Differentiation in Dealerships

In an auto news piece on successful car dealerships, Jesse Snyder explores what Matick Chevrolet has done to set themselves apart from their competition.  At Matick, they make a very strong effort to provide better competition than everybody else.  They realize that all dealerships can offer employee pricing, so there is not much competition there, and there isn’t really anything they can do to improve the technology of the cars they sell.  This means that the only thing they can control is how they are perceived by customers.  They understand the importance of how they brand themselves, saying “We want to be a destination for car buyers.”  They also set themselves up in a very strategic location near nice residential areas, but also very accessible from two highways, in order to attract both customers and employees.  The closing of one of these highways for construction shows exactly for far out of their way Matick workers will go to set themselves apart.  Their plans for dealing with the closing?  “We’ll grin and bear it. Over-communicate with customers,” Paul says. “E-mail alternate routes, confirm every sales appointment, offer to pick them up, even go to their office or home to demo a car.”

I found this piece interesting because it demonstrates an extreme difference between how OEMs and how dealers function.  While there is room for competition in prices and technology in the manufacturing market, dealerships have little room for competition.  To me, it seems like the OEMs function in monopolistic competition, while the dealerships tend to be in a standard competitive market, and this only changes when dealerships like Matick Chevrolet go out of their way to differentiate themselves from the competition.

Source: Matick Chevrolet Says Hello To Customers, hello to sales

7 comments to Differentiation in Dealerships

  • heardd16

    That is an interesting dynamic. Maybe there is an element of tacit collusion among the Chevy dealerships in Detroit. I know that in many towns that deal the same cars, there is competition in pricing as you can go to multiple dealerships and compare prices, often getting one dealership to lower their price below another dealership.

  • Alexander Dawejko

    Refer to my post about the high tech Audi dealership. I feel like to compete in the modern world, many of these dealerships will have to start upgrading their technology. A parking lot with cars and a few offices won’t do the job anymore.

  • Alexander Dawejko

    That will allow them to become fully competitive, if that’s their goal.

  • Louis Ike

    I agree that their is a distinct difference between the market that OEM’s compete in compared to the market in which dealerships/franchisers compete. The OEM market is very much a monopolistically competitive market, becoming less so as you reach more niche parts of the OEM production field. However, dealerships can resemble a perfectly competitive market in some instances, thus distinguishing themselves from OEMs. On the contrary, certain dealerships with unique or high end cars compete in a market with few competitors and as such are allowed to capitalize on much higher price points generating significant margins and profit.

  • Louisa Ortiz

    Its interesting how different levels of luxury in cars allow different dealerships to market in completely different ways. To some extent they all follow the same basic pattern. But I bet Porsche dealers get a lot more return donating big money to particular charities whose sponsors also make a lot of money then say a basic Ford or Fiat Chrysler dealer. The brands have to market in the same ways to different groups of people in the way that that particular group would respond to.

    • Mr. Tomm was very thoughtful about his marketing – non-profit contributions provided a better return than a radio or TV spot. Unfortunately there’s likely little room for that level of sponsorship for United Way, but we did raise almost $3000 from local small businesses in return for a bit of advertising from our end. Nevertheless, dealerships are “competitive” in new cars in the microeconomic sense, so as we heard from Mr. Tomm don’t rely on new car sales for more than a slice of profits, and often none at all.

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