The practice started at DaimlerChrysler's Chrysler Group in 1992 when its Dodge brand convinced the dealer groups to use national ads from Omnicom Group's BBDO Worldwide, Troy, Mich., for the 1993-model Intrepid launch. Before that, Dodge, Chrysler and Jeep associations used retail executions and only got matching funds if the work came from the brands' national agencies. When Dodge returned to Nascar Winston Cup racing in 2001 after a 15-year hiatus, it was the dealer associations that paid to underwrite the team.
Mr. Marinelli says the dealer associations "have significant budgets, so it's important we're on the same page if we want synergy." Marketers at Chrysler's three brands sit down with key dealers to plot ad tactics and then agree on creative executions from BBDO, the national shop for all three brands. Omnicom sibling PHD, also Troy, handles both national and regional media.
spending can outstrip factory
Many dealer ad associations raise ad funds through assessments based on each new vehicle sold. The manufacturer then kicks in some funds-not always a dollar-for-dollar match. In a sizzling sales year, the groups can outspend the factory.
But that's not all the ad support available. Local dealers also spend their own money on ads, apart from dealer association or factory support. Local dealers for Nissan Motor Co. and Mitsubishi Motors Corp. actually spent larger ad sums per vehicle in 2002 than their regional dealer association. Of the $1,035.25 in total advertising spent per Mitsubishi unit in 2002, $158.88 came from local dealers vs. only $60.12 from regional dealer groups and $816.24 from the factory.
Chrysler's dealer groups spent $123.68 in measured advertising per Chrysler car and light-truck in 2002 compared with the factory outlay of $544.26 per unit, or $1 for every $4.40 spent by the factory. Dealer associations at other auto giants are even more powerful: Ford dealers spent $1 for every $1.98 spent by the factory in 2002; Toyota dealers $1 for every $2.08 by the factory (see chart).
HYUNDAI DEALERS' ROLE
Hyundai Motor America's four dealer groups spend nearly as much as the marketer, dishing out $1 for every $1.16 by the factory. The South Korean importer has had its dealer system in place since it entered the U.S. market in 1986. Don Hicks, a Hyundai dealer in Colorado, says the system "puts us in partnership with the factory" and its advertising. "Between the two of us, we generate a lot of clout."
Like Chrysler Group and other automakers, Hyundai has the same agencies for both its national and dealer accounts: independent Richards Group, Dallas, on creative and Aegis Group's Carat North America, New York, on media.
Mr. Hicks, also a Subaru and Suzuki dealer, says the systems work as long as dealers play a role. General Motors Corp. whipped up dealer wrath when it disbanded its 954 dealer associations in 1999. GM, which initiated the groups in the 1960s, shifted some $600 million in local ad funding to its five revamped regional offices. The goal was unified ad messages for the six GM vehicle brands in the disparate programs.
But the auto giant lost momentum, partly because its dealers were no longer part of the local ad process; their monthly meetings with regional GM staff were also cut. Dealers complained they weren't getting as much local media weight under the new system.
Within two years, GM slowly started bringing back the groups, albeit in a different form. Today, the carmaker has local marketing groups in the top 50 markets that represent 60% of its total vehicle sales, a spokeswoman says. GM now has a unified methodology across all its vehicle brands vs. the old program in which every brand had its own. Under the latest version, the groups must use each vehicle brand's national agency, something GM had been trying to do for most of the past decade.
GM isn't unusual since many car companies have changed their association programs over the years.
In April, Nissan North America's Nissan brand ended dealers' per-vehicle assessment for local advertising and started to pick up the tab for all regional ads. The assessments, some as high as $400 per model, varied by region. A key reason for the change, according to a spokesman, was that the program "was a nightmare to administer" for the brand's regional staff.
Subaru of America dropped its dealer groups in the early 1990s, when the dealers were adding $75 to each new sale invoice and the factory was kicking in $25. Rick Crosson, VP-marketing, says the groups didn't generate enough funds for TV with annual unit sales hovering around 100,000. "We were taking out something that could be a conflict between the dealers and us."
Since the late 1990s, less-formal programs began resurfacing when Subaru dealers in several regions requested them. Today, Subaru has no national policy; participation is voluntary.
The associations can be a boon to ad agencies that handle both the national account and dealer groups, says Jim Sanfilippo, exec VP of Omnicom auto consultancy AMCI. The service fees can be higher on the regional accounts because they're more service oriented. The ad groups "have become a tool for the agency to grow billings," he says.