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Brand Strategy

Branding: The Country Of Origin Effect

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Branding And The Country Of Origin Effect

Many factors – brand image, brand personality, brand associations, communication messages – influence the perception of customers about the quality of a brand. The very reason a company indulges in branding is to assist customers in making purchase decisions by providing cues on quality, credibility and value about a product. One such factor that influences perceptions towards brands is the place where it is made. Such effect is referred to as country of origin effect.

Research in international marketing has proven that country associations do lead to customer bias. Such bias is based on the image of the country in customer’s minds. This leads to the next obvious question – what constitutes an image of a country? What makes French the best country for wines, what makes Germany the best in engineering and what makes Switzerland the best in watch manufacturing? Many factors contribute to the country image.

Here are some of the most important ones:

Economy
One of the main factors that influence customers’ perceptions towards a country is the level of the country’s economy. Level of economic growth acts as a main proxy for the country’s other activities. Most of the countries with a positive COO mentioned above are highly industrialized, developed countries.

Technology
Given the extent to which technology and technological innovations impact consumers’ lives in today’s world, it is not surprising that the extent of technological advancement of a country bears heavily on consumers’ perception of the country. This factor is usually related to the level of economic development of the country. Higher the technological capability of a country, more positive is the COO effect.

Wealth Index
This refers to the perceived/actual overall wealth of a country as measured through levels of consumption, number of millionaires, number of billionaires, the size of the luxury goods industry, the sophistication of leisure industry, the proportion of individual income spent of leisure and self enhancing activities and so on. Wealth index offers customers a cue to infer the level of product quality, variety, and perceived credibility of the products/brands.

Regulatory Mechanisms
With heightened globalization, the existence and effectiveness of regulatory mechanisms have become a major factor in creating country images. Regulatory mechanisms such as Intellectual Property Rights law (IPR), online piracy laws, anti-fraud regulations and others create a sense of perceived security in the minds of businesses and customers about a specific country.

Government
The success of capitalism and the resulting market economy around the world has created inherent perceptions (often negative) about countries that do not follow capitalism. Similarly, democracy has become the defacto form of governance in most countries of the world. As such, other forms of government such as monarchy, communist regimes and dictatorships tend to be viewed negatively. As such, the form of government feeds into the generation of country images. A related aspect is the reputation of the government and its corporate governance – how bureaucratic, transparent, corrupt or efficient is a country’s government?

Business History
This refers to the evolution of business in a country and what a country has specifically been known for historically. Even though countries evolve through time to specialize in successively high-value industries, it takes a long time to shrug off any negative associations of the past. As such, the business history of the country contributes to the overall image of the country.

All of these factors contribute towards the formation of an overall image of a country. As such, a country which is economically well developed, is technologically advanced, has a high wealth index, has stringent regulatory mechanisms, follows a market economy, is democratic and has positive historical associations, tend to have a very strong positive country of origin image and thus products of those countries enjoy a positive COO effect. On the other hand, depending on the number of above factors on which countries score low, they tend to have a relatively lesser positive (or negative) COO effect.

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1 Comment

Mario Sanchez on March 12th, 2008 said

Great article. The COO perception is very important. I come from an industry (hand tools) where the country of origin is as important as any product feature. Saying that a certain tool is “made in the USA” or “made in England” automatically generates positive perceptions that justify a higher price for the product.

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