J.D. Power Study Shows J.D. Power Not That Smart
Jason Lancaster | Jan 09, 2009 | Comments 15
J.D. Power recently released a study describing “new vehicle buyer retention rate” by brand. To put that in English, J.D. Power figured out how likely someone who bought a new [blank] is likely to buy another new [blank]. Here’s a nice graph that breaks it down:
J.D. Power’s “Owner Retention Rate by Brand” study results are hardly conclusive (or reasonable).
You’ll have to click on the picture to see all the brands with below-average buyer retention. Jaguar, with only 26.2%, is the lowest.
Toyota and Lexus placed highly, with 63.2% and 60.4% retention respectively. In other words, about 60% of the people buying new Toyota and Lexus vehicles currently own another Toyota or Lexus product. Honda finished just slightly above Toyota at 64.7% retention.
The problem, of course, is that retention has as much to do with brand selection as it does with brand satisfaction. Only brands that offer “one of everything” can get good results in a study like this.
First, a note about methodology: this study didn’t predict the future. JD Power asked people who just bought a new car if they had another car of the same brand in the garage. If you bought a new Toyota 10 years ago, and you’re buying another new Toyota today, you’re considered a “retained owner.”
To our point about selection vs. satisfaction, let’s talk about the luxury car market. Here, according to the study, the big winners are Lexus, BMW, and Mercedes. Of course they’re the only luxury brands with a near complete line-up. For example, if you’re a huge fan of Jaguar and you need an SUV, you’re going to have to look somewhere else. Porsche fans don’t have much in the way of choices when it comes to anything that’s not a sports car. Most luxury brands offer fewer than 6 models – of course they’re going to have low retention! The fact is that Lexus, BMW, and Mercedes come closest to offering “one of everything,” and because of that fact they enjoy higher than average retention. Big surprise.
Because selection is so important, we have to discount the results of this study even further. Exclude any brand that doesn’t offer a complete line-up – Hummer, SAAB, and Mini are obvious, but mainstream brands like Mercury, Pontiac, Chrysler, and Subaru don’t offer complete line-ups either. You can scratch every brand on the list but five…
Toyota, Honda, Ford, Chevy, and Nissan all offer a complete (or nearly complete) line-up, meaning they can be compared somewhat fairly. Statistically, Nissan, Ford, and Chevy are in a dead heat – there’s no clear winner among the three. Honda and Toyota seem to be a step above the rest, but they have an advantage that we haven’t mentioned yet…cheap small cars. First time buyers usually opt for cheap small cars (they’re cheap, after all), and anyone with a cheap small car in the garage they bought years ago is considered a “retained owner.” Since Honda has done a phenomenal job of selling cheap small cars during the last decade, they take first prize in this “study.” Toyota, no slouch in small car sales during the last decade, comes in second. Ford, Chevy, and Nissan, who haven’t sold too many cheap small cars in the last 5-10 years (they were busy selling profitable trucks and SUVs, which haven’t been too popular lately) are going to come in behind.
Sure, sure, it’s true that Honda and Toyota do a good job of making great cars that people love, but we already knew that. This study didn’t tell us much – at best, the results could be compared for two very similar brands (say Mercury and Chrysler), but even then the data is hard to swallow. While we like J.D. Power, we think it’s important to remember that a lot of the work they do should be met with a heavy degree of skepticism.
Filed Under: Auto News
But if a maker does not offer a complete line up, it is not meeting it’s clients needs at a later date so the numbers are more relevant than you assume. If I choose to get a diesel dually to tow my 35 ft trailer Toyota does not meet my needs. Owner retention speaks both of quality and offerings. If you understand what the numbers MEAN it is a very good survey. I company able to meet customer expextations and meter the furture needs of those buyers today will be very high on the list while one who is poor quality and is not looking forward to meeting the future needs of their customers will be far down.
I’ll have to take what JB said above as well when saying this goes for any survey. You have to know what the data truly represents and what their criteria/questions were in order to fully understand it. I agree that retention is also based on product offerings, so if the brand I like doesn’t have what I want I would have to look elsewhere. It doesn’t mean I wouldn’t buy again.
The problem with this graph is Honda does not have the line up Toyota or Lexus has…not even close. So, by the graphs admission Toyota and Leshould actually be in the number 1 and 2 spot. The real point here is if I have owned a Honda product for 10 yrs and I needed a truck to pull my 8,000plus pound RV trailer,Honda doesn’t have that kind of product. Now if used to and prefer import quality vehicles my best choice would be to purchase a Tundra new or used. Again if I owned Hondas for 10 yrs and I needed a larger SUV than my pilot, the best choices would be a new Highlander or new Sequoia that is if I could afford them. Besides, Toyota still out sells Honda by a long shot. Yes,Honda does compete with Toyota in the quality arena and some Honda products have a slightly higher resale value but beyond that you’d have to be seriously blind or bias to not end up with a Toyota on your purchase list..Seriously. Retetion rate?….trust me their are way more Toyota owners out there by far.
Intelligent critique. Written by Jason, or sourced from somewhere else?
I conduct surveys on vehicle reliability and fuel economy at TrueDelta.com, partly because I’ve looked into the information truly provided by other surveys and found it less than I personally wanted. Problem is, there aren’t many people who realize what TXTee points out, that to get the most value out of a survey you have to take a close look at what it’s actually measuring. So good to see an analysis that does this.
Actually, I said that, but thank you for not paying such close attention so no one noticed my spelling errors. :-B
To continue, Honda knows who it is selling to. Buy a civic/ Fit, move to a Accord or CR-V then to a Pilot/Ridgeline/Odyssey mail the kids to college and go back to a Accord or CR-V OR move up to Acura line. Honda also creates a scarcity in the market by under supplying to the demand. Not EVERYONE who wants one, gets one. They leave a few people out there emptyhanded which keeps the prices high and the market stable. The chart measured return sells and Honda is a master of getting people back to buy another. My sister bought a accord 3 years ago and they have personally called her to buy her used accord back and upgrade her to a nicer, higher line model of the accord three times. Honda doesn’t sell near what toyota sells but they sell smart. Honestly, if I had to buy a small car it would be a civic. And I would chose the CR-V over the 4 cyl Rav-4.
Jeremy – Always good comments from you, thank you. You’re very much correct about Honda offering a line-up geared towards every phase of their customers lives. Re-sale value absolutely helps with retention – I should have mentioned that. Honda’s “certified used” program is only available thru Honda dealers, so they have an inherent advantage over competing dealers offering similar Honda products…in other words, they can sell used Hondas for more than anyone else because only Honda dealers can offer certification. That, in turn, means that a Honda dealer can offer current Honda owners more money on trade. This brings us to yet another reason that Honda experiences high brand retention – they can offer previous customers more money, on average, than most of their competitors.
TXTee – Right on – if you liked your Tundra but needed a big diesel pickup from one of the domestics, that doesn’t mean Toyota has failed you. That just means you had to go somewhere else. Yet, according to this study, Toyota “failed” to retain you as a customer. Flawed logic, flawed survey. All it told us is what we already knew – Toyota and Honda make excellent vehicles. Big news, J.D. Power.
Marty – You are correct in saying that Honda’s line-up isn’t as complete as Toyota, Ford, Chevy, and Nissan…but it’s close. That does put a little bit of a hole in my argument, but I would suppose that Honda’s overwhelming success in building and selling cheap vehicles that appeal to first-time buyers gives them a leg-up in this survey that compensates for the holes in their line-up. Still, an excellent point.
Michael – Thank you – this post was written by me. I like railing against J.D. Power because I don’t like a group of people who know so little about the auto industry but claim to know so much. Thanks for your kind words – feel free to link to this article and/or clip it for use on your site. For anyone who hasn’t done it yet, visit TrueDelta.com and check it out. Interesting and high-quality info.
Seems to me there’s a lot more companies below the ” industrial average ” than above. This is a survey on companies not models right?
The interesting brand was Scion. Which is a gateway company to get people into toyotas.
Perry – Your are correct.
Jeremy – Yes, very true. Scion’s performance might be influenced by their extremely low sales volume, but it’s hard to say for sure.
I was amiss about the Scion point. My point was that Scion makes a very good, small car, that is inexpensive. BUT they do not have very good retention due to the whole lineup being geared toward first time car buyers but not having anything else in the line to grow into. If Toyotas plan is working, they buy a scion and then buy a Toyota when the time is right. What I would like to see is how many Scions buyers then buy a Toyota. For all real purposes, that is a retention. Same goes for toyota Owners who then buy a Lexus.
Hmmm I must be backwards because I bought the Lexus sedan before I bought the two Toyotas (SUV then truck). It’s really what you need at a given time. I personally don’t trade my vehicles back in so I look for quality, durability, endurance, versatility, and long-term costs.