AM Online

Why carrot beats stick in carmaker-dealer relationships

Jim Saker

In the 1990s, I undertook some research in the hope of understanding the principles underpinning the manufacturer-dealer relationship. The study surveyed a number of franchises and identified ‘coercive’ and ‘non-coercive’ approaches.

Coercive approaches were where the manufacturer told the retailer what to sell and how, a process based on compliance.

The non-coercive approach was collaborative, with mutual respect, communication and understanding. Most observers would prefer the latter option, as having a distribution network that hated you seemed counter-productive.

Over the years, I have seen swings between coercive and non-coercive – some manufacturers take a low view of their dealers, while others see them as partners who should be supported. There is, however, a general tendency that when the market is buoyant, and the brand is doing well, the manufacturer starts to exert power in areas such as standards, with new investment specifications to buildings or showroom layout.  But when the market or the brand is falling, standards are ignored and the manufacturer suddenly becomes supportive in trying to ‘shift the metal’.

In that light, it is always interesting to look at the NFDA Dealer Attitude Survey results and try to work out why some brands are firmly positioned at the top while others seem rooted at the bottom.  

Inevitably, return on investment is a major driver of a positive attitude from the dealer, but that is not the only factor.  

Kia, Toyota and Lexus – all significantly ahead of the pack in the latest survey – are delivering good returns, but their management style also has a reputation for being collaborative and close with their respective dealer networks. Having spoken to several dealer groups with these franchises, they would have more locations if they were available.

A recent AM Online article highlighted Citroën’s poor performance in the NFDA survey.  In that story (and in our interview with him on page 56 of this issue), Citroën’s UK MD, Karl Howkins, quotes a dealer group as saying Citroën had “lost the dressing room”. Although there is a weakness in the analogy – it is in the interest of the dealer to try to make money – the sentiment rings true. If the manufacturer-dealer relationship becomes coercive, negative behaviours creep in and both businesses weaken.

Howkins plans to get out and “be approachable and transparent to the network”. This is undoubtedly the right approach and reflects the tenet from In Search of Excellence by Peters and Waterman that the most effective management is “wandering around”.

By building trust through being visible, attitudes do change and by being better informed, manufacturers make decisions that lead to greater profitability for all.

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