010216_The American Chamber of Commerce_Counterfeit Measuring it Fighting it

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010216_The American Chamber of Commerce_Counterfeit Measuring it Fighting it

  1. 1. Counterfeits: Measuring it Fighting it Prepared for: The American Chamber of Commerce Prepared by: Spire Research & Consulting Date: 16 February 2011Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 1
  2. 2. Impact of Counterfeits World wide estimates seem to have coalesced around $500–600 billion annually (International AntiCounterfeiting Coalition [IACC], 2007; Punch, 2005)Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 2
  3. 3. Impact of Counterfeits World wide estimates seem to have coalesced USD Billion around $500–600 billion annually. 600 500 400 Worldwide estimates 300 GDP of Thailand GDP of Singapore GDP of Malaysia 200 GDP of Philippines 100 0 Worldwide GDP of GDP of GDP of GDP of estimates Thailand Singapore Malaysia PhilippinesCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 3
  4. 4. Impact of Counterfeits World wide estimates seem to have coalesced around $500–600 billion annually. USD Billion 600 500 400 300 Billion 200 100 0 Worldwide GDP of Thailand GDP of GDP of Malaysia GDP of estimates Singapore PhilippinesCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 4
  5. 5. Types of Counterfeit Clones / Duplicates Stolen Ramped Counterfeits Deceptive Non-Deceptive When customers are unaware When customers are purchasing that they are purchasing counterfeits knowingly counterfeits Typically sold at a discounts (as Typically sold at a similar price gray, “replicas”, “china-made” or using other euphemisms Can be addressed by customer Need enforcements and legal education, authentication and action marketing More difficult to measure Easier to measure using consumer researchCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 5
  6. 6. Consumer Behavior Towards Counterfeits Customers willingness to buy Non-deceptive Counterfeits USD Billion 600 500 400 300 Billion 200 100 0 Worldwide GDP of Thailand GDP of Singapore GDP of Malaysia GDP of estimates PhilippinesCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 6
  7. 7. Consumer Behavior Towards Counterfeits Types of consumers who buy non-deceptive counterfeits Happy Purchasers Feel that Counterfeits are a smart purchase. The have a playful relationship to Counterfeits and claim to be experts. Usually purchase sophisticated products (fashion, electronics etc. in small quantities. Struggling Consumers Belong to the low income level groups. Don‟t see the problems posed by counterfeiting, and typically cant tell the difference. They don‟t have the mental space or education to question product origin. Commonly found in emerging markets Robin Hoods Refuse to accept the current system. They consider branded products over priced and contest the margins, distribution system and taxes. They criticize big corporations and see no point in protecting their interests Feel that they have the moral right to purchase counterfeits since they Innocent Purchasers are what they regard them selves in a difficult position Very price conscious and found in emerging markets Buy counterfeits, but are not happy about it. They do not like Genuinely Frustrated counterfeits but can‟t afford genuine productsCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 7
  8. 8. Consumer Behavior Towards Counterfeits Customers attitude towards counterfeits can be summarized into 3 points: A lack of resources “There‟s no way on earth I‟d be able to afford the real thing, so I‟m not harming anyone. Why should I be denied a look alike because of my socio-economic standing?” A lack of recourse “There is no risk I‟m going to go to jail for this, and if it was a big deal, the government would be doing something about it?” A lack of remorse “What‟s unethical is that I cannot afford the item I want?”Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 8
  9. 9. Consumer Behavior Towards Counterfeits The drivers and deterrents for customers are: Predominant drivers behind counterfeit purchases Low price and increasingly better quality create temptation. Low risk of penalty equates to a license to buy. Availability, quality, price and low risk generate an overall sense of social acceptability. Top deterrents to acquiring counterfeit and pirate products Health & safety consequences top the list. Threat of legal action or prosecution delivers a wake-up call. Links to organized crime have more traction than might be thought. People don‟t want to harm „someone like me.‟Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 9
  10. 10. Consumer Behavior Towards Counterfeits Key message: Purchasers listen to victims and experts, not authority figures: Effective messengers include: a person harmed by C/P product; mothers whose children have been harmed, a medical expert. Less significant messengers include: police, corporate executives, judges.Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 10
  11. 11. Consumer Behavior Towards Counterfeits Three primary issues will impact purchasing habits of counterfeit/pirated products that are influenced by a combination of awareness and enforcement: Potential physical harm to buyer or their family (awareness). Reduced supply of counterfeit/pirated products (enforcement). Threat of prosecution or incarceration (awareness/enforcement).Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 11
  12. 12. Who is Under Threat? Countries with high counterfeits show the following characteristics: High income disparity Large unmanaged / unorganized supply chain Strong Middle class Low law enforcement Well connected distribution of network (locally or regionally)Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 12
  13. 13. Who is Under Threat? Top 10 countries based on counterfeit markets as a % of GDP Country Counterfeit as a % of GDP Mexico 7.470% Kenya 1.980% Russia 1.964% Canada 1.919% United States 1.539% South Korea 1.440% Japan 1.391% Peru 1.303% China 1.044% Germany 0.976%Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 13
  14. 14. Who is Under Threat? Some markets / products have more counterfeits than others: Status Symbols Not mission critical Low involvement Low CF Products / brands with Where product quality is Customers are not consciousness high aspiration Value not perceived immediately sophisticated or rely Customers are not heavily on channels sophisticated or rely heavily on channelsCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 14
  15. 15. What can companies do? Creating awareness and Conducting raids Investigation and Increasing consciousness enforcement Working with law Encouraging enforcement agencies Authentication to arrest and prosecute counterfeiters Working with Education and Customs and Communication Government Fighting Counterfeits Tamper Proofing Channel Ensuring ease of Education Channel Packaging identification Channel Programs /Authentication Proper disposal Accountability of used parts AuditsCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 15
  16. 16. How can Research analytics help? Warning Signs for Counterfeits Regular scanning of Monitoring of products retail channels (during Monitoring of customer going into the Service merchandizing complaints Centers checks) Encouraging customer Market Research registration (online)Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 16
  17. 17. What can companies do? Warning Signs for Counterfeits Monitoring results of ACF activities Valuation of Seized goods Evaluating customer communication Lead Generation Obtaining leads Research analytics for further investigation or Diagnostic Metrics legal action Research CF % of volume & value sold Research CF Share by Channel Presence Customer Perception Identification of Sensitive Areas Brand Health Identifying countries, markets, channels to focus on Diagnosing types of counterfeitsCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 17
  18. 18. Challenges in Measuring Counterfeits? Difficulty in interviewing Producers Wariness of customers Ambiguity in valuing and retailers dealing in to report accurate seized goods Counterfeits information (Cost vs. Value) Counterfeiters don‟t Conflict of interest: follow general business Investigators are Parts and packaging principles of typically in charge of are easily concealed pricing, inventory, man evaluation and ufacturing cycles etc. measurement.Counterfeits: Measuring It Fighting It Date:16 February 2011 Page 18
  19. 19. Methodologies adopted for Counterfeit Research? Advantages Drawbacks Transparent and Unable to measure Objective collusive, non- deceptive CF Minimizes human error Suitable for products with fragmented distribution Sampling Approach of CF and deceptive CF Transparent and Risks brand reputation Objective Less accurate for Minimizes human error categories where deceptive CF is Suitable for products with Customer Interviews predominant fragmented distribution Robustness of CF and non-deceptive CF Capitalizes existing data Valuing seizures is problematic Requires a standardized Seizure Approach process for investigations, consistent over time Can be conducted more Highly subjective quickly/in a less costly High risk of human bias Expert/Supplier Interviews way Lacks transparency of Cost processCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 19
  20. 20. Selecting a research Methodology that suits your market? Are there credible, unbiased Is Seizure data available? experts? NO NO NO Is the final tier channel Can customers identify CF? fragmented? YES NO YES YES Can seizures be valued with YES certainty? NO NO Would Customers be comfortable YES sharing information? Do deceptive counterfeits EXPERT INTERVIEWS dominate? CAN BE USED NO NO YES Are detection rates certain? YES NO What is the risk of damaging brand YES when talking to customer about CF issues? SAMPLE APPROACH CAN BE USED YES NO YES Is detection rate above 75%? CUSTOMER INTERVIEWS CAN BE RETURN TO EXPERT USED INTERVIEWS SEIZURE APPROACH CAN BE USED Source: Spire analysis, drawing inputs from CBER 2002 study for EUCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 20
  21. 21. In Conclusion… Tips for fighting counterfeits Spend up front Have an anti-counterfeiting research program in place Monitor your product Monitor the product of the counterfeiters Learn about counterfeiters and counterfeiting Educate the public better Cooperate with law enforcementCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 21
  22. 22. Tel: (65) 6838 5355 Fax: (65) 6838 5855 78 Shenton Way #20-01 Singapore 079120 sg.info@spireresearch.com www.spireresearch.comCounterfeits: Measuring It Fighting It Date:16 February 2011 Page 22

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