You are on page 1of 12

Effect of Counterfeit products on

market dynamics for Original


products
Marketing Management Project

Group 3
Section B

Kaushik Chandrashekar
Madhuranand
Nikhita Gupta
Nitin Rajotia
Sourav Pattanayak
Vicky Nishiket

PGP/18/08
2
PGP/18/08
4
PGP/18/09
4
PGP/18/09
5

Contents
Abstract................................................................................................................. 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

Abstract
The 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.

Introduction
Counterfeiting 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 its
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 Question
What effect do counterfeit products have on market dynamics for the original product?

Synthesis and Application


The 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-NOL KAPFERER, ANNE
MICHAUT 2014)
Consumers usually consider the social implications of the goods they decide to buy whether
its 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--vis in-store shopping. Results suggest that the effects of
individuals 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
Sampling
We 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 followsAdvantages 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 consumers 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
consumers 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 variablesGender- M, Age- 20-25, City- Metropolitan, Brand Conscious, Spends 2500 per
month on apparels

Qualitative Methods
1. 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 consumers
preference for the real brands are determined by the social functions underlying their attitude
towards luxury brands.
2. Focus Group DiscussionWe 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 & Discussion


Regression

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

Quality
Availabili
ty

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.

Social
Image

Component 1
a Importance to Durability
b Importance to fabric/material quality
c Importance to outer appearance
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
Component 3
a Importance to ones social image
b Importance to own outlook other use of counterfeit products
c Importance to general publics 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

Limitations
1
2
3

Sample size for survey is very less.


Survey respondents were mostly IIMK students.
Biased views from respondents as they would not be willing to share information

4
5

regarding counterfeit purchasing.


Rigged views from few respondents due to filling it in haste.
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
FGDs can be conducted in a better way to bring in the diverse views of the respondents
regarding this topic.

Future Research
Presently, we had focused our research only on Literature review, FGDs 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 brandson 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-NOL 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 ROMAN (2013), The Inuence of Consumers
Cognitive and Psychographic Traits on Perceived Deception: A Comparison Between
Online and Ofine Retailing Contexts