What Exactly Is JD Power?

J.D. Power and Associates is a marketing research firm that analyzes consumer data to create rankings, reviews, and reports for a variety of industries. The company has been in operation for over 50 years and is well-known for its vehicle and truck ratings.

This article will explain what J.D. Power is, what it does, and why the company is important.

What Exactly Is J.D. Power?

J.D. Power is a global marketing research firm that analyzes customer feedback on a wide range of products and services, including automotive, credit cards, and insurance. The information is then translated by the company’s expert team into reports that are sold to corporate clients and free surveys and studies that are published for consumers.

J.D. Power’s most well-known industry is the automobile industry. You may have heard of the company’s Initial Quality Study (IQS) and Vehicle Dependability Study (VDS).

Subaru was the first automaker to use J.D. Power rankings in a commercial in 1984.

Though best known for its work in the automotive industry, J.D. Power analyzes a wide range of industries, including:

  • Services in finance (banking, credit cards, etc.)
  • Insurance
  • Medical care
  • Home \sRetail
  • Media, technology, and telecommunications
  • Utilities for travel and hospitality

J.D. Power survey results are included in The Balance’s reviews of credit cards and insurers, among other things. For example, for our credit card reviews, we consult the J.D. Power Credit Card Satisfaction Study, and for some of our insurance reviews, we consult the company’s auto insurance and claims satisfaction surveys.

What Is J.D. Power’s Role?

J.D. Power is well-known for its benchmark studies, which are based on consumer survey data analysis. J.D. Power then ranks the competitors and bestows awards on the top performers.

Depending on the product or service, the firm’s ratings take into account a variety of customer-based factors. J.D. Power’s annual credit card satisfaction study, for example, ranks credit card issuers in the following categories:

  • Interactions
  • Terms and conditions for credit cards Communication Benefits and services
  • Rewards
  • Important moments (applying for a card, resolving problems, handling possible fraud, etc.)

J.D. Power’s consumers for its analysis are confirmed owners or users of the products and services. Every year, J.D. Power interacts with millions of consumers as part of its research.

J.D. Power’s surveys and research take a variety of forms as well. For example, the Auto Insurance LoyaltyIQ report is aimed at industry players and measures shopping and company-switching behaviors among customers of the top 50 auto insurers in the United States.

Why Are J.D. Power Rankings Important?

J.D. Power’s consumer popularity is most likely due to its marketing and methodology. J.D. Power awards are frequently featured in automaker commercials, making the company’s rankings and awards more well-known than its competitors. For example, a 2019 Chevrolet commercial devotes its entire 30 seconds to J.D. Power studies, noting that more than 440,000 people responded to a vehicle quality survey, resulting in Chevy winning more awards than any other car manufacturer in the previous four years.

J.D. Power creates its customer satisfaction rankings independently, based on real-world customer feedback. This methodology may increase the firm’s rankings’ credibility among customers who purchase products or services ranked by J.D. Power.

How Does J.D. Power Make Money?

J.D. Power generates revenue by selling research findings and licensing fees. If a company wants to use J.D. Power in an advertisement (such as those car commercials), the company must pay a licensing fee.

Auto-insurance companies can work with J.D. Power to gain access to LoyaltyIQ reports, white papers about the auto-insurance industry, an analysis of your company’s product performance in key areas, and 10 hours of consultation with an insurance industry analyst.

Businesses can hire J.D. Power to conduct a certified customer service audit, which includes a customer survey, industry standard comparisons, a best-practices scorecard, and a one-year license to use the survey and scorecard. When the program is completed, the company receives the “Certified Customer Service Program” designation.

JD Power has come under fire.

Because companies pay J.D. Power licensing fees, there are times when J.D. Power profits from the companies it ranks. This potential conflict of interest was addressed by competitor “Consumer Reports” in a May 2020 article. The article brought to light the fact that J.D. Power charges companies to access survey results, mention the company in advertisements, and participate in the Certified Customer Service Program.

J.D. Power, on the other hand, claims that its surveys provide “independent and unbiased feedback from a representative sample of verified product owners,” which would, in theory, negate any bias toward paying customers.

Furthermore, according to J.D. Power, only the companies that perform the best in specific categories can afford to pay for a license. In other words, J.D. Power does not grant licenses to anyone who is willing to pay a fee.

Other Rankings Than JD Power

J.D. Power is one of several rating and analysis platforms you can use to assess the reputation and performance of a company or service. Here are a few more:

  • Consumer Reports: This non-profit organization provides ratings for hundreds of products ranging from automobiles and vacuum cleaners to financial services such as insurance and investment firms. Consumer Reports, like J.D. Power, consults with customers of financial services firms to develop its ratings. To generate revenue, the organization does not sell its rankings to businesses. Consumer Reports’ business model is based on paid subscriptions purchased by consumers to access ratings, reviews, and articles.
  • BBB (Better Business Bureau): Based on consumer complaints and company responses, the BBB creates company profiles that include a letter grade. Take its ratings with a grain of salt, however. An “A” rating only indicates that the company has followed the BBB’s membership rules, not that it has resolved consumer complaints. In addition, a CNN investigation discovered that a number of A-rated companies had serious government actions taken against them on behalf of their customers.
  • 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 that provide consumer insurance as well as a complaint database that shows how many complaints a company receives and how its complaint rate compares to the industry average.

If you’re interested in other ranking and scoring organizations, look into how they collect information, conduct research, and obtain funding. Each step of ranking and reviewing organizations should be transparent.

If a ratings firm isn’t forthcoming about its methodology and revenue, this could be a red flag. High-quality ranking organizations are usually very open about their operations.

Important Takeaways
J.D. Power is one of the world’s most influential consumer research firms.
While most people associate J.D. Power with the automotive industry, the company also conducts research in insurance, credit cards, and healthcare.
J.D. Power’s research is based on consumer surveys of people who have used the product or service.
Consumer Reports, the BBB, and the NAIC all provide ratings and metrics that can be used to evaluate a company.