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Bloomberg.com links to two fascinating studies, both authored by Renne Richardson Gosline who teaches marketing at MIT’s Sloan School of Management, that investigated a number of issues related to luxury goods and knock-offs.

The first study, “Rethinking Brand Contamination” (link to PDF), examined to what extent consumers can spot counterfeit or knock-off versions of luxury goods.  The data suggested that when knock-off goods were displayed by the owner without additional cues or context, observers were less likely to differentiate between authentic and knock-off luxury goods:

To determine the impact of counterfeits on how consumers value the real brand, Gosline constructed experiments where she showed consumers pictures of products against neutral backgrounds and asked if they could distinguish between the counterfeits and the legitimate items and if they would be willing to buy the products. Under those circumstances, consumers’ confidence in determining the “real” products decreased as did their willingness to purchase them. However, when she showed pictures of people actually using the products, consumers’ confidence in their ability to identify the real versus the fake increased as did their willingness to pay for the real brands.

In an earlier post I hypothesized that the ability to differentiate between a premium and low-cost brand was key to the premium brand’s ability to extract a higher price in the market.  The relationship should be the same for premium brands and knock-off products.  This study would seem to confirm that idea–if consumers can’t tell the difference between the real and knock-off products, why pay the premium for the real product when you can seemingly send the same signal for for less money?

The second study was equally insightful. Gosline looked at the extent to which counterfeit goods depress sales of luxury goods or serve as a kind of ‘gateway’ purchase. What did she find?

Many purchasers of knock-off bags move on to buy real ones within a few years, Gosline found in a separate study of 100 consumers.

“The counterfeit actually served as a placebo for brand attachment,” she said. “People were becoming increasingly attached to the real brand even though they never possessed it at all.”

Forty-six percent of the counterfeit-bag owners bought the authentic products within two and a half years, she said.

One question I have is to what extent the 46% of counterfeit-owners who went on to buy the real products perceived that their fake could easily be differentiated from the authentic product.  One could imagine that if their attempt to signal their status through the counterfeit good was hampered by the ability for others to easily distinguish between the two it could prompt them to purchase the real thing.  However, if they did not feel there was a significant distinction I wonder what compelled them to eventually buy the real thing. I could not find a link to the second study, so if anyone has it please pass it along.