Disrupting the Cycle
Chuck Patterson Toyota’s Vehicle Exchange Program is enticing customers to trade their Toyota for a new one, sooner rather than later
Mar/April 2018
Catering to Customers
General Manager Mike Patterson saw a way to sell more cars by disrupting the buying cycle. “We’re simply catering to what customers want but didn’t know was possible,” he says.
General Manager Mike Patterson saw a way to sell more cars by disrupting the buying cycle. “We’re simply catering to what customers want but didn’t know was possible,” he says.
When market analysts refer to companies as “disruptors” of various business sectors, talk of high-tech innovators like Google, Apple, Amazon and Uber invariably follows. Car dealerships? Not so much.
But if Chuck Patterson Toyota keeps making waves with its breakthrough Vehicle Exchange Program, they just might need to be included in that conversation.
At the heart of this program is a stand-alone vehicle exchange team that’s taken up residence along the Chico, California, dealership’s service drive. Its mission? To tap into what NADA and J.D. Power surveys have revealed: Most customers would prefer to trade for a new vehicle every 24 months, even if the average buying cycle is 41 months and the typical financing term is 63 months.
“We are disrupting the buying cycle,” says General Manager Mike Patterson. “It’s amazing how many customers, who come in for service with no intention of buying a car, come back and say, ‘I didn’t realize we could do that.’ We’re simply catering to what customers want but didn’t know was possible.”
Here’s How It Works
The vehicle exchange manager identifies customers with low-mile/high-value vehicles that will likely fetch top dollar on the used car lot. These customers are contacted the day before they’re scheduled to come in for service, letting them know that an agent will conduct an obligation-free evaluation of their vehicle while they wait.
The proposal includes a trade-in appraisal and a deal sheet that lists various options for getting a new Toyota. Often, customers can buy a new car with no money down and lower monthly payments. The customer receives the packet at check out and has the option of adding in the cost of the service visit, yet another benefit.
If the customer returns and asks to take the next step, their vehicle exchange agent introduces them to a salesperson who completes the sale and the delivery.
When it’s all said and done:
Talk about your win-win-win-win-win.
Four Years in the Making
Though the program is humming along now, it didn’t start out that way.
“It took us a couple of years to figure this thing out,” says Ryan Dietz, business development and internet manager. “The big ‘aha moment’ was when we put a dedicated manager in the exchange department, rather than have the agents work with the sales manager on the showroom floor. That eliminated a huge bottleneck, where the sales manager also had to continue to manage the flow with the frontline salespeople.
“Besides, vehicle exchange requires a different mindset,” he adds. “It’s more about advising the customer on their options than selling them on a product. So, it made sense to run that department with a dedicated manager.”
The team also experimented with pay plans.
“At first, we only gave the salespeople half credit for the deals they completed,” Patterson says. “It wasn’t until we changed it to full commission that they really got onboard. That does mean paying two people to sell one car, which costs more. But we more than make up for it when we sell the trade-in as a used car. I used to go to the auction every week. Now, I don’t need to. I literally have a used-car factory 30 feet away from my desk.”
Bottom line: The program is generating 40 trade-in vehicles and 35 new-car sales per month. It’s one of the big reasons Chuck Patterson Toyota is No. 1 total gross, No. 1 in gross per vehicle, No. 1 in used-car net profit and No. 4 in customer retention in the San Francisco Region.
“It stands to reason that if our customers shorten the time they keep their cars, we’re going to sell them more cars,” he adds. “Our exchange department has a manager and three agents now and we’re ready to add a fourth. It’s only going to continue to grow.”
But if Chuck Patterson Toyota keeps making waves with its breakthrough Vehicle Exchange Program, they just might need to be included in that conversation.
At the heart of this program is a stand-alone vehicle exchange team that’s taken up residence along the Chico, California, dealership’s service drive. Its mission? To tap into what NADA and J.D. Power surveys have revealed: Most customers would prefer to trade for a new vehicle every 24 months, even if the average buying cycle is 41 months and the typical financing term is 63 months.
“We are disrupting the buying cycle,” says General Manager Mike Patterson. “It’s amazing how many customers, who come in for service with no intention of buying a car, come back and say, ‘I didn’t realize we could do that.’ We’re simply catering to what customers want but didn’t know was possible.”
Here’s How It Works
The vehicle exchange manager identifies customers with low-mile/high-value vehicles that will likely fetch top dollar on the used car lot. These customers are contacted the day before they’re scheduled to come in for service, letting them know that an agent will conduct an obligation-free evaluation of their vehicle while they wait.The proposal includes a trade-in appraisal and a deal sheet that lists various options for getting a new Toyota. Often, customers can buy a new car with no money down and lower monthly payments. The customer receives the packet at check out and has the option of adding in the cost of the service visit, yet another benefit.
If the customer returns and asks to take the next step, their vehicle exchange agent introduces them to a salesperson who completes the sale and the delivery.
When it’s all said and done:
- The customer drives off in a new Toyota, loaded with the latest technology and safety features.
- The vehicle exchange agent receives compensation for presenting the offer and for initiating the sale.
- The salesperson gets his or her full commission.
- The dealership gains a highly desirable used car that will appeal to another customer.
- Both customers are encouraged to bring their vehicles back for service, ensuring they’re well taken care of by trained technicians who use genuine Toyota parts.
Talk about your win-win-win-win-win.
Four Years in the Making
Though the program is humming along now, it didn’t start out that way.
“It took us a couple of years to figure this thing out,” says Ryan Dietz, business development and internet manager. “The big ‘aha moment’ was when we put a dedicated manager in the exchange department, rather than have the agents work with the sales manager on the showroom floor. That eliminated a huge bottleneck, where the sales manager also had to continue to manage the flow with the frontline salespeople.
“Besides, vehicle exchange requires a different mindset,” he adds. “It’s more about advising the customer on their options than selling them on a product. So, it made sense to run that department with a dedicated manager.”
Working the Lot
Business Development and Internet Manager Ryan Dietz and Vehicle Exchange Agent Kim Valdez evaluate a potential trade-in vehicle, one of the key steps in the program.
The team also experimented with pay plans.
“At first, we only gave the salespeople half credit for the deals they completed,” Patterson says. “It wasn’t until we changed it to full commission that they really got onboard. That does mean paying two people to sell one car, which costs more. But we more than make up for it when we sell the trade-in as a used car. I used to go to the auction every week. Now, I don’t need to. I literally have a used-car factory 30 feet away from my desk.”
Bottom line: The program is generating 40 trade-in vehicles and 35 new-car sales per month. It’s one of the big reasons Chuck Patterson Toyota is No. 1 total gross, No. 1 in gross per vehicle, No. 1 in used-car net profit and No. 4 in customer retention in the San Francisco Region.
“It stands to reason that if our customers shorten the time they keep their cars, we’re going to sell them more cars,” he adds. “Our exchange department has a manager and three agents now and we’re ready to add a fourth. It’s only going to continue to grow.”
