Understanding Brand and Dealer Retention in the New Car Market: The Moderating Role of Brand Type

Dealers are assumed to contribute positively to brand retention. We argue that the type of brand moderates the effect of dealer performance on brand retention. Moreover, dealer retention is determined by different drivers for dealers selling different types of brands. To analyze our claims empirically, we collected data on brand retention and dealer retention among consumers who recently purchased a new car. Our findings show that dealers of prestige and economy brands do not contribute to brand retention. Only dealers selling volume brands are in a position to improve brand retention rates. A simulation reveals however that the contribution of volume dealers to brand retention is rather small in comparison to the impact of brand-related variables on brand retention. In line with the notion of brand-dealer fit we also find that the impact of dealer extrinsic quality (e.g., dealer showrooms) and dealer payment equity on dealer retention differs between prestige, volume, and economy brands. Extrinsic dealer quality affects dealer retention most for dealers selling prestige brands and dealer payment equity is the most important determinant of retention for dealers selling economy brands.