Counterfeit products are not just lost revenue, they’re also lost brand equity
According to a report published in 2016 by the OECD and the EU’s Intellectual Property Office, imports of counterfeited goods are worth nearly half a trillion dollars per year. In addition to this, they make up around 2.5% of the world’s global trade importation.
Overtly, these figures show the damage done to legitimate brands in terms of revenue. If the public buys counterfeits, also known as knockoffs, instead of the actual brand product – the brand is losing out on its money. Covertly, counterfeit products also deliver a killing blow to brand equity, meaning the commercial value that lies behind a consumer’s perception of a brand name.
Are there different types of counterfeit products?
The problem is with the different levels and types of counterfeit products that the market is flooded with every year. Counterfeits can be divided into two main categories: non-deceptive counterfeits, and deceptive counterfeits.
Non-deceptive counterfeits don’t pose much of a threat to brand names because the consumer is aware that they are buying a knockoff and that the knock-off’s quality is not reflective of the legitimate brand’s quality. According to various studies carried out in the 21st century, non-deceptive counterfeits have very small impact on brand equity.
Deceptive counterfeits are an entirely different story. These products are made to look and feel identical to the brand equivalent so that the consumer completely believes that they are buying the brand product. In fact, sometimes the value of deceptive counterfeits is elevated so that the consumer is duped into thinking they’re purchasing the real product.
Since the consumer believes that the product they bought is legitimate, when something goes wrong with it (as often does), they of course blame the brand for its sub-par quality product.
How is brand equity lost?
Of course, since there is such a vast quantity of deceptive counterfeit products on the market, many consumers go through this experience. Sometimes even, media outlets get hold of the story and portray the brand in a negative light through no fault of its own.
When consumers are deceived by counterfeits, it creates the larger scale effect of loss of brand equity. The brand image and perception are tarnished, and consumer interest declines rapidly for the brand. Brand loyalty, as it is termed in the marketing industry, takes a serious hit and the brand loses much of its hard-earned credibility.
Loss of brand equity is by far worse than the loss of revenue through non-deceptive counterfeits, because in losing equity the brand doesn’t just stand the chance to lose a few hundred purchases – it stands to lose its entire market. If the situation becomes critical, the brand can find itself having to rebuild its equity for a faulty product that it didn’t even create in the first place.