Insights

‘Made in’ – does it really matter?

By Robert Kellner, Managing Director of octOpus.


Shopping for a new pair of shoes lately I noticed just how many of the brands have Italian sounding names. After looking for a while it occurred to me that this was having the desired effect as I found myself unconsciously favoring those that I thought were Italian made. Looking a little closer however and asking the shop assistants I realized to no real surprise that many of them were not Italian made at all, in fact some were not even Italian brands in any sense of the word. They simply used an Italian brand name to give shoppers like me the illusion that they were better because of the association with the quality for which Italian shoes are renowned. So I started to narrow my search to those that were truly Italian made. But even this doesn’t necessarily mean all that it suggests. Does it just mean that the company is Italian and the shoes are manufactured elsewhere or does it just mean Italian designed or does it mean the leather is Italian; and does it really matter anyway. It can be a confusing scenario for consumers.

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The country of origin of certain products can have a powerful influence on our perception of its quality, reliability, authenticity, heritage etc. One of the most powerful examples of all relates to the product category of watches where the term ‘Swiss Made’ immediately differentiates one product from another in a way that most product brand names alone can’t match. It is therefore little wonder that the Swiss have protected this brand so vigorously over the years and particularly in recent years as Asian manufacturers have moved into the market with their own high quality products at much lower prices, in some cases using Swiss made components.

For a country of origin brand to have legitimacy it must be backed up with proper protection and a credible claim. In the case of watches, there are very stringent rules which govern the use of the term Swiss Made. For instance the assembly work must be carried out in Switzerland, as well as final testing and a minimum of 50% of the components should be manufactured there. This ensures the quality that the name stands for and maintains the power of the brand.

The value of country of origin brands can be especially powerful in bad times. When companies in a region like Europe are suffering dramatic downturns in revenue and all sorts of fiscal pressure, as has been the case in recent years, it is the power brands that usually weather the storm best. That’s one reason why Italy, although badly effected, has an advantage over some of its fellow ailing economies in Europe like Spain and Greece. Many of its big corporates are still a good investment choice for the long term because they are power brands synonymous with what Italy stands for – stylish, fashionable, designer and cutting edge innovation. Just think of a few – Ferrari, Gucci, Ray Ban, Armani, Maserati. Now try to come up with a similar list from Spain and Greece……Struggling aren’t you? This is evidenced by the fact that the share price for Luxottica (makers of Ray Ban) and Gucci both saw strong share price performance in the first half of 2012 when many others continued on a downward spiral or plateaued at best. This was on the back of positive sales outlooks for such exclusive brands from emerging markets like China, Brazil and India.

Another industry where country of origin plays a critical role is motor vehicles. If you think of any of the major producing countries you will no doubt make many different associations based purely on the manufacturers country. Germany – BMW, Audi, Porsche and Mercedes mean prestige and automative excellence. Italy – Ferrari, Maserati and Lamborghini mean sporty, sexy and stylish. Japan – Toyota and Suzuki mean reliability and value for money.

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To add a bit of science to the argument, in a study by Jay Y. Chung, Hideo Hayashi, and Chung Koo Kim (1994), “The Marketing Value of Country Name”. in Asia Pacific Advances in Consumer Research Vol 1, the relative value of the Japanese brand name was compared to US in compact sized car market.  The results found “that Japanese name relative to American name has equivalent sales value as the 15 percent price reduction, everything esle being equal. As far as advertising is concerned, it turns out that the ‘value’ of country name was 2.9 times bigger than that of manufacturer advertising….therefore the U.S. brand should increase their manufacturer advertising by 290 percent” to compete with Japanese made cars. That’s pretty powerful stuff and says a lot about the value of Japanese Made in the compact car market.

There are of course many factors at play that contribute to brand equity but its country of origin can sometimes play a very significant role in how we perceive and value a brand.  So next time you’re buying a pair of shoes will you be looking for where it is made?