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What is the country-of-origin effect?

What is the country-of-origin effect?

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What is the country-of-origin effect?

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Monday, 21 january 2019 | Redacción CEU

There are many factors that influence the purchase decision. Among the main ones, we can find quality, consumer experience, price, easy returns, availability, a simple purchasing process and positive referencing. However, there are other subtle aspects that often go unnoticed and that can greatly influence a client's preference for one product or another. Today, at The CEU IAM Business School, we talk about the so-called “the country-of-origin effect". What is this phenomenon? What is its relationship with foreign trade? How can the label "made in" influence the acceptance of a brand abroad?

Consumers have many ideas that are associated to products depending on their place of origin. Proof of this is that if we carry out a small survey on the best products according to their country of origin, the majority of participants may respond that the best cheese is in France, the best watches in Switzerland and the best towels in Portugal. This type of ideas are fully assimilated in the collective thinking. Hence, the success of the products with a designation of origin category. This qualification helps products, which generally have an agricultural origin, to be distinguished and protected from others. This way, the products which do not comply with standard requirements cannot compete with them. But, what does it happen when the "made in" label goes against the brand?

How can the "made in" label influence brands?

For years, different experts in the field have debated about the level of influence that the country of origin has on the perception, representation, preference and disposition for customers to buy. Regardless of whether this level is high or low, all specialists conclude that consumers often analyze some products with a different interest when they discover where they come from. This phenomenon is known as "the country-of-origin effect".

When a group of foreign tourists visit a Spanish designer's clothing store, they do not expect to find the sentence "made in China" on the inside label. The same happens when Spaniards go abroad and realize that the souvenir that they are going to buy in a regional boutique is manufactured neither in the region nor in the country that they are visiting. The odds are that these tourists decide to leave the store and buy somewhere else. It is true that both cases can be regarded as extreme cases, because these clients rather than distrusting the country of origin, they feel fooled. However, both situations illustrate the type of associations that customers make when buying a product. A simpler example, and also a very likely one, is that, in a grocery store, a customer who wants to buy coffee will choose a product originating in Brazil or Colombia rather than one that comes from countries such as Vietnam, Honduras or Indonesia; despite them being also large producers of coffee.

On other occasions, the country of origin becomes the perfect selling argument. This is the case of the salesperson that ensures that the electronic device which we hold in our hands comes from Japan or that the bonbons which we are seeing in the counter are made with Belgian chocolate. When this happens, we find it easier to trust they are high quality products. Sellers can take advantage of our association of ideas to enhance the value of the product that they want us to buy. "The country-of-origin effect" can be understood, to some extent, as an indicator of quality. This phenomenon can also be associated with an emotional factor. When the crisis struck, many small shops in Spain, especially clothing stores, bet on emphasizing that their products were manufactured and designed in the country.

What is the country-of-origin effect?

The country-of-origin effect and foreign trade

There is some ambiguity in the "country-of-origin" concept, because a product can be linked to many places at the same time: where it has been produced, assembled and designed, an where the company's headquarters is placed. We can also distinguish two different processes in the association of ideas by consumers. In the first one, clients link brands to the bias or stereotype that they have about the country of origin. In this case, consumers usually have very little information about brands and the market of origin. In the second process, the idea of the brand is based on the experience that clients have with other products from that same country. These consumers usually have a more real idea of the product, but may not always be like this.

"The country-of-origin effect" is closely related to foreign trade, since the better the image of the place of origin and its positioning as a country-brand is, the easier will the product be accepted abroad. In the case of the Spain Brand, the agri-food industry and tourism sector are an attraction for the international markets. It is also true that other fields such as finance and construction may come up against more difficulties when it comes to competing abroad.

When a brand wants to go abroad, not only does it need to analyze the target market, it also has to take into account how it is perceived outside its own country. One factor to keep in mind is that consumers tend to have an ethnocentric vision, in other words, they usually bet first on their own country rather than on a foreign one, and therefore on their own brands. When facing the international challenge, it is important to maintain coherence, design, an appropriate marketing strategy, and always bet on quality as a lure. The good management of a brand can reinforce the positive image of a country. In addition, the negative effect of this phenomenon disappears when brands occupy a special place in the mind of consumers.

At The CEU IAM Business School, we want to help professionals who have four or more years of experience to give a boost to their careers. That is the reason that has led us to design our Executive MBA, a training that will give you the skills and key tools to make successful decisions and face new challenges, whether they are national or international ones.

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