Protect your reputation: the counterfeit epidemic is damaging brands like never before

Digital transformation has been both a blessing and a curse for brands across all sectors. While the emergence of social media and the fast pace of technological innovation has changed how brands operate, it has also opened them up to the increased possibility of counterfeiting.

New research commissioned by MarkMonitor and conducted by independent market research firm Vitreous World, showed that the scourge of counterfeiting is hitting almost half (47 per cent) of brands through lost revenue. It’s not just pennies either, with one-in-three brands reporting this loss in sales to be worth more than 10 per cent.

Four-in-ten organisations (41%) have experienced an increase in the occurrence of counterfeiting and brand infringement. This originates from a variety of components related to digital transformation, including: advances in social media for 61% of companies; big data (52%); chat/messaging (52%); artificial intelligence (51%); the dark web (48%), and augmented reality (47%).

There appears to be no light at the end of the tunnel for brands. In fact, our research found that 58% of brands feel that keeping themselves safe from counterfeiting will become increasingly difficult over the next five years.

Skewed reviews damaging brands

Counterfeiting is a serious problem and there’s an increasing number of fake goods entering the supply chain. For example, in December 2017, millions of pounds worth of fake clothes, toys and gadgets were seized by the UK Border Force — which has led to a massive reduction in consumer confidence levels. This in turn can have catastrophic consequences on a genuine brand’s bottom line.

Today, reputation is everything. Whether it’s a restaurant, a movie or a car, nowadays they all live or die by the ratings they receive online. The internet has become a word-of-mouth referral system for a whole generation of consumers. Because of this, negativity around a brand – partially stoked by counterfeit goods skewing reviews – can spread like wildfire.

Adapting approaches

Online brand protection has never been more important than it is today. Brand protection will continue to grow in complexity and, as a result, it’s vital that organisations adapt their approach accordingly today to reap the rewards tomorrow.

The issue of brand protection has always been a challenge for businesses. However, the scope and complexity of the problem has grown significantly over the last few years due to the global nature of business, an increased consumer appetite for shopping online and an expanding marketplace, driven by the proliferation of social media channels. This has provided additional points of infiltration for criminals and those with malicious intent. Today, brand protection is not confined to just the business. Rather, an overriding objective is for the organisation to protect its customers, safeguarding their trust and loyalty.

Successful company brand protection requires a multi-disciplinary approach that starts from within. However, our research reveals that only 19 per cent of respondents currently use a unified approach when implementing and monitoring a brand protection initiative. Looking at those respondents with no plan in place, the number one barrier is cost (65%), followed by a lack of time and resources (64%).

Remaining complacent

As we have seen, nearly half of brands report having lost sales due to fakes flooding the market. However, much of the damage is difficult to quantify. For example, other types of infringement from which brands typically suffer include: lost traffic due to cyber-squatted sites (46%); an increased cost of paid search adverts (49%); damage to a brand’s reputation (50%) and counterfeit-sponsored adverts on social media (45%).

Despite counterfeiting rising in frequency, far too often brands are remaining complacent regarding standing their ground against infringement. Only just over half (56%) of respondents have taken legal action, with 23 per cent saying the action resulted in a takedown of infringing content or products, and a quarter (24%) saying it resulted in financial compensation.

Catch-22

Online brand protection remains a critical feature for all businesses. As digital channels expand with new ways to advertise and market goods and services, the threat of infringement and abuse rises, too. It’s a catch-22. The online space has presented brands with tremendous opportunities, but these same opportunities are also being exploited by cybercriminals and fraudsters. The result is damaged customer trust, lost revenue and a tarnished reputation.

The good news is that those brands that have had the foresight to implement online brand protection will gain valuable awareness of the landscape in which they operate, the channels that need to be monitored and the importance of such a plan. However, they will still face challenges in the monitoring and management of these programmes, including the ability to quantify the value lost to infringements and the ability to prioritise them, a lack of knowledgeable staff and a lack of resources.

Protecting revenues and reputations

While it is easy to understand the temptation to solve the issue of counterfeiting internally, the difficulty of working with scant in-house resources can potentially do more harm than good, as it can quickly become a compromised programme.

Working with third-party experts is often a more effective way forward. Reassuringly, the customer can remain at the heart of these programmes, too. Either way, cost remains a prohibitive factor for those brands that don’t currently have an online brand protection programme in place. But with the increase in counterfeiting and the associated loss of revenue, it is a case of speculating to accumulate, and the exercise generally has swift return on investment.

Conclusion: tech and ‘policing’ to curb damaging brands

In the globally connected times we live in, all brands from world-leading multinationals to enthusiastic start-ups must embrace advanced technology to protect revenues and reputations alike. They also need to turn to trusted third-party organisations to help police their brand online.

Brand protection in today’s landscape requires much more than simply taking care of the brand itself. As digital transformation continues to take hold, it’s important for organisations to identify how this might impact consumption patterns for digital content, goods and services, before taking appropriate action. This is crucial for maintaining customer trust and protecting them from the dangers of counterfeiting.

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