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The Attraction of Counterfeit Goods

Corporations that understand why people buy counterfeit goods can learn to draw more consumers away from fakes.

(originally published by Booz & Company)

Counterfeit goods might be phony, but their economic impact is all too real. In 2012, global counterfeiting grew into a $600 billion-a-year-industry, according to the International Anti-Counterfeiting Coalition, and U.S. government agencies believe fake goods account for as much as 10 percent of international trade. For individual companies, the impact of illicit trade extends beyond the bottom line and strikes at one of their most valuable assets: brand image.
We’ve written about how companies can crack down on the supply side of the counterfeit market, but what about demand? What makes some consumers eager for these phony products, while others shy away? A new paper in the Journal of Consumer Behavior tackles these questions and suggests countermeasures companies can use to appeal to consumers’ underlying attitudes about counterfeiting.

The study was set in Morocco, a fast-growing trade and tourist hub, where the counterfeit trade flourishes along the porous borders with European Union countries. Morocco’s open-air markets, called souks, are famous for carrying rip-offs of labels such as Chanel, Fendi, and Louis Vuitton, and counterfeit Levi’s that sell for less than one-tenth of the genuine article’s price. 

Working with a national polling firm, the authors surveyed 400 consumers whose demographic blend represented the general Moroccan population, and analyzed three categories of commonly faked products: cosmetics, clothing and accessories, and mobile phones. Each participant completed a comprehensive survey about why they decided to purchase or not purchase counterfeit goods, which the authors weighed against their socioeconomic characteristics.

Across the board, consumers said they were able to distinguish phony products from genuine brands before making their purchase, the authors found. Accordingly, consumers’ intention to buy counterfeit brands varied across product categories: overall, shoppers preferred authentic brands when purchasing cosmetics or mobile phones, but were less picky when it came to clothing labels.

One of the more striking findings was that women were 28 percent less likely than men to purchase counterfeit brands, and 37 percent less likely to buy phony clothing labels, and reported feeling much more embarrassed than men by owning rip-offs. Similarly, consumers with higher income and education levels were significantly less willing to buy fake products—by 18 percent and 21 percent, respectively.

Unsurprisingly, the lower price of phony goods made them attractive to consumers, but perceptions of quality were also crucial: If a counterfeit product seemed relatively well made, consumers were about 65 percent more disposed to dip into their wallets. But consumers who reported being slightly more mindful of design were 16 percent less inclined, on average, to buy counterfeit apparel.

Consumers cited health concerns and the risk of disappointment as the primary drivers in their decision to pass on purchasing counterfeit goods. Integrity also played a large role, which could be a sign that the Moroccan government’s public campaign to raise awareness about the ills of counterfeiting is making inroads. Fear of prosecution, however, was not a significant deterrent, proving that legislation targeting this illegal trade has not had an impact on consumer’s complicity in buying fakes.

Given these factors, marketers should emphasize their products’ distinctiveness, originality, and reliability, the authors suggest, and explicitly warn consumers about the pitfalls of buying fake products that do not have the same high quality. Because safety and health concerns have a decisive effect on consumers’ choices in the counterfeit realm, companies should also promote the regulatory standards they must meet to develop their genuine products. And with design a high priority for consumers, firms should ensure their standards are distinctive and hard to mimic using the low-end technology prevalent in counterfeiting rings—without passing along any added R&D costs to their customers.

Because counterfeit goods are more commonly found in developing countries, multinational companies could also consider adapting, rather than standardizing, their products for these markets. For example, some computer and telecommunications firms have introduced low-cost, basic-service models for emerging markets that have proven unprofitable to counterfeit. Ultimately, the authors warn, counterfeit goods continue to look and work more like the real thing—a danger for corporations. “Counterfeiters are flexible, imaginative, and, above all, likely to pursue continuous adaptation to the market,” the authors write, “in the same way that leading innovative companies do.”

Matt Palmquist

Matt Palmquist is a freelance business journalist based in Oakland, Calif.

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