What's in a name? The foreign branding paradox

Nov 26, 2012, 10:07 ET from American Marketing Association

CHICAGO, Nov. 26, 2012 /PRNewswire-USNewswire/ -- In an effort to give their product a certain image, marketers often brand their products with a foreign name. However, if a foreign brand name suggests a particular country of origin, which is different from the one where the product was manufactured, this incongruence backfires for hedonic products but has hardly any effect for utilitarian products.

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A foreign brand name suggests a particular country of origin (usually favorable for the product type), which may differ from the country where the product was actually manufactured. For example, Haagen-Dazs ice cream, suggests a Scandinavian origin, but is actually made in America. Increasingly, companies from emerging countries use foreign brand names: mostly French or Italian names for hedonic products such as cosmetics (e.g., Laneige) and German-sounding brand names for appliances (e.g., Galanz). However, what happens if consumer discovers that the implied country of origin is different from the "made in" label?  

The analysis appears in the November issue of the American Marketing Association's Journal of Marketing. It represents four studies to investigate the conditions under which the incongruence between a product's actual country of origin and the implied country of origin (by foreign brand names) affects consumers' purchase intentions. Across three parts of the world, several product categories, different foreign brand names, and different "made in" labels, the authors find a key result: the incongruence backfires for hedonic products, whereas it has hardly any effect for utilitarian products. The authors explain this asymmetric effect by showing that consumers process information about these product types differently.

"Using foreign brand names is a double-edged sword. "Because consumers are increasingly paying more attention to "made in" information (e.g. a recent EU survey shows that about a quarter of consumers make product choices based on where a product was actually made), we wanted to investigate when foreign brand names work and when they backfire. Our results show that a German-looking brand name may work for utilitarian products even if the company is not manufacturing in Germany; whereas a French looking brand name may backfire for hedonic products that are not actually manufactured in France," says Dr. Valentyna Melnyk, one of the paper's authors.

The research suggests that, for example, a Chinese company may successfully export electronic appliances (utilitarian products) with German-sounding brand names but might have a more difficult time selling decorative cosmetics (hedonic products) under French-sounding brand names.

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SOURCE American Marketing Association