Understanding Car Dealerships
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Understanding Car Dealerships

What is this industry really like?

Understanding Car Dealerships

In a bit of a departure from my norm, in this article, I'm going to talk about the different types of Automotive Marketing, as well as how dealerships are structured. There are three tiers of dealership marketing. Tiers 1,2 and 3. The first tier is OEM, or original equipment manufacturers. These are large brands, such as Ford, GM or Toyota. Tier 1 dealers structure their ads in the form of "Why you should buy this vehicle," and their ads come from a wide variety of sources. Tier 2 dealers are regional networks of dealers who band together to form an organization that gives them more collective bargaining power. Their ads are limited to regional television networks but are starting to move to social media outlets as well. Finally, Tier 3 dealers are local, stand-alone entities. These dealerships advertise almost exclusively on local TV stations, and even on simpler platforms like billboards.

In addition to these tiers of dealership marketing, there is also an additional classification of dealership types. They are franchised and independent. Dealerships are directly franchised through OEMs. So, for instance, a dealership might get franchised by Ford, and then it has authorization to sell Ford vehicles. Dealerships that are franchised frequently have larger customer service staff, as well as service departments. On the other hand, independent dealerships more commonly sell used vehicles, and don't have dedicated service staffing. This is important, because while it gives them more flexibility in terms of vehicles, it also makes it harder for them to develop customer relationships.

Finally, this brings us to the value of franchising dealerships. Franchising dealerships provides a huge boon to local economies. When dealerships are franchised, it lowers prices (because there is frequently competition), as well as ensuring protection of the consumer. Because there are lots of rules and regulations that need to be followed, franchising serves a perfect system of checks and balances for this.

Ultimately, we can conclude that the dealership industry is varied and extensive. This makes sense, because there are so many dealerships in the United States (around 18,000). Dealerships provide an enormous amount of jobs and economic value to communities. However, we will need to realize that there are different ways these dealerships should be marketed to. For instance, regional organizations that bring together several dealerships would be a perfect tactic. Meanwhile, it will be harder to reach the tier 3, standalone dealerships. Finally, the importance of relationships with the OEM cannot be overstated. This is not just the case with cars, but with servicing capacities as well. The people who manufacture the products that go to the dealerships have a lot of power.




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This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
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