Jeremy M. Wilson
Director, Center for Anti-Counterfeiting and Product Protection

Professor, School of Criminal Justice
Michigan State University

Clifford Grammich
Academic Fellow, Center for Anti-Counterfeiting and Product Protection
Michigan State University

Brand-integrity management has become more important to global firms for at least two reasons. First, executives are aware of the value of brands and other intangible assets. Second, regulators are requiring firms to monitor and disclose risks, including those related to counterfeit products.

Yet few studies have systematically examined how brand-owning firms attempt to assess and mitigate the risk of product counterfeiting. To better identify practices of leading firms, researchers at the Michigan State University Center for Anti-Counterfeiting and Product Protection interviewed representatives of ten brand-protection teams about organization, measurement, practices, success, and other areas of brand protection. All ten teams are among the top 600 firms in total revenues as ranked by Fortune, and all serve a broad variety of industries.

The brand-protection teams range in size from 9 to 250 members. The median size of these teams is 20, with no team reporting more than 25 full-time members. Most brand-protection personnel work on the issue only part-time (while working on other issues if full-time workers) or on a contract basis.

Most brand-protection teams are positioned at least partially within their firm’s legal function, but many are also in other functions as well, such as security.

Most firms report multiple means to measure the prevalence of counterfeits among company products. These include covert product purchases, Internet monitoring, and complaint reviews. Firms also report multiple methods to measure the negative effects of counterfeits of their products. These include measuring effects on brand image, equity, reputation, or impact on revenue.

Teams report several ways to justify the use of firm resources on brand protection. The most common include successful raids, seizures, takedowns, third-party investigations, or value of product being protected.

Firms prioritize counterfeiting and brand-abuse activities by frequency and severity of the issue, impact to product users, or effects on the bottom line. Core products receive greatest priority, followed by service products, then licensed products. Firms prioritize responses to individual incidents similarly. Impact on users is particularly important for firms providing pharmaceuticals or medical devices.

Teams report a variety of brand-protection tactics. All said they use seizures, targeted investigative actions, and trademark registration. All also monitor physical and virtual (i.e., Internet) markets. Teams tend to rely more on external than internal tactics. Yet the use of multiple tactics suggests these firms prefer a multifaceted, or layered, approach to combating product counterfeits.

Eight of the ten firms claim their efforts are successful. Management understanding of the problem appears to be one key indicator of perceived program success. Half of the successful firms said their management had a “thorough” understanding of the problem and half said it “somewhat” understood the problem. The two teams not claiming success said their management only “somewhat” understood the problem.

Other key indicators of success are whether teams are “aggressive” and “proactive” in addressing the problem (see figure). All four teams that report being both “aggressive” and “proactive” claim to be successful in their brand-protection efforts, with one of the four claiming to be “very” successful. By contrast, the only team saying it is “unsuccessful” in its brand-protection efforts reports being “passive” and “reactive” in addressing product counterfeiting.

Teams are confronting many emerging issues. Many respondents note Internet-related concerns, particularly as a facilitator of product counterfeiting, as well as the growth of social media and its potential in product counterfeiting. Awareness remains a top issue for firms, as does protecting the supply chain all the way through to the end user.

These findings point to further areas for exploration. Chief among these would be defining how brand-protection professionals define “aggressive” and “proactive” and the relative effectiveness of specific strategies. Identifying possibly fruitful ways for leading firms to improve their brand-protection efforts may also be helpful. Only one of the ten firms interviewed, for example, consider counterfeiters as “unseen competitors.” Firms often share information, even with recognized legitimate competitors, in addressing the product-counterfeiting problem. Counterfeiters often work in concert to advance their work, compelling firms and researchers to do so as well.

For the full study, see “Organizing for Brand Protection and Responding to Product Counterfeit Risk: An Analysis of Global Firms.Journal of Brand Management, Vol. 23(3): 345-361. (subscription required to access)

More on brand protection organization in “How to Talk to Your CFO/COO…