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Chapter One

Management deals in reality.

Marketing deals in perception.

The first responsibility of a leader," said Max DePree, former CEO of Herman Miller, "is to define reality."

Management deals in facts and figures, a left-brain analytical approach to a problem. "Getting to the bottom of the situation" is the goal. In short, management deals in reality.

Marketing deals almost exclusively in perception. What matters to marketing people are not the "facts" of a situation, but what's in the minds of consumers that may or may not correspond with reality.

Since perceptions are difficult to measure, marketing people often use right-brain intuitive, holistic thinking.

Management people, of course, are aware of the importance of perception. The problem is they believe perception is a mirror. It's just a reflection of reality. Change the reality and you change the perception.

Marketing people disagree. Changing reality is easy. But changing perception is among the most difficult jobs in the universe.

"This is our surest move ever."

That's what one chief executive said before the launch of a new product that could make or break his company.

That chief executive was Roberto Goizueta, former CEO of Coca-Cola, who confidently predicted the success of New Coke.

How could it miss? The company conducted almost two hundred thousand consumer taste tests that proved conclusively that New Coke tasted better than the original formula.

New Coke was a new, improved product. And doesn't the better product win in the marketplace?

The universal answer to this question in the boardrooms of corporate America is "Yes, of course, the better product wins. That's why we spend millions of dollars benchmarking our competitors. We won't launch a new product until we can develop a definitive competitive advantage."

That's reality at work in left-brain management circles. That's also why the vast majority of new supermarket and drugstore products fail in America today."The best idea I've ever had . . . "

That's what David Novak, now CEO of Yum! Brands, said about Crystal Pepsi. And, he quickly added, it was "the worst executed."

"Crystal Pepsi was an idea that was well ahead of its time," said Mr. Novak. "It was a brilliant idea."

Nor did he let Crystal Pepsi's failure undermine his confidence in his ability to predict the future. "We could have been clearer in the positioning to have it taste a little more like Pepsi, like people suggested, and it would have been a home run."

Crystal Pepsi hit the supermarkets in 1992, a year when the "clear craze" was sweeping the country.

Also introduced that year was Miller Clear. At the launch of the product, one of the brand managers said, "If you close your eyes, you would think you were drinking regular beer."

An editor attending the press function replied, "Tastes like regular beer only if I close my eyes?"

Clear beer, clear cola, clear toothpaste, clear mouthwash, clear dishwashing detergent, clear window cleaner, clear deodorant, clear antiperspirant, clear cosmetics, clear gasoline, and dozens of other clear products were launched into the market.

None of these clear products made much of an impact.

Actually, Miller Clear only tasted like regular beer if you did close your eyes. When you drank Miller Clear with your eyes wide open, it tasted like watery beer. Perception always trumps reality.

What keeps bad ideas alive at the management level is the disconnect between strategy and execution. The CEO who dreams up the bad idea can always blame the execution.

"The best idea I've ever had and the worst executed." Many management people, many politicians, and many motion-picture producers can say exactly the same thing. And do.

The irony is that the "red color" in a cola drink is just a dye added to the mixture before it's bottled. No matter.

The perception in the consumer's mind is that a cola product has to be reddish-brown. You putter with this perception at your own peril.

Crystal Pepsi a home run? It could taste exactly like regular Pepsi and still strike out. That's marketing's point of view.

"The most compelling luxury vehicle currently sold."

A pet project of Volkswagen supervisory board chairman Ferdinand Piech, the luxury Phaeton model was introduced in 2003 and received exceptionally good reviews.

"It might be the most-compelling luxury vehicle currently sold," reported Business 2.0 magazine, "It is overwhelmingly the best value among high-end luxury cars. Without question it is a magnificent vehicle."

Volkswagen recently announced it was withdrawing its Phaeton model from the U.S. market. No surprise there. Since its introduction in November 2003, VW has sold just 3,354 Phaetons in the United States.

Why would Volkswagen, a company known for small, relatively inexpensive cars, introduce the Phaeton, a sedan that started at $68,655 for the V-8 model and went up to $100,255 for the twelve-cylinder version?

Reality at work. With the low end of the market being taken over by brands from Japan and Korea (Toyota, Honda, Nissan, Mazda, Hyundai, Kia, and others), the folks at Volkswagen figured they would have to move upmarket.

Furthermore, low-cost Chinese brands are poised to enter the American market. With all this competition at the low end, it makes sense for Volkswagen to get into bigger, more-expensive, and presumably more-profitable cars. That's left-brain logic at work.

Hence the Phaeton, a model that would not only stake out a claim at the high end, but whose success would also add luster to the rest of the Volkswagen product line.

We can visualize what happened in the boardroom. Grown men, with decades of experience in the automobile field, sat around a conference table and decided to launch a Volkswagen vehicle with a price tag reaching six digits.

(We don't know any right-brain marketer who would have thought that was a good idea.)

Forbes called the Phaeton "a great car." USA Today gave it a glowing review: "Styling is nice. The interior decor sets a standard for class and taste. Comfort is exceptional. Driving personality is ever-so-lovely. Power's right."

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Excerpted from War in the Boardroom: Why Left-Brain Management and Right-Brain Marketing Don't See Eye-to-Eye--And What to Do about It by Al Ries, Laura Ries
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