Effect of Counterfeit products on market dynamics for Original productsMarketing Management Project

3/27/2015Group 3Section B

Kaushik Chandrashekar

Madhuranand

Nikhita Gupta

Nitin Rajotia

Sourav Pattanayak

Vicky Nishiket

PGP/18/082

PGP/18/084

PGP/18/094

PGP/18/095

PGP/18/110

PGP/18/115

ContentsAbstract.................................................................................................................................................2

Introduction...........................................................................................................................................2

Literature Review..................................................................................................................................4

Research Question.............................................................................................................................4

Synthesis and Application..................................................................................................................4

Research Methodology..........................................................................................................................5

Sampling............................................................................................................................................5

Measurement & Scaling....................................................................................................................6

Quantitative Methods.......................................................................................................................6

Qualitative Methods..........................................................................................................................7

Data Analysis, Result & Discussion........................................................................................................8

Regression.........................................................................................................................................8

Factor Analysis...................................................................................................................................8

Cluster Analysis..................................................................................................................................9

Limitations...........................................................................................................................................10

Future Research...................................................................................................................................11

Bibliography.........................................................................................................................................11

AbstractThe study which we are considering addresses the issue of consumer intention to buy original

brands and their counterfeits in the Indian product market. Mainly, it examines the impact of

past purchases (of original brands and counterfeits), consumer attitudes (majorly the

economic benefits of counterfeit purchase and also benefits of counterfeit purchase), and

personal characteristics (i.e. self-image, self-materialism, and perceived future social status)

on consumer intention to purchase original luxurious fashion brands and their counterfeits.

Based on a previous study, products and brands all across the apparel industry were selected

and used for the study.

Received 66 responses from respondents with diverse demographics and also conducted 2

Focus group discussions to mainly figure out the factors or points people consider while

going for counterfeit products.

The results mainly indicated that purchases in the past and personal characteristics were

significant predictors of consumer intention when checked in context with buying

counterfeits, while consumer attitudes toward the main benefits of counterfeit purchase were

not related to the dependent variable. Most factors (except sheer materialism and self-image)

had significant influences on purchase intention of original brands. Whereby, there was

reciprocal influence of consumer intention to buy counterfeits and consumer intention to

purchase original brands.

The main findings suggest that Indian consumers are simply willing to buy both originals and

counterfeits. It seems that for consumer availability, quality and social image are the major

factors that influence their buying behaviour. However, further studies with bigger sample

sizes and broader geographical scopes are needed to clarify these findings.

IntroductionCounterfeiting and piracy of products constitute a serious and ever growing problem against

businesses that are legally run and owners of intellectual property rights. Counterfeiting is not

specific to any industry but it affects a large number of sectors such as the fashion, software,

and luxury goods, and also pharmaceuticals industry, automobile industry, fast moving

consumer goods (FMCG) industry, and toys. As per International Chamber of Commerce,

“counterfeiting and piracy are growing exponentially in terms of volume, sophistication,

range of goods, and countries affected - it has a significant negative economic and social

impact for governments, consumers and businesses” Product counterfeiting has many

victims: several kinds of counterfeit products threaten the health and safety of end-users and

consumers, sometimes with the most serious consequences. Legally run businesses and

governments have a number of direct and indirect economic losses which decreases the

welfare of affected societies. So considering this, understanding and continuously surveying

the problem and available countermeasures, however, companies can protect their products

and mitigate the negative impacts and ensure the safety of consumers. In addition, alongside

technological development that enables counterfeiting on an industry scale, technology also

allows for original countermeasures. Most importantly or the thing that has changed in recent

times, mass-serialization is changing the way product information is managed by giving

unique identities to individual items. There are several implication, One implication of this

higher level of information granularity is that the physical security of products can be

improved in terms of novel anti-counterfeiting techniques, as well as with the detection of

illicit trade activities.

In India alone, the “fakes” market is estimated to be worth more than $2 billion and it’s

growing by nearly 20% every year. With the weak execution of IP laws and the growing

corruption, there is no doubt that very soon one may find himself driving a counterfeit car!

If you think it won't happen to you, think again.

The reasons they are so popular with counterfeiters is because they are money-spinning

brands with wide appeal, easily reproduced and sold in the Indian market. The problem is

manifest across all product categories throughout the country - medicines, FMCG products,

cosmetics, foodstuffs, aerated soft drinks, liquor, watches, clothes and even currency notes.

Consumers are often unaware that they are buying products that merely ‘resemble’ what they

actually want. This is worrying companies because fake products often ride on the success of

the original product, eating into sales, and, in some cases, harming the consumer. For

counterfeiters, it is the easiest thing. Put a passable product into a tube, with markings that

resemble the original and market it in rural, semi-urban areas, through promoters, agents and

retailers willing to make a quick buck. For most, the con job is easy to carry through.

We wish to figure out the main reasons why consumers prefer buying counterfeit products;

the major factors that affect their buying decisions. With the help of qualitative and

quantitative research followed by data analysis we want to see if feasible relation could be

achieved.

The survey also provides demographic analysis to help understand how some sections of

our society view the values and outcomes of the Internal Market differently from others. The

statistical breakdowns include: male/female; age range; monthly spending on lifestyle

products and then further moving to the spending in apparels industry and a range of other

socio-economic factors.

Literature Review

Research QuestionWhat effect do counterfeit products have on market dynamics for the original product?

Synthesis and ApplicationThe market for counterfeit fashion items relies heavily on the market for branded items,

especially at the high value designer end, that it cannibalises. If consumers did not desire

these items and use them in the formation of their respective identities, there would be no

resultant market for counterfeits. (LEE HOE, GILLIAN HOGG, AND SUSAN HART 2003)

The most obvious factor motivating consumer purchase of counterfeit products is their

relatively low price but it is commonly appreciated that such products will be of lower quality

than the genuine products. However some research has found that people who have

previously bought counterfeit goods believe that they are as good as genuine products. (DR

HAIDER ALI 2008)

On the basis of the functional theories of attitudes, what is proposed that both consumers’

desire for counterfeit brands and the extent to which the availability of such counterfeits

alters their preference for the real brands, are determined by the social functions underlying

their attitude towards luxury brands. (KEITH WILCOX, HYEONG MIN KIM, and

SANKAR SEN 2009)

The consumers' perception of counterfeit products has a negative effect on the consumer

perception of luxury brands. Both the consumer's brand associations and how consumers

perceive the quality of luxury brands are affected by counterfeit products. (ARVID

CADEMAN, RICHARD HENRIKSSON, VIKTOR NYQVIST 2012)

Low price, easy access and past experience have a positive significant relationship with

attitude towards buying counterfeit shoes, while value consciousness (negative) and social

status found an insignificant relationship with attitude towards buying counterfeit shoes.

(MUHAMMAD WAQAS TARIQ CHAUDARY, MUHAMMAD SAJID GILL, FURQAN

AHMED 2014)

Beyond making good copies easier to produce, the increased cynicism among consumers and

lessening of the moral barriers attached to the purchase of counterfeit products have

aggravated the issue of counterfeit purchasing. (JEAN-NOËL KAPFERER, ANNE

MICHAUT 2014)

Consumers usually consider the social implications of the goods they decide to buy whether

it’s a luxury brand or a counterfeit of it. This study finds support for the importance of status

considerations in this selection process. (STEPHANIE GEIGER-ONETO & BETSY D.

GELB & DOUG WALKER & JAMES D. HESS 2012)

The article examines the role of consumers’ cognitive and psychographic traits in their

perceptions of retailers’ deceptive practices and the different effects on perceived deception

associated with online vis-à-vis in-store shopping. Results suggest that the effects of

individual’s cognitive traits and risk aversion on perceived deception are more relevant when

consumers shop online than when they purchase. (ISABEL P. RIQUELME SERGIO ROMA

´N 2013)

Research Methodology

SamplingWe have used Convenience Sampling (non-probabilistic) for data analysis. We have

collected our samples from a population belonging to Tier 1, 2 & 3 cities including both

males & females as we found them conveniently ready to participate in our study. Some

important advantages & disadvantages of this sampling technique are as follows-

Advantages of Convenience Sampling

Simplicity of sampling and ease of research

Data collection can be facilitated in short duration of time

 Disadvantages of Convenience Sampling

Highly vulnerable to selection bias

Generalisability unclear

Measurement & Scaling

We have used Metric Variables and Ratio Scale for our analysis. We collected the data with

proper order, distance and origin, so we have used ratio scale.

We have used Likert Scale to capture the responses from the survey. The responses related

to our questionnaire were highly subjective depending on a consumer’s attitude and

perception; hence we decided to use likert scale for measurement.

Quantitative Methods 1. Survey Questionnaire

We floated an online survey questionnaire including approximately 20 questions regarding a

consumer’s attitude towards counterfeit brands (Primarily Apparels) and their buying

patterns. We received around 66 responses from a diverse set of respondents including both

males & females from Tier 1, 2 & 3 cities. The data obtained through this process has been

used for statistical analysis further.

Statistical Analysis

After getting the results from our Primary & Secondary research, we performed the Statistical

Analysis of the data collected through SPSS software package. Some important points

regarding the analysis are as follows-

We have performed the following steps in our data analysis-

Regression – Key Findings- Past Experience , Apparel design, color – outer

appearance of apparel

Factor analysis – 3 important factors identified- Quality , Availability & Social

Image

Cluster Analysis- Analyzed 2 clusters

Cluster 1 – 2000 to 5000, male dominated

Cluster 2 – very close to 2000, considerable presence of female

We found that Males are comparatively less conscious about quality as compared to

Women while both are equally inclined towards counterfeiting in future.

Conjoint Analysis- We also performed conjoint analysis using the following

Demographic variables-

Gender- M, Age- 20-25, City- Metropolitan, Brand Conscious, Spends 2500 per

month on apparels

Qualitative Methods1. Literature Review

We have reviewed eight different literatures including articles, research papers & journals

through which we have tried to identify the key reasons which motivate people to buy

counterfeit products. We have also tried to identify the purchasing behaviour and attitudes of

consumers towards counterfeit products. We also observed that the desire for counterfeit

brands and the extent to which the availability of such counterfeits alter a consumer’s

preference for the real brands are determined by the social functions underlying their attitude

towards luxury brands.

2. Focus Group Discussion-

We conducted the Focus group discussion including 8 members. We made sure that the group

remains homogeneous and asked relevant questions to understand the consumer behavior

towards counterfeit brands (Apparels). The important observation from the FGD was, most of

the consumers were ready to try counterfeit brands as they consider it an economic option as

compared to luxury or premium brands.

Data Analysis, Result & DiscussionRegression

Regression was run on dependent variable – likeliness of the respondent to buy counterfeit

product in future. Regression run on independent variables showed high significance level for

two variables – past experience and the appearance of the cloth like design, color etc.

Factor Analysis

Ten variable were used for factor analysis to extract factors/principal component out of these

variables. The result after analysis showed three distinct group of variables.

a.) Component 1

a. Importance to Durability

b. Importance to fabric/material quality

c. Importance to outer appearance

b.) Component 2

a. Importance to distance of the store

b. Importance to the availability of the product in store throughout the year

c. Importance to parallel availability of counterfeit product and branded product

c.) Component 3

a. Importance to one’s social image

b. Importance to own outlook other use of counterfeit products

c. Importance to general public’s outlook towards counterfeit product use

We have named Component 1, Component 2 and Component 3 as Quality, Availability and

Social Image respectively.

Cluster Analysis

Cluster Analysis revealed two categories. First one was dominated by males and other one

had considerable presence of females.

The analysis suggested that males are comparatively less conscious about quality as

compared to women. However, both are equally inclined towards counterfeiting in future.

The expenditure of first cluster is in the range of 2000-5000 whereas the second cluster

revealed the expenditure close to 2000. It suggests that the males shop frequently either due

to variety or the low quality of product whereas females buy good quality product but less in

number.

Cluster 1 – 2000 to 5000, male dominated

Cluster 2 – very close to 2000, considerable presence of female

Limitations1) Sample size for survey is very less.

2) Survey respondents were mostly IIMK students.

3) Biased views from respondents as they would not be willing to share information

regarding counterfeit purchasing.

4) Rigged views from few respondents due to filling it in haste.

5) Group-think could have affected the views in Focus Group discussions.

These limitations can be overcome by selecting a large sample size of heterogeneous

respondents and give them enough time to fill in the survey. Also, we must take precautions

that the form must be requested to fill in when they are not busy to avoid rigged views. The

FGD’s can be conducted in a better way to bring in the diverse views of the respondents

regarding this topic.

Future ResearchPresently, we had focused our research only on Literature review, FGD’s and Questionnaire.

We plan to conduct detailed interviews with 3 respondents who purchase counterfeit

products, 2 detailed interviews each of shopkeepers who sell counterfeit products and the

Shopkeepers who sell branded products at premium outlets to get their views. We also intend

to float a questionnaire specifically targeted to the shopkeepers to get their views regarding

counterfeit purchasing. Using these views, we plan to do conjoint analysis to determine how

people value the different attributes. This analysis will help us get a better picture and a

holistic view of the research.

Bibliography

1. LEE HOE, GILLIAN HOGG, AND SUSAN HART (2003) ,"Fakin’ It: Counterfeiting

and Consumer Contradictions", in E - European Advances in Consumer Research

Volume 6, eds. Darach Turley and Stephen Brown, Provo, UT : Association for

Consumer Research, Pages: 60-67.

2. DR HAIDER ALI (2008), Article “Why people buy counterfeit brands”on OpenLearn

website (http://www.open.edu/openlearn/society/the-law/criminology/why-people-buy-

counterfeit-brands)

3. KEITH WILCOX, HYEONG MIN KIM, and SANKAR SEN (2009),”Why do

consumers buy counterfeit luxury brands?” J Marketing Research, Volume 46, Number 2,

April 2009

4. ARVID CADEMAN, RICHARD HENRIKSSON, VIKTOR NYQVIST (2012), “The

Affect of Counterfeit Products on Luxury Brands - An Empirical Investigation from the

Consumer Perspective”

5. MUHAMMAD WAQAS TARIQ CHAUDARY, MUHAMMAD SAJID GILL,

FURQAN AHMED (2014), “The determinants of purchase intention of consumers

towards counterfeit shoes in Pakistan”, Journal of Public Administration and Governance,

ISSN 2161-7104 2014, Vol. 4, No. 3

6. JEAN-NOËL KAPFERER, ANNE MICHAUT (2014), “Luxury counterfeit purchasing:

The collateral effect of luxury brands’ trading down policy”

7. STEPHANIE GEIGER-ONETO & BETSY D. GELB & DOUG WALKER & JAMES D.

HESS (2012), “ Buying status ” by choosing or rejecting luxury brands and their

counterfeits

8. ISABEL P. RIQUELME SERGIO ROMA´N (2013), The Influence of Consumers’

Cognitive and Psychographic Traits on Perceived Deception: A Comparison Between

Online and Offline Retailing Contexts