Models of compensation for phonological variation in spoken word recognition differ in their ability to accommodate complete assimilatory alternations (such as run assimilating fully to rum in the context of a quick run picks you up). Two experiments addressed whether such complete changes can be observed in casual speech, and if so, whether they trigger perceptual compensation. Experiment 1 used recordings of naive speakers and found that the presence of following context supporting place assimilation led to an increase in miscommunication rate when listeners were asked to identify the potentially assimilated words. This result was also obtained when trained phoneticians gave their considered judgments of a subset of the stimuli. Experiment 2 examined the extent to which words articulated correctly by naive speakers (e.g., rum) would be perceived as assimilated and found that compensation for assimilation in these stimuli depended on the type of following phonemic context and the semantic fit with the preceding sentence. These results suggest that place assimilation does involve complete alternations and that the perceptual system can compensate for them in certain circumstances.