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Start in an environment with very few distractions.
Allow the dog to take the treat from your hand.
Once your dog has the hang of this and is dropping every time:
IMPORTANT: Make sure you are playing with this toy outside of training. Otherwise he will decide to quit picking it up and just look at you for treats, and he will no longer play with it.
Your dog should be dropping the toy when you say drop, and when he does you will take the toy, hand him a treat, and give him the toy back.