Abstract
Most companies struggling against unauthorized fake products fail to create an effective brand protection program that actually reduces the impacts of counterfeiting. Instead, they often fall prey to approaches focused on activity metrics that do not succeed and were never going to.
There is a better method—one that I call the Dual Brand Reputation" approach.
The Dual Brand Reputation" approach recognizes the fact that all brands have two types of reputational strength. One of them is commonly recognized, that is, the capacity of a brand, in the minds of consumers, to suggest attributes, represent values, and promote a shared identity with other brand users. The second, and generally overlooked, element of brand reputation is what it means to counterfeiters: How much value can be stolen by misappropriating and misusing the brand and, most importantly, how dangerous is it to the counterfeiter to target the brand? Identifying, controlling, and growing this second form of reputational value is the path to genuine brand protection success.
The following three steps are key to this approach:
- Develop a clear and achievable goal.
- Have a rational understanding of what motivates counterfeiters and how they can be pressured to change their behavior.
- Implement effective and impactful tactics to achieve your goal.
Ultimately, you win by developing a reputation within the counterfeiting community as a brand that cannot be profitably or safely targeted.
Introduction
The brand protection industry has a massive blind spot. Much of the industry is focused on high-profile brands such as Apple®, Chanel®, Adidas®, etc. It also focuses on a few key industries that have long histories of fighting fakes—luxury products (purses and watches), pharmaceuticals, or consumer electronics. But the reality is that counterfeiting impacts much more than this. Anything that can be made and sold for a profit by a legitimate company can be made and sold by a counterfeiter for a profit as well. After all, the counterfeiters face far lower costs than the legitimate source. They do not need to invest in R&D or advertising (you did that for them). They rarely pay taxes, provide lawful working conditions, or follow employment and environmental regulations. They can make very little off any individual fake product and still make a large total profit.
As the global supply chain has grown, improved, and gotten cheaper over the past 20 years, counterfeiting has hit many companies and brands that never expected to have to cope with the problem. This is especially true for medium-sized manufacturers and brand owners that have developed great brand value in a relatively small and specific field but may be unknown to the general public. The narrowness of their brand reach and importance of the brand's reputation to the customers mean that few are on guard for fakes, but the fakes out there are especially damaging. This creates a large pool of poorly defended medium-sized entities, with growing brands, that counterfeiters target in greater numbers each year.
This paper outlines a brand protection approach for adoption by these companies.
Very often these companies try other, ineffective approaches to brand protection that fail to create the only result that matters—significant reduction in the impact of counterfeits flooding the marketplace. Some of these approaches are discussed below, along with why they don't work or provide only a partial solution. In most cases, however, companies initially pursue these approaches because they seem to make sense and are marketed as comprehensive solutions. It is only when they fail to do anything more than provide useless metrics and cost significant amounts of money that their limited usefulness becomes fully apparent. At that point, it is best to step back and consider a better long-term solution to a problem that is certainly not going to go away on its own.
Step 1 – Develop a Clear and Achievable Goal
The Goal
"Eliminate all counterfeits" is not a goal. Not an achievable goal, anyway. And if a goal isn't achievable, what use is it?
All successful brands will face counterfeits. Just as more and more consumers see value in your brand as it grows, more and more criminals see greater potential for theft and misappropriation. The modern system of inexpensive global production, distribution, sale, and delivery has so lowered the costs faced by a criminal intent on hijacking your brand reputation that attempts are inevitable whenever you have a successful product in the market.
An achievable goal is to develop a reputation as a brand that counterfeiters are smart to avoid. That means developing a reputation within the counterfeiting community of being one of the brands that genuinely understands how to disrupt counterfeiters. This is a valid and achievable goal.
Counterfeiters as an Industry
They may not have conferences in Las Vegas where they all walk around wearing lanyards, but make no mistake— counterfeiting is an industry. Like participants in all industries, they talk to each other. Information passes informally between criminal counterfeiters. And brands develop reputations within the industry.
Some are known as easy targets, as they do not take action to protect their brand. Sometimes this is an intentional choice by the company (some fast fashion companies, for example, know that their fashion cycles move far faster than even the best counterfeiting enforcement response, so they don't bother). More often, lack of brand protection is the default position. These brands either ignore the fakes or respond so poorly that the result is the same to the counterfeiter.
Other brands are known as giant targets that, while they do fight back, one can steal from profitably with a bit of care. Many large brand names fit into this category. They are constantly deluged with fakes. They occasionally take big, loud actions in response to visible counterfeiting and create a great deal of noise. But, in the end, many counterfeiters escape without any meaningful retribution.
There is another category populated by a few companies that fight hard and smart against counterfeiters by using the tactics described in Part 3 of this paper. These are companies that consistently keep pressure on the counterfeiters in ways that achieve results and leave counterfeiters no reasonable choice but to take their "business" elsewhere. This reputation is neither easy nor quick to develop, but once it is achieved, the return on investment is immeasurable (literally immeasurable, as one cannot put a price on the counterfeiting that did not take place). This is the best position for any company that is serious about long-term growth for their brand.
It is the true goal.
Step 2 – Have a Rational Understanding of What Motivates Counterfeiters and How They Can Be Pressured to Change Their Behavior
Profit Effort Risk (PER) Analysis and Opportunity Costs
Essential to developing a forbidding reputation among counterfeiters is to gain a clear understanding of counterfeiters and what drives them to counterfeit your company's brand.
Counterfeiters are—at bottom—rational business actors. They are not super villains. They do not have a vendetta against your company in particular. When you are being counterfeited it can certainly feel like that, but it is almost never true.
Counterfeiters never specialize. Consider—if you had a giant glue-making machine and you made counterfeit glue, would you specialize? Absolutely not! For a counterfeiter—who pays no license or royalties for all of the intellectual property they misuse—diversification is an easy choice. They will produce as many types of fake glue as they can possibly sell.
This means that you beat the counterfeiters not by completely destroying the counterfeiter's business, but by (the much more achievable goal of) getting them to produce one less fake brand of counterfeit product than they were before—your brand. In short, you don't have to put them out of business; you just have to put them out of the business of stealing from you.
This is accomplished by focusing on the counterfeiters' "PER Calculation":
(Profit / Effort) × Risk
Counterfeiters look at these three factors when trying to identify fruitful counterfeiting targets:
Profit – How much can I make?
Effort – What do I have to do to make it?
Risk – What negative things might happen to me?
Move any of these variables in the direction that is unfavorable to the counterfeiter and you alter the final calculation. Counterfeiters, whether consciously or not, face the same problem of opportunity costs as all legitimate businesspersons. Choosing to steal from you uses up resources that could otherwise be used to steal from your competitors. When you alter the PER Calculation enough (e.g., reduce profits or increase efforts or risks for counterfeiters), you are no longer the optimum target for them. Once you become established in this position, you become known in the counterfeiting community as a brand it is better to avoid.
This is how you win.
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