Feature Articles

by Tim Phillips

Amazon lists 7,627 books on brand management. I haven’t read all of them, but it’s a safe guess that the overwhelming majority make a simple assumption when consumers experience the brand: that what they think they are buying is actually what they get.
 
If the name on the outside of the box, or on the pill, or stitched to the back pocket, or stamped on the part is fake, then all the brand equity built into the product is meaningless. That’s a losing situation for everyone.
 
On one hand, it disastrous for an unwitting consumer whose car parts, whose medicines or whose premium eBay purchase is at best a waste of cash - and at worst positively dangerous.
 
But it is also calamitous for the brand owner. Any brand owner building a responsible brand is marketing brand attributes that it is attempting to build into its products. For example, if safety is a brand attribute, if responsible manufacturing and sourcing, build quality, exclusiveness or unique design features are part of the brand, then counterfeiting takes those brand values and piggy-backs on them to sell a product that doesn’t share them.
 
The traditional way to look at this is leakage - that is, if the authentic product has effective branding, a leak into the counterfeit product is irritating and unfair, but it doesn’t negatively impact the brand.
 
This happens because much of current management thinking about the problems of counterfeiting is hampered by an understandable assumption: that it’s a legal problem. Anyone counterfeiting your products is breaking the law, and probably more than one. But they are doing more besides.
 
In large parts of the developing world, and in many areas of the developed world, the primary experience of a brand is through counterfeits of that brand.
 
To start in the richest parts of the globe: today’s street markets and Internet sites are awash with counterfeit product: clothes, shoes, CDs, DVDs, toys, beauty products. Entire segments of the population are experiencing the brand values of the counterfeiter: easy availability, cheap prices, the brand as little more than a name.
 
But move to the developing world, and there are large parts of the globe where the branding message is getting through: logos and names are easy to recognize from television and magazines. But the genuine product is simply not available - even if it was affordable.
 
A particular worry is the next generation of affluent consumers. Four countries are usually singled out: Brazil, Russia, India, China. I’ve visited all four to look at the market for counterfeits, and anyone who is optimistic about the global reach of brand values can’t help but be depressed by what’s happening. All four countries share attributes: counterfeits are easily accessible, and fake consumer brands are knowingly bought by the emerging middle classes as just another consumer choice. Premium brands aren’t affordable; but there are more pressing problems that the often marginal differences in quality between many consumer brands and their fakes.
 
Without explicitly saying it, we’re sending a message to consumers that maybe branded product isn’t so much branded - which implies quality in design and manufacturing - as labeled. For the pedigree to mean something, the branding effort has to start with the question: would this product be significantly worse for our customers if it were not real?
 
There are two brand values that must be meaningful in a global situation: relevance and service.
 
By relevance, I mean the ability to make those products relevant for the markets in which they are available. In a globalized economy it simply isn’t enough to claim that if the products weren’t directly marketed at a country, or a group of consumers, that they simply won’t buy it - or its counterfeits. In that case there’s the possibility for products that are the real thing to be manufactured for those consumers - to reward them for the interest in the brand rather than punishing them.
 
One example of this in recent history is Daks. A traditional British clothing brand offering products to a small elite, it spotted an opportunity early in India, where its styling and its history offered the chance for growth. Yet the aspiring Indian middle classes could not afford the full-priced product common in Western Europe. So Daks produced a range made from local fabrics, designed specifically for the climate, and manufactured locally for low costs. It practiced inclusivity, seeking to bring a new generation of customers to the genuine product through an imaginative commitment to quality and appropriate pricing that is rarely used as a way to promote authenticity.
 
Service has to provide some difference: often in low-cost economies service is the first thing that is cut (sometimes, ironically, because there are so many counterfeits that it’s not economical to provide it).
 
This might mean some awkward decisions have to be made, and unprofitable ones. One example is in providing service to consumers who have purchased the counterfeit: for example, offering them a replacement at cost. It might mean, as Daks did, redefining brand values. It might mean voluntarily investing at a loss in the long term, or looking into those brand values and asking if they are more than packaging?
 
All of these tactics give social legitimacy to a strong enforcement policy that needs to be part of the overall strategy. But counterfeiting is kryptonite for branding: if the fake economy persists, all the how-to books on Amazon.com will not save our brands from ruin.
 
Note: Tim Phillips is an international expert in the war against counterfeiting and fraud.  This article represents a new instalment in Mr. Phillips’ ongoing series highlighting the issues and potential solutions to this growing crisis.