J.D. Power does its customer satisfaction rankings independently, basing them on real customers’ experiences. This methodology may make the firm’s rankings more trustworthy among customers buying products or services J.D. Power has ranked.
How J.D. Power Makes Money
J.D. Power makes money by selling its research findings and licensing fees. If a company wants to feature J.D. Power in an advertisement (like those car commercials you might see), the company has to pay a licensing fee for it.
Auto-insurance companies can hire J.D. Power to get access to LoyaltyIQ reports, white papers related to the auto-insurance industry, analysis of your company’s product performance in key areas, and 10 hours of consultation with a J.D. Power insurance industry analyst.
Businesses can hire J.D. Power to perform a certified customer service audit that includes a customer survey, comparisons to industry standards, a best-practices scorecard, and a one-year license to use the survey and scorecard. Completing the program gives the company a “Certified Customer Service Program” designation.
Criticism of JD Power
Because companies pay J.D. Power licensing fees, there are situations in which J.D. Power is making money off of the very companies it’s ranking. This possible conflict of interest is something competitor Consumer Reports addressed in a May 2020 article. The article called attention to the fact that J.D. Power charges fees for companies to access survey results, mention the firm in ads, and participate in the Certified Customer Service Program.
However, J.D. Power claims its surveys provide, “independent and unbiased feedback from a representative sample of verified product owners,” which would negate, in theory, any bias toward its paying customers.
Furthermore, J.D. Power argues, only the companies who perform the best in certain categories can pay for a license. In other words, J.D. Power doesn’t hand out its licenses to just anyone who’s willing to pay the fee.
Other Rankings Besides JD Power
J.D. Power is one of several rating and analysis platforms you can use to judge a company or service’s reputation and performance. Here are some others:
- Consumer Reports: This nonprofit organization provides hundreds of ratings for products ranging from cars and vacuums to financial services like insurance and investment firms. Like J.D. Power, Consumer Reports talks with customers of financial services firms to craft its ratings. The organization doesn’t sell its rankings to companies to generate revenue. Rather, Consumer Reports’ business model relies on paid subscriptions consumers purchase to access ratings, reviews, and articles.
- Better Business Bureau (BBB): The BBB creates company profiles that feature a letter grade based on consumer complaints and company responses. But take their ratings with a grain of salt. An “A” rating only means the company has followed the BBB’s membership rules, but not that it’s, say, satisfied consumers with complaints. And a CNN investigation found a number of A-rated companies had serious government actions taken against them on behalf of consumers.
- National Association of Insurance Commissioners (NAIC): The NAIC establishes insurance standards and best practices, reviews regulations, and provides oversight in all 50 states, Washington, D.C., and U.S. territories. Its website includes profiles of companies offering consumer insurance and a complaint database highlighting the number of complaints a company gets and how its complaint rate compares to the industry average.
If you’re curious about other ranking and scoring organizations, look to see how they gather information, conduct research, and get funding. Ranking and review organizations should be transparent in each step.
If a ratings company isn’t upfront about its methodology and revenue, this might be a red flag. High-quality ranking organizations tend to be very transparent about their operations.
- J.D. Power is one of the most influential consumer analysis companies in the world.
- While most people associate J.D. Power with the automotive industry, the firm conducts research in other industries, like insurance, credit cards, and healthcare.
- J.D. Power bases its studies on consumer surveys that query consumers who’ve actually used the product or service.
- Consumer Reports, the BBB, and NAIC also offer various ratings and metrics you can use to assess a company.