Reality: The state of things as they actually exist, rather than as they appear or may be thought to be.
Perception: The belief as a result of past experience, and interpretation of sensory information.
Most of us accept our most closely held beliefs–our thoughts about things, our perceptions– as reality, at least in our personal lives. It governs our world view. When it comes to how we run our business, we understand the factual reality of what it takes to make the business hum but often forget that others, especially customers, don’t have as much insight into the specifics of our business as we do. We understand the reality of what it takes to make the product, keep the place running, and generate a profit. Yet as customers, we don’t really care—we just know how the product worked, how long it lasted, what kind of service we received and how much we think we paid.
Let’s look at a few real life examples, how they were handled and the result. Each of these is a different situation but the battle in each is reality vs. perception. The Lesson? Perception is reality for the savvy marketer and brand manager.
Brand Change
About a week ago the National Speakers Association, founded in 1973, believed it was time to update their image and become more relevant to more people around the globe. After two years of work they unveiled the new brand—Platform. Unfortunately, the big launch fell flat as they had failed to follow the rules of change management—one of which is understanding the difference between reality and perception.
By holding all the cards close to the vest during the two year development process and not engaging influencers to seed the change and become ambassadors for the new brand, it was inevitable that the announcement has resulted in an internal organizational squabble. The basis for the challenge being issued by many in the organization is whether the brand is even available to use. What the market/members perceive to be true is that Michael Hyatt already “owns” that brand regardless of the reality which is that the name used by Michael Hyatt does not carry a registration mark and some suggest the name is not “trademarkable” because of its general use. By not engaging their membership in the discussion prior to the announcement, they offended many. Couple that emotional reaction with a legitimate concern for the integrity of a great organization by seemingly horning in on someone else’s brand, there is a tornado of public outcry from both NSA members and Michael Hyatt’s 400,000 followers.
What is NSA to do? The jury is out; they have put it on hold. However, it is fairly clear that they have lost in the “marketplace” and no organization can afford to lose in the marketplace. If they don’t want to split the organization, they can only back off, regroup and in a year or two consider a new approach and other alternatives. If this moves forward, there will be no healing and members will feel they were not listened to (regardless of the “reality” about how much research was done or the rationale behind the selection of Platform—it simply doesn’t matter now). NSA is too good of an organization with too many good people. I expect they will take the high road.
Product Recall
Two high profile companies with product recall experiences have fared very differently.
Toyota, the more recent of the two, was dragged through public ire over a faulty floor mat and sticking accelerator. While it was discovered, eventually, that it was an isolated incident not a manufacturing flaw, Toyota lost brand equity. Further, it didn’t help that there were additional recalls for other issues and all of them heavily reported in the press. Toyota, once the Cinderella of the auto industry had fallen into the hall of shame. (http://www.forbes.com/sites/annemariekelly/2012/03/05/has-toyotas-image-recovered-from-the-brands-recall-crisis/
What is perception and what is reality? Did Toyota deserve the adoration for its cars before the recall? Is it the scourge of the auto industry after? The reality is most likely in-between. Current Toyota CEO Jay Lentz, shared the lessons learned in an exclusive interview with Automotive News “You have to be able to listen to your customers, not just hear them, but listen to what they’re telling you — and be quick about it,” Lentz said. “In our case, it is all about transparency and speed and listening.”
On the other end of the spectrum, Johnson and Johnson is often the case study for how to handle a product recall and survive the market reaction. In 1982 seven people died from ingesting cyanide-laced capsules of Extra-Strength Tylenol. Within a year, its market share had dropped from 37% to 7% and climbed back to 30% with a change in packaging and also earned the public’s respect for its swift and complete withdrawal of product. According to an article in the New York Times by Judith Reak, “What set apart Johnson & Johnson’s handling of the crisis from others? It placed consumers first by recalling 31 million bottles of Tylenol capsules from store shelves and offering replacement product in the safer tablet form free of charge.”
Product Price
A company that sold their goods through specialty stores had lower prices on average than a company selling similar products in grocery and drug stores. Without direct price comparison, customers assumed they paid less in the grocery and drug stores. What does a company do? Communicate the reality or deal with the perception?
In business decisions, you must know the “reality of the perception”. In other words, perception is the reality for the customer. If you are to be successful, you must meet or even exceed expectations. Expectations aren’t based on the reality of doing business but on the market perceptions. If customers think they are getting a value (whether they are or not), they are happy. The company that sells product in a specialty store setting must address the perception of a higher price, not just explain the reality.
And they did. They offered a small selection of very well priced products which created a “reverse halo”. Rather than the perception of higher price due to channel, by offering highly visible promotionally priced product on an everyday basis, it changed the perception that their products were overpriced. They sold a lot of lower priced product, but more of the higher priced product and more units with more total profits dollars overall.
As business leaders, the market chooses for us. We deal with perception because it is the reality of the market. The customer’s perception is based on experience and expectation, not fact. The bottom line is to seek to understand, even if you don’t like the answers. Once understanding is achieved, change is possible—it just might not be the change you envisioned.