Toyota NZ reveals how it transformed its business model
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Customer insights drive happy sales
One thing is always true no matter what business you are in: the closer you can get to understanding your customers, their needs, desires and bothers, the more successful you can be in delivering a product or service that they want.
A year ago, we set out to solve six issues that were bothering our customers. We knew they were problems that had to be addressed because we had talked to Toyota owners up and down the country.
Instead of being defensive, we took a clear and objective view of those concerns. We allowed those insights to drive a process to turn our sales, pricing and whole business model on its head.
Toyota New Zealand chief executive officer Alistair Davis. Picture/Supplied
We broke down the entire sales and delivery process and rebuilt it using a new model focused on what works for the customer, not what suits us or our dealer network. We called it the Drive Happy Project.
The single biggest issue for new vehicle buyers was the price. Over time a culture had developed so that customers looked at a Recommended Retail Price and saw that as a starting point for haggling with the store. While some might enjoy that process, most found it stressful or harboured a lingering doubt that they could have got a better price if they had pushed harder.
We put a price sticker on every model and said that is the final price. We took the haggling and stress out of buying a new vehicle by putting our best price on the vehicle, so our customers know they are getting a good deal without having to push hard for it. We even included a bunch of benefits that customers should expect with a new vehicle, but often were charged surprise extras for at the end of the deal: registration costs, a tank of gas, floor mats. The all-inclusive Toyota Driveaway Price has been well received by customers and store staff, who find the engagement with the customer vastly improved.
A buyer of a new Toyota CH-R told us “the fixed price made it easier for me. I knew exactly what I was paying and exactly what I was getting”. She said she doesn’t like haggling over a price, but she likes to get a good deal.
Customers also told us they couldn’t find the ideal car at a dealership and were being pressured into taking something because the dealer had an overstock of that model.
We now hold all our new vehicle stock in three distribution centres. There is now no pressure on a customer to buy a certain model. The customer gets the model and variant that meets their needs, not ours or the dealer’s inventory system.
At the same time, we rolled out a major revamp to our website so customers can see clearly the models available and can configure the model they want.
The customer can then go to the store, test the model and order what they want. It takes between one and four days to deliver the final vehicle depending on accessories. Would customers wait this long for their new Toyota? Turned out that they will happily - for the right product.
The website revamp had the added benefit of giving us much better data on visitors and pages visited. We are getting more than 140,000 unique visitors each month and, of those, around 36,000 visit the new vehicles section and about 13,000 go through the build-your-own process of configuring a vehicle.
Buyers had been expected to make a purchasing decision on the basis of a quick test drive around the block. Customers told us they felt obligated to do a quick test drive and then decide. So, we have increased the number of demo vehicles in each store and given customers more flexibility. If the store has cars available, the customer can take a car for the day or overnight if they want. As a result, test drives have increased by 30%.
Buyer’s remorse is a real thing. People always have second thoughts when buying a house or car – it’s a big deal for them. So, we now offer a seven-day money-back option. Has this meant a flood of new car returns every weekend? Unequivocally no.
Since adding the money-back deal, we have had 20 instances of customer remorse out of about 12,000 sales. Of the 20, 15 bought a different new Toyota and one bought a used Toyota.
Finally, service costs were an ongoing bother. Before Drive Happy Project, customers were unsure about ongoing service and maintenance costs. The new sales model includes a four-year capped-price service agreement including Warrants of Fitness and AA Roadside Assist with an extension to the warranty to five years if they kept servicing.
For Toyota New Zealand, the Drive Happy Project has been a transformational change in the way we sell vehicles. We have been inundated with interest from Toyota distributors and dealers from around the world. We noticed some of our local competitors responded by investing in their stores.
But in our experience, the fundamental customer bother was not the décor of the showroom or quality of the coffee but the hard sell and price negotiation. That’s where we have focused our efforts.
Toyota New Zealand’s record sales in 2018 proved the point – if you listen hard enough to your customers and adapt to their needs, everybody wins: the customer and the business that serves them. For us, the success of the Drive Happy Project means we will continue to listen closely and adapt to our customers’ changing needs.