EXAMINATION OF DEALER LOYALTY AND

BRAND LOYALTY
Gary Holmes, University of North Texas at Dallas
Charlie Pettijohn, Missouri State University
Subhro Mitra, University of North Texas at Dallas

EXTENDED ABSTRACT

Researchers have explored the dealership and brand relationship as it pertains to developing a cohesive and
concentrated effort to build important loyalty relationships (e.g., Akaeze & Akaeze 2017; Xu et al., 2017; Carter
2015). A dilemma may arise when situations such as product or service failures occur which may bring dealership
loyalty and brand loyalty into conflict. A gap exists in the literature for studies that explore times when a customer
may experience divided loyalty between the dealership and the brand. There have been recent calls for further
investigation into dealership and brand loyalty (Akaeze & Akaeze 2017; Xu et al., 2017), but very little research exists
on this important topic. This research attempts to address these significant gaps in the literature.

Constructs used in this research are brand loyalty, dealer loyalty, divided loyalty, and likelihood to switch brands.
Brand loyalty is a concept that is valued by businesses, as they desire a customer who prefers their brand and tends to
resist attempts by competitors who may lure them away with enticing offers and promotions. Oliver (1999) articulates
the classic definition of brand loyalty as a deeply held commitment to purchase the same brand offerings consistently
in the future. Dealership loyalty carries many of the same characteristics of brand loyalty, such as maintaining a
certain level of commitment to conduct business with a specific dealer now and in the future, resisting enticements by
other dealerships, and sustaining a high level of satisfaction with received products and services (Wysocky, 2017).
Divided loyalty refers to customers who frequently and consistently purchase two or more brands in the same product
category. Ramaswami and Arunachalam (2016) offer a comprehensive definition, “similar, strong, and favorable
levels of overall predispositional commitment toward two or more closely competing firms or brands on perceptions
of the respective value offerings.” Divided loyalty in this context refers to when the dealership brand conflicts with
the offered product brand. Finally, likelihood to switch brands refers to switching costs described in the literature as
barriers to switching brands if they are high or enticements to switch if they are low (Yang & Peterson 2004).

Hypotheses explored in this study are as follows: 1) The higher the consumer’s brand loyalty the lower the
consumer’s likelihood to switch brands, 2) The higher the consumer’s loyalty to the dealership the higher consumer’s
likelihood to switch brands, and 3) The impact of brand loyalty will be higher than dealership loyalty.

An automotive dealership group located in the Midwestern US allowed the researchers to survey customers. The
dealership offers four distinct brands of automobiles along with full automotive service centers at two locations. A
survey was developed to obtain data for this research as well as other data requested by the dealer. The items used in
this study were 5-point Likert-style format questions to record the constructs of brand loyalty, dealer loyalty, and
likelihood to switch brands. The aforementioned constructs were determined from execution of factor analysis on the
data. Structural Equation Modeling was utilized to analyze support for the hypotheses. This research found support
for all three proposed hypotheses.

This study found the higher the brand loyalty the lower the likelihood a customer will switch brands. The negative
correlation between brand loyalty and likelihood to switch brands reflects past research that articulates consumer
evaluation of products under the same brand tend to remain stable and are undifferentiated among dealers (e.g., Akaeze
& Akaeze 2017, Xu et.al., 2017). Customers who demonstrate high dealership loyalty are more willing to switch
brands, as there is a positive correlation between dealership loyalty and the likelihood to switch brands. This finding
supports the notion for customers who may consider a branded product as undifferentiated among differing outlets are
more likely to see a difference among competing dealerships (Akaeze & Akaeze 2017). Brand loyalty demonstrated
a stronger negative effect on likelihood to switch brands than the positive effect dealership loyalty had on brand
switching. This finding implies customers are more likely to switch dealerships than switch product brands.

Marketing Management Association Fall 2019 Educators’ Conference Proceedings 32

 Previous research focused on both brand loyalty and dealership loyalty as possessing synergistic relationships,
which combined, determine the degree to which a consumer determines his/her relative loyalty. This research suggests
that in some instances, rather than being complimentary, loyalty can be divided between the dealer and the brand and
thus be in competition.

REFERENCES

Akaeze, C. & Akaeze, N. (2017), “Exploring factors that influence consumer loyalty to automotive dealerships in
New York” Journal of Business Theory and Practice, 5(2): 98-102.

Carter, B. (2015). “An introduction to automobile dealerships.” The Appraisal Journal, 83(3), 193-200.

Oliver, R. (1999), “Whence consumer loyalty?” Journal of Marketing, 63(1). 33-44.

Ramaswami, S. N., & Arunachalam, S. (2016), “Divided attitudinal loyalty and customer value: role of dealers in an
indirect channel.” Journal of the Academy of Marketing Science, 44(6): 770-790.

Wysocky, K. (2017), “Tailgate party helps dealer score points”, Automotive News, available at:
https://www.autonews.com/article/20170605/RETAIL07/170609894/tailgate-party-helps-dealer-score-
points. (accessed Jan. 11, 2019).

Xu, L., Prybutok, V., & Blankson, C. (2017), “Relative contributions of product quality and service quality in the
automobile industry.” Quality Management Journal, 24(1): 21-29.

Yang, Z., & Peterson, R. (2004), “Customer perceived value, satisfaction, and loyalty: The role of switching costs.”
Psychology & Marketing, 21(10): 799-822.

For further information, contact:

Gary Holmes
University of North Texas at Dallas
7400 University Hills Blvd.
Dallas, TX 75241-4600
(972) 338-1870
Gary.Holmes@untdallas.edu

Marketing Management Association Fall 2019 Educators’ Conference Proceedings 33

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