UNDERSTANDING AND COUNTERING SPURIOUS PRODUCTS

SUBMITTED BY: RAUNAK MANDHANIA - 33264

Contents
INTRODUCTION .............................................................................................................................................. 1 TYPES OF SPURIOUS PRODUCTS ............................................................................................................. 2 REASONS FOR INCREASED CONCERN OVER SPURIOUS PRODUCTS ........................................ 3 DEVELOPING A PLAN TO REDUCE THE SALE OF SPURIOUS PRODUCTS ............................... 3 CONSUMER BUYING BEHAVIOUR MODEL FOR SPURIOUS PRODUCTS: .................................. 4 BIBLIOGRAPHY: .............................................................................................................................................. 6

spurious | [spyoo r-ee-uh s] adjective MEA I G: not genuine, authentic, or true; not from the claimed, pretended, or proper source; counterfeit. ORIGI : 15901600; < Latin spurius bastard, perhaps < Etruscan

INTRODUCTION
In general terms, commercial counterfeiting or the selling of spurious products can be described as the fraudulent practice of affixing a false trademark to a product. The false trademark then appears superficially indistinguishable from its legitimate counterpart. The purpose of this fraudulent activity is to dupe the consumer into purchasing the counterfeit under the mistaken belief that the product is the genuine article. For the consumer who unknowingly purchases a counterfeit, the result is typically dissatisfaction; For the firm whose goods are counterfeited, loss of revenue and goodwill are possible For the counterfeiter, profits are reaped with little financial or legal risk and with minimal marketing effort

LOSS TO ORIGINAL MANUFACTURER LOSS OF REVENUE LOSS OF GOODWILL LOSS OF CUSTOMERS LOSS TO CONSUMER DISSATISFACTION WITH THE PURCHASE POTENTIAL HEALTH OR SAFETY HAZARDS LOSS TO EXCHEQUER LOSS OF TAX REVENUE

SPURIOUS PRODUCTS

TYPES OF SPURIOUS PRODUCTS

There are two types of spurious products based on consumer knowledge at the time of purchase: Deceptive: The customer does not know that he is buying a spurious product. These products usually cost similar to what the original product costs on deceptive: The customer knows that what he is buying is not authentic, however he is willing to purchase as the risk associated with the purchase is not that great. These products are available at a great discount to the original products. There are five distinct types of spurious products: Knockoffs: These are basically counterfeit or imitation product offered for sale which uses the brand name of the original manufacturer or some resemblance to it in their products. According to the OECD, counterfeit products encompass all products made to closely imitate the appearance of the product of another as to mislead consumers. Thus they are very close to the original products but are not exactly like the original products. E.g.: Cimega (Omega), Fruit of the Moon (Fruit of the loom) etc. Imitation: Imitations are very similar to knockoffs; however they do not constitute as an infringement of copyrights and as such the original owner of the brand cannot take any action against the manufacturer. The products have enough resemblance for a link to be established but not enough to invite legal action. Counterfeits that are reverse engineered from genuine goods: It is very difficult to fight these types of counterfeits as the manufacturers can claim to have intellectual property rights and any infringement is difficult to prove. Goods produced by outsourced suppliers on "third shifts": Outsourced suppliers engage in manufacturing products in absence of supervisors of the original trademark provider and using substandard raw materials. These are then sold off amongst the original products at same prices. Thus the outsourced supplier earns huge profits. Goods that do not meet a manufacturer's standards but are not properly labelled as seconds or destroyed: Some manufacturers may not have seconds stores and do no dispose properly the goods rejected by their manufacturing department. Unscrupulous parties can then sell these goods off as originals at discounted prices.

REASONS FOR INCREASED CONCERN OVER SPURIOUS PRODUCTS

Losses caused to consumers, original manufacturers and to economy Counterfeiters are more difficult to detect and prosecute o They do not register with any trade organizations or with the government, hence it is difficult to monitor or detect them o In many cases there is no infringement of copyrights that can be proved in a court of law, despite an obvious attempt to take advantage of the brand name or image of the original product Increased Web purchases o E-commerce becomes very difficult to trace and many spurious products are sold over the internet o Trading of products over websites such as e-bay, wherein one website user sells to another is very difficult to control High levels of trade with China

DEVELOPING A PLAN TO REDUCE THE SALE OF SPURIOUS PRODUCTS

Developing early warning signals of spurious product invasion in the market o Closely monitor the sales of various products in small geographies. Sudden dips may indicate the presence of a spurious products operating in the region o Monitor previous trends where spurious products attacked the market and stole business and try to find out key indicators o Rural areas and remote markets are easy targets for selling spurious products. Sales force should keep a close eye out for spurious products Budgeting to monitor, deter, and remove spurious products o Allocation of resources towards monitoring, preventing and removing by force counterfeiters o A special cell should be established to monitor the situation if it starts to go out of hand Demand-side strategies to deter spurious products o Increasing customer awareness about dangers and issues related to spurious products o Increasing awareness in the channel with respect to spurious products and the disadvantages of selling them in the long term

o Channel should be aware of legal implications of abetting counterfeiters Supply-side strategies to deter spurious products o Differentiating products through holograms, logos etc. which are difficult to imitate o Controlling outsource suppliers o Monitoring websites to search for spurious products o Legal actions to reduce spurious products o Reducing grey market activity o Using track and trace authentication technology

CONSUMER BUYING BEHAVIOUR MODEL FOR SPURIOUS PRODUCTS:

I have tried to develop a model to try and understand the behaviour of the consumer while buying the spurious products, the thought process while making the purchase, the impact on the consumer (worst case) and precautionary measure the company can undertake to prevent such purchase in the near future. Spurious products are purchased either intentionally or unintentionally. Intentional purchases are made when the consumer does not appreciate the risks associated with consumption of spurious products or when the risks associated are too low. In the earlier the consumer needs to be made aware of the risks and hazards of consumption while in the latter the consumer needs to be made aware of the ethical choices he is making. In case of unintentional purchases the consumer needs to be educated as to how he can distinguish the original product from spurious one.

PURCHASE

TYPE

REASON

WORST CASE OUTCOME

PREVENTIVE STEPS

UNABLE TO APPRECIATE THE DIFFERENCE IN QUALITY AND POTENTIAL HAZARDS INTENTIONAL (COST BENEFIT HIGH) AWARE OF DIFFERENCES IN QUALITY, STILL GO AHEAD WITH PURCHASE BECAUSE OF LOW RISKS INVOLVED CONSUMER PURCHASE OF SPURIOUS PRODUCT

HARM CAUSED TO CONSUMER

INFORM CONSUMERS OF POTENTIAL HAZARDS OR THREATS OF USING THE SPURIOUS PRODUCT

LOSS OF SOCIAL STATUS BECAUSE OF USING SPURIOUS PRODUCTS

INFORM CONSUMERS OF THE IMPORTANCE OF ETHICAL DECISION MAKING

INFORM OF POSSIBLE SPURIOUS PRODUCTS IN THE MARKET UNINTENTIONAL (COST BENEFIT LOW) UNAWARE CONSUMER DISSATISFACTION INFORM HOW TO DISTINGUISH BETWEEN GENUINE AND SPURIOS PRODUCTS

BIBLIOGRAPHY:
http://www.ask.com/wiki/Counterfeit_consumer_goods http://www.canon-europe.com/About_Us/About_Canon/045_Counterfeit/ http://hbr.org/product/strategies-to-detect-and-reduce-counterfeiting-act/an/BH275-PDFENG?Ntt=Barry+Berman http://repository.cmu.edu/cgi/viewcontent.cgi?article=1488&context=tepper http://findarticles.com/p/articles/mi_m1038/is_n6_v39/ai_19125124/ http://www.crito.uci.edu/noah/noah/paper/AdvConsumerRsh12.pdf