The Law Of Perception

Recently, the famous "Six Sigma" management technique came into question as Bob Nardelli was blown out of Home Depot. He had left General Electric, where Jack Welch made this quality-boosting methodology famous, and applied it to Home Depot with a vengeance. It didn't seem to help things as their competitor, Lowe's, nailed them with the simple but powerful concept of "improving home improvement." They brought this to life with neater stores, no messy contractor business and playing to the lady of the house.

This is a vivid lesson in the simple fact that a quality program is not a differentiating idea. It's not what marketing is about. In my last post, I wrote about "The Law of Division." This post is about "The Law of Perception." Marketing is a battle of perceptions.

Still, many people think marketing is a battle of products. In the long run, they figure, the best product will win. Thus, Mr. Nardelli's Six Sigma push.

Marketing people are preoccupied with doing research and "getting the facts." They analyze the situation to make sure that truth is on their side. Then they sail confidently into the marketing arena, secure in the knowledge that they have the best product and ultimately the best product will win.

It's an illusion. There is no objective reality. There are no facts, no best products. All that exists in the world of marketing are perceptions in the minds of the customer or prospect. The perception is the reality. Everything else is an illusion.

All truth is relative. Relative to your mind or the mind of another. When you say, "I’m right and the next person is wrong," all you're really saying is that you're a better perceiver than someone else.

Most people think they are better perceivers than others. They have a sense of personal infallibility. Their perceptions are always more accurate than those of neighbors or friends. Truth and perception become fused in the mind, leaving no difference.

It's not easy to see that this is so. To cope with the terrifying reality of being alone in the universe, people project themselves on the outside world. They "live" in the arena of books, movies, television, newspapers, magazines and the Internet. They "belong" to clubs, organizations and institutions. These outside representations of the world seem more real than the reality inside their own minds.

People cling firmly to the belief in such a reality, with the individual as one small speck on a global spaceship. Actually it's the opposite. The only reality you can be sure about is in your own perceptions. If the universe exists, it exists inside your own mind and the minds of others. That's the reality marketing programs must deal with. Most marketing mistakes stem from the assumption that you're fighting a product battle rooted in reality.

Some marketing people see the natural laws of marketing as based on a flawed premise--the product is the hero of the marketing program and you'll win or lose on the merits of the product. That's why the natural, logical way to market a product is invariably wrong. Only by studying how perceptions are formed in the mind and focusing your marketing programs on those perceptions can you overcome your basically incorrect marketing instincts.

Each of us (manufacturer, distributor, dealer, prospect, customer) looks at the world through a pair of eyes. If there is objective truth out there, how would we know it? Who would measure it? Who would tell us? It could only be another person looking at the same scene through a different pair of eye-windows.

Truth is nothing more or less than the perception of one expert--someone who is perceived to be an expert in the mind of somebody else.

If truth is so illusive, why is there so much discussion in marketing about so-called facts, with so many marketing decisions based on factual comparisons? Why do so many marketing people assume that truth is on their side, that their job is to use truth as a weapon to correct the misperceptions that exist in the mind of the prospect?

Marketing people focus on facts because they believe in objective reality. It's also easy for marketing people to assume that truth is on their side. If you think you need the best product to win a marketing battle, then it's easy to believe you have the best product. All that's required is a minor modification of your own perceptions.

Changing a customer's mind is another matter since they are very difficult to change. With a modicum of experience in a product category, consumers assume they're right. A perception that exists in the mind is often interpreted as a universal truth. People are seldom, if ever, wrong. At least in their own minds.

It's easier to see the power of perception over product when the products are separated by some distance. The largest-selling Japanese imported cars in America, in order, are Toyota, Honda and Nissan. Most marketing people think the battle between these brands is based on quality, styling, horsepower and price. Not true. It's what people think about a Toyota, Honda or Nissan that determines which brand will win. Marketing is a battle of perceptions.

Japanese automobile manufacturers sell the same cars in the U.S. as they do in Japan. The same quality, the same styling, the same horsepower and roughly the same prices hold true for Japan as they do for the U.S. But in Japan, Honda is nowhere near the leader. There, Honda is in third place, behind Toyota and Nissan. Toyota sells more than four times as many automobiles in Japan as Honda does.

So what's the difference between Honda in Japan and Honda in the U.S.? The products are the same, but the perceptions in customers' minds are different.

If you told friends in New York you bought a Honda, they might ask you, "What kind of car did you get? A Civic, an Accord?" If you told friends in Tokyo you bought a Honda, they might ask you, "What kind of motorcycle did you buy?" In Japan, Honda got into customers' minds as a manufacturer of motorcycles, and apparently most people don’t want to buy a car from a motorcycle company.

How about an opposite situation? Would Harley-Davidson be successful if it launched a Harley-Davidson automobile? You might think it would depend on the car. Quality, styling, horsepower, pricing. You might even believe the Harley-Davidson reputation for quality would be a plus. We think not. Its perception as a motorcycle company would undermine a Harley-Davidson car--no matter how good the product (that's the Law of Line Extension).

What makes the battle even more difficult is that customers frequently make buying decisions based on second-hand perceptions. Instead of using their own perceptions, they base their buying decisions on someone else's perception. This is the "everybody knows" principle.

Everybody knows Japanese make higher-quality cars than Americans. So people make buying decisions based on the fact that everybody knows the Japanese make higher-quality cars. When you ask shoppers whether they have had any personal experience with a product, most often they say they haven't. More often than not, their own experience is twisted to conform to their perceptions.

If you have had a bad experience with a Japanese car, you've just been unlucky, because everybody knows the Japanese make high-quality cars. Conversely, if you have had a good experience with an American car, you've just been lucky, because everybody knows that American cars are not as well made.

Marketing is not a battle of products. It’s a battle of perceptions. Unfortunately, Mr. Nardelli never quite understood this law.

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Comments

[Adman4]

While reading this blog, I couldn't help but think that, while I agree in theory with what you are saying, that your idealism is going over the top, at least to some extent. For example, there are indeed better products...it isn't ALL perception. A bread knife is a far bettter product for slicing a loaf of bread than a lawnmower...although I'm sure there are some who would attempt to argue otherwise.

[Adman4]

I believe that a counter argument can be made using additional examples. Apple, for example, has an historical perception of being a computer company, yet they have had enormous success with the iPod, with video editing software (Final Cut Pro), and other offerings.

[Jennifer McLean]

It is ALL perception, In fact I am writing about this topic tomorrow. Perception becomes reality and marketing done right creates a brand that sells products. If the product is not delivering value over time that will definitely affect the brand and sales, but the driving force is marketing and the sustaining force is marketing a great product. As always thanks Jack (and Derrick) for superior insights.

[Robert Davis]

It may well be "all perception" but perception reflects reality to at least some degree. You'll never change my perception that a lawnmower isn't appropriate for slicing bread. It ain't gonna happen, period.

Btw... if memory serves correctly, Honda was also perceived as a motorcycle company in the US when they first introduced cars to the U.S. market.

As I said, I agree in theory with the thesis (which is also a theory, not a LAW, IMHO) of this blog... while also pointing out, by playing devil's advocate, that there are exceptions.

[James Speirs]

It is stated that "They [Lowe's]brought this to life with neater stores, no messy contractor business and playing to the lady of the house."

Neater stores would come from Lean 6σ and the other two points would have been identified using other six sigma methods, such as Fishbone charts and Value Stream Mapping. Could it be that Lowe's "out Six Sigma'd" Home Depot. As with all improvement, it's not how you do it, but who you surround yourself with.

[Rob Stalder]

I'm not sure why you're trying to link Six Sigma with marketing so much. To use some GE-speak, Six Sigma is primarily utilized to "drive cost out" through improved quality.

While that can be applied to product quality, and that would have some marketing implications, it's more often used for improving process quality. Within GE, that's called "process capability." Cost reductions would typically occur through more efficient processes and better productivity.

So, I think you overplayed the angle on Six Sigma being used as a product differentiation tool. In my five years at GE, I never heard anyone speak of really using Six Sigma for marketing purposes. In fact, marketing tended to be one of the most resistant functions to using Six Sigma at all.

[James Hammond]

Bob's comment that perception "reflects reality to at least some degree" shows a lack of understanding of how the brain works. Perception is reality, period. No exceptions, sorry. Nothing else can be considered 'reality.' Reality is only ever created through our senses, the five 'traditional' ones being sight, sound, taste, smell and touch. Experiencing the world around us through these senses is the only way we construct our understanding and meaning of the world. If Bob never had experience of a lawnmower (or bread), that experience would never reside in his long-term memory -- so how would he know that it wasn't used for slicing bread? Everyone's construct of the world around us is from our own personal sensory experience. We form our own personal meanings, views, beliefs, ideas, etc through the experiences via our sensory channels. That is why branding is so powerful...it can create a perception for a product or service that far exceeds anything established on a purely rational basis, as companies like Coke can easily verify. A great book for studying this in more detail is 'How Customers Think' by Gerald Zaltman. My own book on the subject is out at the end of the year. Great blog, by the way!

[Robert Davis]

Your perception of my name is not reality. I signed my name as Robert. That is how I insist on being addressed. I have never "positioned" myself as "Bob." As a matter of fact, I hate it when people take it upon themselves to use a nickname for someone who has introduced themselves by their proper name.

I stick by my comments, btw. This blog is based on a theory... someone's opinion... it is not a law. Perception is tempered with reality... at least for those who are not living in a bubble of unprovable theories and concepts.

As I noted, I am very much in agreement with the premise of this blog. But, there should be a certain amount of healthy skepticism applied to those who claim their theories as "law."

As I said, Honda was perceived as a motorcycle company in the US (as well as in Japan) at the time of the introduction of the first Honda car.