Better Test Drives and Service, Quicker Throughput on Toyota’s Radar Screen

SAN FRANCISCO – The growing base of Millennial consumers will change the car-buying process in years to come, top U.S. officials at Toyota concede, but they expect dealers to remain a big part of the customer-relationship equation.

In fact, Bob Carter, senior vice president-Automotive Operations for Toyota Motor Sales U.S.A., tells reporters on the sidelines of last weekend’s 2015 NADA Convention & Exhibition here, Millennial, or Gen Y, customers will want even closer ties with traditional retailers, despite the increasing influence of the Internet on the vehicle-pricing and sales process.

As a result, don’t look for Toyota to end-run its dealer body and begin selling cars directly to consumers Tesla-like any time soon, he says.

“I think what you’ll see is Millennials are comfortable with doing research (on the Internet),” Carter says. “But dealerships are becoming (even) more important. (Millennials) want to be able to see, touch and drive the product. There are very few people who are willing to make a major purchase without experiencing the car.”

To that end, Carter says Toyota is shifting its focus to improving the test-drive experience (though he doesn’t elaborate) and streamlining sales and service procedures, in some cases with programs it will launch with Scion, still considered its test-bed brand for new retailing initiatives.

Post-sale activity is becoming extremely important for buyers, as well, and will continue to be the case with the Millennials, Carter predicts. He points to the brand’s 5-year-old Toyota Care program as a prime example of the direction the automaker is headed. Under Toyota Care, buyers get two years or 25,000 miles (40,000 km) of free maintenance with every new-vehicle purchase.

The program has been judged a huge success. It has increased buyer loyalty, changed consumer perceptions that dealer service is more expensive and less reliable than at independent repair shops and bulked up revenues for Toyota retailers, executives say.

Given all that, it’s a wonder few other automakers have followed suit, Carter says.

“It’s a substantial investment,” he admits, declining to disclose costs but noting Toyota reimburses dealers for the maintenance work at close-to-retail rates. “But it is one we’ve embedded as part of the brand going forward.”

The reason is simple, says Bill Fay, group vice president and general manager of TMS U.S.A. The program keeps buyers coming back to Toyota dealers.

Already commanding the second-best buyer-retention rate in the industry (62%) behind Ford, Toyota sees loyalty jump more than 10 percentage points with those who have a Toyota Care maintenance plan.

Dealers, who typically make only small margins on the sale of new vehicles, are enjoying the financial bump the plan provides. Prior to launching the program, 42% of Toyota buyers never revisited a dealer after completing their purchases.

“Toyota Care has changed all that,” Carter says. “Now, after they come in for the five complementary services, they come in for the sixth, seventh and eighth. And the first consumers that bought Toyota Care five years ago are now coming back in to trade.”

As with most other automakers, high on Toyota’s retail-improvements list is an effort to speed the sales-closing process, because few buyers, especially this growing Gen Y customer base, wants to spend four hours completing paperwork at the dealership. That’s where Scion could provide the roadmap.

Fay says Toyota’s youth brand is beginning to pilot online-buying programs that would enable customers to purchase and arrange financing for a new model “without as much personal touch and dealership contact as today.”

The sale still would be finalized through the dealer, but the online step would help speed the process. Fay says hard-and-fast time-saving targets will be set for both the Scion and Toyota brands once the automaker “refines the pain points” in the process.

“One area that holds us back…is throughput,” Carter says, noting with only 1,525 dealers the volume brand has one of the highest units-per-store averages in the industry, and F&I departments can get backed up significantly on a busy day.

“(But) you can take efficiency too far (and) lose that customer touch,” he says. “We’re trying to find that balance, (and) technology can help us quite a bit in that area.”

The executives say about two-thirds of the automaker’s dealers already are on board Toyota’s Image USA II showroom-upgrade program.

“We’re really in good shape with the whole facility-image reinvestment part of it,” Fay says, noting Toyota retailers overall posted their second straight year of record profits in 2014.

Toyota Care has helped persuade dealers to reinvest some of that money in their facilities, he adds, “because it’s driving customers to the dealer and the dealers feel they have gotten good (return on investment) on updated customer waiting rooms, the service drive and the overall capacity of their service departments.”

Carter planned to spend the dealer convention coaxing, but not badgering, his sales network to catch up to the pace of newly emerging consumer trends.

“Nobody will argue where the market’s going; everyone knows the importance of Millennials,” he says. “So our role is to say, ‛Take a look, here’s some ideas.’”

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