ANN ARBOR—Thanks to a highly competitive marketplace, the waning of customer loyalty and greater access to information via the Internet, more and more American consumers are in the driver’s seat when it comes to buying a new vehicle.

The challenge for automobile manufacturers lies in combining resources with dealer networks to “form a consistent customer promise and then delivering on that promise,” say University of Michigan researchers in a new study of auto manufacturers and dealers, sponsored by A.T. Kearney Inc.‘s Global Automotive Practice.

In “Competing for Customers: The Future of Automotive Retailing,” researchers Michael S. Flynn and Bruce M. Belzowski and colleagues at the U-M Transportation Research Institute (UMTRI) found that both manufacturers and dealers say that customers today are less loyal to particular dealerships, salespeople or nameplates and believe that they will be even less loyal in the future.

Moreover, thanks to an abundance of resources found on the Internet, more car-buyers will shop for vehicles electronically and many more will at least gather vehicle information on the Web before visiting a dealer. In fact, manufacturers and dealers strongly agree that customers will often have more information about products and prices than salespeople, whose role will change to that of serving as purchase advisers and consultants for customers.

“The most successful dealers may be those with a professional sales and service staff that provides different types of customers with varied, but high-value buying and ownership experiences,” says Flynn, director of UMTRI’s Office for the Study of Automotive Transportation (OSAT). “These different sales models will probably include Internet sales, traditional negotiations and one-price retailing, as well as other methods.”

The challenge for dealers will be to build profitable strategies for all of these retail models, adds James Mateyka, an A.T. Kearney vice president. In particular, he says, dealers will need to transcend the price focus of Internet sales and build relationships with customers who prefer to purchase this way.

According to the manufacturers in the study, customers in the next decade will less likely compromise their preferences and buy from dealer stock, and will prefer one-price retailing instead of negotiating price. Further, about three-fourths of the manufacturers, as well as luxury dealers, think that the brand of a vehicle is more important to the buyer than is the dealer.

On the other hand, more than half of the dealers, and especially non-luxury dealers, say that the dealership itself plays an equal role with the vehicle brand name in the car-buying decision, and most believe that dealer reputation and service will be much more important to customers in the future.

In addition, the study found that the larger the dealership, the more willing customers are to compromise, but the less willing they are to wait for their preferred vehicle. In terms of customer loyalty, the research shows that smaller dealerships have a larger percentage of sales to returning customers.

Both dealers and manufacturers in the study say that in the next 10 years, dealer inventory levels will be much lower than today, that there will be far fewer dealerships, and that the average dealership will have larger sales volume, serve a larger territory and often have service facilities separate from the showroom.

They also agree that there will continue to be a major surge in manufacturers bypassing dealers and directly targeting customers. Dealers say that manufacturers do not respond quickly enough to product problems, manufacturer programs for financing dealer investments are not effective, and communication with manufacturers needs to improve.

“One of the major challenges for both the manufacturers and the dealers will be to improve their relationship,” Belzowski says. “The number of disagreements between the two groups that our research uncovered are significant.

“Manufacturers should understand that not all their dealers think the same, especially small dealers, and that they need to find common ground across all types of dealerships to develop a basis for strong business relationships. If any manufacturer and its dealer body can develop a sense of shared destiny, it may find new ways to expand both manufacturer and dealer share and profitability.”

The full report is available free of charge on the OSAT Web site at www.osat.umich.edu. OSAT has conducted research on a wide range of automotive issues for some 25 years, primarily focusing on strategic issues, competitive developments, and challenges forcing major changes in the industry’s structure and functioning.