How J.D. Power Ratings Work

J.D. Power Awards

Dave Power learned early on that publicizing the general results of his company's surveys would raise consumer awareness, reward companies for high performance, spur sales of the complete data set within a given industry and push companies to improve products and services.

Though in-depth data is collected from consumers, a highly summarized version of it is produced for release to the media. The summary names the best products in a chosen category. This recognition means a lot to a company's marketing department, and a "win" is usually highly touted. However, early on there was a problem with companies playing fast and loose with the categories and results when trumpeting achievements in the surveys. J.D. Power now fiercely protects the advertising of its ratings, and companies must pay a licensing fee to do so. Additionally, ads must be pre-approved by J.D. Power, and the categories that can be used in advertising pitches are pre-determined each year before the surveys take place. So, a car company that performs poorly overall can't cherry-pick a minor subcategory it performed well in (billing services, for instance) to brag about.

While this generates some money for J.D. Power, the lion's share of the revenue comes from selling the complete data to competitors in the field. They use it to improve their products and services and to better understand what their customers like.

J.D. Power uses "Power Circles" to signify to consumers how a product performed. The circles used are the same as "stars" in other reviews, and five circles is the highest rating. The ratings are entirely comparative, so the circles represent how products compare against similar products in the marketplace. A rating of five circles means a product is the best, or among the best, when compared to others in the survey. A four-circle rating signifies a product is better than most of its competitors, but not the top rated. Earning three stars means you are not the leader of the pack, but rather a member of the pack. No company's marketing department wants to learn a product has been awarded just two circles -- it's the lowest rating, and that judgment comes straight from the people who use your product.

To differentiate between the very top performers in a category, J.D. Power assigns an "award" to the very best in class, along with five circles. Other products that are rated in the top 10 percent just receive five circles.

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