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Drawing negative inferences from a positive country-of-origin image: Consumers’ use of COI and price levels to assess counterfeit drugs

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Purpose The purpose of this paper is to explore how a positive country-of-origin image will impact consumer perceptions for a high-risk product when the price is unexpectedly low. Design/methodology/approach An experimental approach was used with consumers from the USA and India. Consumers were divided into groups and given two scenarios that involved purchasing medicine that may have been counterfeit. In one scenario manufacturing took place in India, the other in Switzerland. They were asked to state the probability that certain goods could be counterfeit if they originated from the stated country and then make choices based on those perceived probabilities. An analysis of variance was conducted to test for differences between groups. Findings The authors found that in both samples consumers attached greater probabilities toward low-priced medicines if they originated from Switzerland vs India. Conversely, the higher priced medicines were more likely to be counterfeit if they originated from India vs Switzerland. When given a choice scenario consumers chose more versions of the cheaper products from India than from Switzerland. Originality/value When country-of-origin is salient then it is believed that a positive country-of-origin image will benefit products that are produced from that country. Consumers expect that more expensive products come from a country with a positive country-of-origin image. The results demonstrate that when there is a conflict between expectations of the country and the price of the product the outcome is lowered perceptions and consumption of the product. This holds true for consumers from a high-cost economy (USA) and consumers from a low-cost economy (India). The authors add to the literature on country-of-origin by demonstrating that a positive image can be a liability when consumers are wary of purchasing a high-risk product.
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International Marketing Review
Drawing negative inferences from a positive country-of-origin image: Consumers’
use of COI and price levels to assess counterfeit drugs
Kashef A. Majid,
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To cite this document:
Kashef A. Majid, (2017) "Drawing negative inferences from a positive country-of-origin image:
Consumers’ use of COI and price levels to assess counterfeit drugs", International Marketing Review,
Vol. 34 Issue: 2, pp.293-310, doi: 10.1108/IMR-03-2015-0060
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Drawing negative inferences from
a positive country-of-origin image
Consumersuse of COI and price levels
to assess counterfeit drugs
Kashef A. Majid
College of Business, University of Mary Washington,
Fredericksburg, Virginia, USA
Abstract
Purpose The purpose of this paper is to explore how a positive country-of-origin image will impact
consumer perceptions for a high-risk product when the price is unexpectedly low.
Design/methodology/approach An experimental approach was used with consumers from the USA and
India. Consumers were divided into groups and given two scenarios that involved purchasing medicine that
may have been counterfeit. In one scenario manufacturing took place in India, the other in Switzerland.
They were asked to state the probability that certain goods could be counterfeit if they originated from the
stated country and then make choices based on those perceived probabilities. An analysis of variance was
conducted to test for differences between groups.
Findings The authors found that in both samples consumers attached greater probabilities toward low-
priced medicines if they originated from Switzerland vs India. Conversely, the higher priced medicines were
more likely to be counterfeit if they originated from India vs Switzerland. When given a choice scenario
consumers chose more versions of the cheaper products from India than from Switzerland.
Originality/value When country-of-origin is salient then it is believed that a positive country-of-origin
image will benefit products that are produced from that country. Consumers expect that more expensive
products come from a country with a positive country-of-origin image. The results demonstrate that when there
is a conflict between expectations of the country and the price of the product the outcome is lowered perceptions
and consumption of the product.This holds true for consumers froma high-cost economy (USA) and consumers
from a low-cost economy (India). The authors add to the literature on country-of-origin by demonstrating that a
positive image can be a liability when consumers are wary of purchasing a high-risk product.
Keywords India, Image, Switzerland, International business, Country-of-origin, Counterfeiting,
Country-of-origin image, Counterfeit goods
Paper type Research paper
Within the literature, the efficacy of the country-of-origin (COO) heuristic has generated
much debate (Usunier and Cestre, 2008; Magnusson et al., 2011; Usunier, 2011). Proponents
of this heuristic have demonstrated that COO can influence consumersperceptions of
brands (Diamantopoulos et al., 2011; Usunier, 2011) and products (Herz and
Diamantopoulos, 2013). Consumers can use the COO to reduce their uncertainty
regarding the quality of the product by applying a positive COO image toward creating
positive perceptions of the product (Han, 1989; Haubl, 1996; Laroche et al., 2005). Opponents
of the COO heuristic counter that country-of-origin image (COI) is not relevant because
consumers fail to connect products or brands with any particular country (Magnusson et al.,
2011; Samiee et al., 2005; Liefeld, 2004). In other words, prior work has made the argument
that the COO is simply not a significant cue when assessing a product.
We acknowledge that opponents of the COO heuristic have merit, especially when the
dominance of the brand nullifies any interest or impact from knowing where the brand
originated or where the product was manufactured. For example, consumers may be less
interested in knowing that Samsung is a Korean firm and more interested in relying on the
knowledge that their phone is a Samsung product. We agree that, at times, the COO may not
be utilized by consumers; however, this is not to say that it is never used by consumers.
International Marketing Review
Vol. 34 No. 2, 2017
pp. 293-310
© Emerald Publishing Limited
0265-1335
DOI 10.1108/IMR-03-2015-0060
Received 17 March 2015
Revised 19 July 2015
30 November 2015
8 February 2016
Accepted 8 February 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0265-1335.htm
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Noteworthy events indicate that the COO can be made relevant when consumers face the
possibility of purchasing a dangerous product that has been manufactured overseas.
For example, consider the case of toy recalls when toys manufactured in China were made
with lead paint (Bapuji, 2011). A significant amount of media attention including a question
in one US presidential debate focused on the fact that these toys were manufactured in
China, and consumers then used this information to form negative perceptions of toys from
China in general (Bapuji, 2011). This incident illustrates that the COO can become a relevant
factor, especially when consumers face the risk of purchasing hazardous products.
Prior work has demonstrated that when consumers have information on the COO and
seek to avoid making an unwise purchase, they can use their perceptions of the
manufacturers COO to minimize their risk of purchasing a poor-quality product (Cordell,
1991). Our paper draws on theories of signaling and the expectancy-violation framework to
argue that the COO creates expectations regarding products that originate from the country.
To test our argument, we draw from incidences where drugs of different price levels may be
counterfeit, and in this way, we explore how consumers use their expectations of a COO to
draw inferences on the authenticity of the drugs and also on their own subsequent choices
concerning the drugs.
The purpose of this paper is to examine how COI, price and counterfeit likelihood affect
consumer perceptions and choices of a risky product. Specifically, we examine how both a
positive and negative COI interacts with varying price levels of a risky product (potentially
counterfeit drug) to influence counterfeit perceptions and choices that consumers make.
Prior work has demonstrated that when consumers lack familiarity with a product, the COI
can enhance consumer perceptions of the product (Han, 1989) while, conversely, a negative
COI can reduce consumer perceptions of a product or brand ( Johansson et al., 1994). If these
arguments hold, then consumers who are wary of purchasing a risky product would choose
the product from the country that holds a more positive COI.
In line with the argument above, consumers would also expect higher priced products to
originate from countries that are perceived positively and lower priced products to originate
from countries that are perceived negatively (Agrawal and Kamakura, 1999). However, as
demonstrated by the emergence of Chinese luxury brands as Mings jewelry which is sold
for a premium in US outlets or discount wines from France such as the country wines that
are priced significantly lower than their premium counterparts (Bartlett, 2009),
these expectations may not match reality.
When the COO creates one expectation and varying price levels create another, it is
unclear how consumers are influenced by both in the choices that they make. Furthermore,
when the risk of purchasing a dangerous product is present consumers seek to alleviate that
risk by using multiple cues to determine quality, or in this case authenticity. This study
contributes to the literature on COO by examining COI and varying price levels
simultaneously. We create a scenario where a low-priced product originates from a
country with a positive COI and a high-priced product originates from a country with a
negative COI. The price levels do not match the COI but consumers must evaluate both and
determine the likelihood that the product is counterfeit. Consumers must also make choices
in terms of the quantity of each product that they would purchase given the conflict between
price and COI. In other words, consumers must draw inferences from the varying price
levels and the COI.
Conceptual framework
A positive COI is built, in part, on the consumers assessment of products from the COO
(Parameswaran and Pisharodi, 1994). If the consumer has a positive experience with that
country, or if their knowledge of products from that country is positive, then the country
COI is enhanced (Parameswaran and Pisharodi, 1994). Prior work has done well to establish
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that a countrys legal and socioeconomic conditions can affect the economic development
within it (Gould and Gruben, 1996). If the environment has a strong regulatory component,
then product quality is enhanced, which translates into a better standard of product for the
consumer (Majid and Bapuji, 2012) and, in turn, enhances the COI. We argue that a positive
COI indicates a standard of quality for products and can serve as an attribute that helps
consumers to distinguish risky or illegal products from legitimate ones.
The choice between a potentially risky (and illegal) product and a legitimate product
represents an asymmetry in the marketplace wherein the manufacturer knows which
product is legitimate, but the consumer does not (Grossman and Shapiro, 1988a). Consumers
are wary of purchasing the risky product, so they rely on signals that can be used to
distinguish good products from bad (Grossman and Shapiro, 1988a). The signal is a form of
distinguishing good from bad because bad sellers such as those that sell poorly made
products cannot afford the cost of providing the signal (Kirmani and Rao, 2000).
For example, consumers who are wary of purchasing from an overseas seller may use the
length of warranty as a means to differentiate good sellers from bad (Kirmani and Rao,
2000). The warranty information provides a signal for the consumer, who then goes on to
infer that a disreputable seller is unlikely to offer a good warranty for fear that consumers
will actually use it (Kirmani and Rao, 2000).
Though often implied but not explicitly stated, the COO may act as a signal that
consumers can use to distinguish a risky product from a safe one. Countries enact laws that
impose a cost on manufacturers, which may inhibit the ability of disreputable
manufacturers to operate in that country. A country such as Switzerland enforces strict
laws on intellectual property (IP) rights, imposing large penalties on any manufacturer that
violates those laws (World Intellectual Property Organization, 2013). If a manufacturer
sought to produce goods that violated IP laws, they may opt to produce their goods in a
country that does not impose (or enforce) large penalties on those who violate the IP laws.
In other words, a positive COO image may create expectations that an illegal product would
unlikely be manufactured in that country.
Furthermore, according to signaling theory, the costs that are used to differentiate between
good and bad manufacturers are incurred by the good manufacturers because they can afford
to bear those costs (Kirmani and Rao, 2000). Legitimate manufacturers that benefit by signaling
quality can absorb the cost of manufacturing in the regulatory and economic environment
because they can recoup these costs by charging higher prices. A consumer may be willing to
pay more for wine from France than from Australia because of the strict manufacturing
classifications that France upholds across its wine-making industry (Bartlett, 2009).
In our framework, we argue that the COI and perceptions of quality work
simultaneously; that is, quality products improve the COI, and the COI creates
perceptions of quality. The positive signal (the COI) in turn creates a positive expectation
for consumers of products from the COO, and these expectations translate into an implicit
promise that product quality will align with those expectations (Rhee and Haunschild, 2006).
Prior work has shown that positive expectations may not be beneficial for the firm when
the actual product does not meet those expectations (Rhee and Haunschild, 2006). When a
consumer expects a quality product, but the reality does not meet these expectations, then,
based on the expectancy-violation framework introduced by Burgoon and Poire (1993) and
supported empirically by Rhee and Haunschild (2006), products with positive reputations
have the most to lose. In our context, the COO creates expectations, but varying price levels
leave open the possibility that these expectations will be violated.
Research context
We use the global market for counterfeit products as the research context for our study.
According to statistics on goods seized, over 1.5 billion euros worth of goods were seized by
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authorities within the European Union between 2012 and 2013 (European Commission
Taxation and Customs Union, 2014). In the USA almost $1.1 billion worth of goods was
seized by customs authorities in the same period (US Department of Homeland Security,
2013). The counterfeit markets cover a wide variety of products, from designer sunglasses to
medicines, with products originating from over 50 nations (US Department of Homeland
Security, 2013).
We draw on the work of Zaichkowsky (2006) to conceptualize counterfeits as an imitation
of the real version. In our context, counterfeits are not direct copies because a direct copy
implies that the product is the same in composition and quality as the original version
(Zaichkowsky, 2006). Rather, a counterfeit is an imitation of the original version, but with a
lower standard of composition and no similar expectation of quality (Zaichkowsky, 2006).
For example, counterfeit drugs may portray themselves as the original version, but they do
not contain the same ingredients as the original version. In line with the work of Grossman
and Shapiro (1988b), the counterfeit drugs would be referred to as deceptive counterfeit
goodsbecause they attempt to portray themselves as the legitimate versions.
These products attempt to portray themselves as legitimate versions by representing as
close to the legitimate product as possible both in design and price. The motivation for doing
so is based on the premise that if consumers knew that the goods were counterfeit they
would not purchase them, counterfeit drugs fall under this category (Grossman and Shapiro,
1988a). In contrast to deceptive counterfeit goods are non-deceptive counterfeit goods which
make very little attempt to conceal their true identity because consumers may actively seek
these goods as low cost alternatives to the legitimate versions (Wilcox et al., 2009).
For example, consumers may buy luxury handbags at several hundred dollars less than the
actual price because they prefer the illusion of owning the product rather than paying full
price for the actual product (Wilcox et al., 2009).
Recent research has done well to explore the impact that counterfeit goods can have on
brand relationships (Commuri, 2009) and show how brand perceptions may motivate
consumers to purchase counterfeit goods (Wilcox et al., 2009). However, counterfeit goods
are not simply embodiments of luxury brands. They can also be functional goods, such
as movies and pharmaceuticals. Our study focuses on deceptive counterfeits such as
pharmaceuticals that have the potential to cause significant harm to the consumer and
because of this consumers actively try to avoid purchasing these products (Aldhous, 2005).
It is well known that price can be used as a cue to cast suspicion on counterfeits
(see e.g. Grossman and Shapiro, 1988a, b), wherein an unexpected low price can serve to
warn the consumer of a possible counterfeit. Research has shown that COO functions as yet
another cue. Made inlabels that show unexpected origins can also evoke suspicions of
counterfeits. (see e.g. Chakraborty and Allred, 1996) This paper argues that COO effects
play an enhanced role with respect to consumer choice when consumers first become wary
of purchasing a counterfeit product because of its low price. We test this proposition in a
high-risk setting the purchase of a malaria medicine.
The presence of high-risk counterfeit goods in the marketplace often captures the
attention of government agencies, who seek to protect consumers, and of the media, which
seeks to inform. In recent years, a trend has emerged to alert the public as to the origin of
these counterfeit goods so consumers can avoid purchasing the counterfeit versions of the
products. As part of this investigation, a scan of news reports was first conducted between
September 2010 and October 2010. During this time period, media reports of counterfeit
goods published in mainstream media outlets in the USA were analyzed, and indications of
the goodsCOO (outside the USA) were then recorded.
Only unique reports were counted within the analysis; therefore, news articles from several
different outlets but reporting on the same incident were counted only once. Over the course of
the 61-day period, no less than 42 news stories revealed incidents of counterfeit goods.
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Of the 42 news reports, 30 (i.e. approximately 71 percent of the total number) indicated the
country where the goods originated. This high level of reporting is to be expected since
a large majority of counterfeit goods are seized by customs authorities upon arrival in the
destination country.
Hypotheses development
Our hypotheses reflect the perceptions consumers form and the choices they make when
they receive information on the COO and they in turn seek to avoid the purchase of a high-
risk product. We test these hypotheses in a high-risk setting the purchase of a malaria
medicine. In this study, high-risk products are represented by counterfeit drugs, and price
variations are represented by a price of $6 for a low-priced item and $15 for a higher priced
item. Our rationale for choosing these two price points will be explained during our
discussion of the methodology used.
COO and counterfeits
When counterfeit products originate from a country that also produces legitimate products,
a scenario emerges in which consumers must differentiate the legitimate from the
counterfeit. In the majority of cases, this assessment can be made simply by relying on price,
since lower priced items are more likely to be counterfeit than their higher priced
alternatives (Chakraborty and Allred, 1997). However, a question remains as to whether the
mere existence of a counterfeit product can harm consumersperception of the higher-priced
good. The reluctance of legitimate manufacturers to produce pharmaceuticals in India
would indicate that this is the case (Lakshmi, 2010). An abundance of counterfeit drugs in
India has led to a reluctance on the part of legitimate manufacturers to introduce their new
drugs into the Indian marketplace for fear that their product too will be perceived as
counterfeit (Lakshmi, 2010).
To answer the above question –“Can the existence of a counterfeit product harm
consumersperception of the legitimate article?”–we turn our attention to the country
image to gain some useful insights. The extensive literature on the effects of COO tells us
that consumersimpressions of a particular country can influence their opinion on a product
from that country (Bilkey and Nes, 1982; Johansson and Nebenzahl, 1986; Chao, 1993; Han,
1989; Haubl, 1996; Diamantopoulos et al., 2011). The COO effect can vary from positive to
negative. Further, the causality is reciprocal a countrys products can also color how
consumers view the country itself. Thus, if the product experience is negative, then attitudes
toward similar products from the producing country will be negative as well (Haubl, 1996).
Papadopoulos and Heslop (2002) argue that, through a halo-construct mechanism,
consumers form beliefs about a country through their interaction with products, people, and
images from that country. This effect in turn creates expectations for products
manufactured within that country ( Johansson et al., 1994). It is reasonable to expect that
higher priced goods stand to benefit from these associations and will be less likely to be
perceived as counterfeit than will their lower priced alternatives. Consumers have an
expectation that goods that are manufactured in a positively perceived country will have a
high price to begin with, which creates an expectation that the higher priced good is likely to
be of exceptional quality (Haubl, 1996). In contrast, when a country is perceived negatively,
consumers may naturally expect lower priced products from that COO.
In line with previous research (Chakraborty and Allred, 1997), it is likely that the lower
priced product will be perceived as more likely to be counterfeit; however, the perceptions
toward the higher priced product may suffer the most when consumers become aware that
the country exports counterfeit versions of the product as well. We draw on the expectancy-
violation framework to support this assertion.
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Quality expectations can be viewed as an implicit promise from a producer to its
potential customers to produce goods with a quality level commensurate with reputation
and product expectations (Rhee and Haunschild, 2006). Given this status, the better a
countrys image, the greater the extent to which poorly made products will be viewed as a
breach of that implicit promise (Rhee and Haunschild, 2006). This expectation has been
referred to as the expectancy-violation effect (Burgoon and Poire, 1993). Consumers will
react more strongly to actions that violate their previous expectations, provided those
expectations were high (Rhee and Haunschild, 2006).
These expectations are developed based on the COO, and a low-priced product from a
country with a positive image violates this expectation. Consumers expect that higher end
products will come from countries with a positive COO, and that lower end products will
originate from countries with a negative COO ( Johansson et al., 1994). Under a scenario
where consumers must distinguish between an authentic and a counterfeit product, the
consumer may use a combination of price and COO to discern the products nature. Previous
literature has done well to demonstrate that lower-priced products are more likely to be
perceived as counterfeit (Chakraborty and Allred, 1997), and our analysis extends this
argument by considering the COO cue as well. If consumers are given two prices for a
product made from a country with a positive COO image, it seems plausible that the lower
priced version would violate the consumers expectations of that country. Low-priced
products from a country with a positive image are more likely to be perceived as counterfeit
compared to low-priced products from a country with a negative image. Stated formally:
H1a. Lower priced products from countries with a positive image are more likely to be
perceived as counterfeit than are lower priced products from countries with a
negative image.
Alternatively, higher priced products are already less likely to be perceived as counterfeit.
When we consider the added effect of the COO, we anticipate that the country image will
further decrease the likelihood, depending on consumersperceptions of the country.
In other words, a high-priced product will be seen as less likely to be counterfeit than will a
low-priced product, but when the consumer includes the COO in the assessment, then a
positively perceived country will reinforce the consumers sense that the product is not
counterfeit:
H1b. Higher priced products from countries with a positive image are less likely to be
perceived as counterfeit than are higher priced products from countries with a
negative image.
Following their assessment of the perceived likelihood of the product being counterfeit,
consumers will then make choices to avoid purchasing a high-risk, counterfeit good.
Based on the earlier hypotheses regarding the role of country image when choosing between
two uniquely priced goods, one of which is suspected of being counterfeit, we propose a
similar argument that consumers will be more willing to purchase the higher priced good if
it originates from a country with a positive COI. If consumers had a choice between products
that originated from a country perceived positively and a country perceived negatively we
argue that they will show preferences (as measured by the quantity purchased) for products
that originate from a country perceived positively. Stated formally:
H2a. Consumers are more likely to choose a greater quantity of the higher priced
product if it originates from a country that has a positive image than if the higher
priced product originates from a country with a negative image.
Conversely, consumers may be skeptical about purchasing a higher priced, high-risk good
from a country with a low COI when the threat of purchasing a counterfeit good is present.
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We refer back to our earlier argument using the expectancy-violation framework (Burgoon
and Poire, 1993; Rhee and Haunschild, 2006). Consumers expect higher priced products to
come from countries with a positive image and lower priced products to come from a
country with negative image. We expect that consumers would be hesitant to
purchase lower priced products from a country such as Switzerland because they expect
only higher priced products to come from this country. At the same time, it is conceivable
that lower priced products from a country such as India may be legitimate. Therefore, if they
had to purchase lower priced products from India or Switzerland, we would find no net
effect from COI:
H2b. Consumers are no more likely to choose a greater quantity of the lower-priced
product if it originates from a country that is perceived negatively than if the lower-
priced product originates from a country that is perceived positively.
Methodology
Study 1
We employed an experimental approach using a total of 226 participants to test the
proposed hypotheses. In all, 63 participants took part in the pre-test and 163 took part in the
actual study. The participants were undergraduate students at a large southeastern
university in the USA, and they were given course credit in return for their participation.
Although the use of student samples has previously been cited as a limitation of studies on
international business phenomena because students are not representative of the larger
population (Bello et al., 2009), prior work on counterfeit goods has found that those in the age
demographic of undergraduate students are more likely to have exposure to counterfeit
goods compared to those in higher age brackets (Tom et al., 1998). Hence, the use of student
samples in the present study extends beyond a matter of simple convenience.
In our study, we manipulated perceived risk, price, and COO. To manipulate perceived
risk, we used a product category that was viewed as having high levels of perceived risk
that is, pharmaceuticals. Informed by the work of Kaplan et al. (1974), we conducted a pre-
test with 63 participants to measure perceptions of risk for different products, based on a
seven-point Likert scale (α¼0.81). We found that counterfeit pharmaceuticals had the
highest level of perceived risk (M¼4.09, SD ¼1.34) in our pre-test, and this category was
therefore chosen to represent a product that had high perceived risk.
Our country manipulation contained two different countries: India and Switzerland.
We chose two countries because both have previously been linked with the production of
counterfeit medicines (European Commission Taxation and Customs Union, 2007).
We measured country image for India and Switzerland using an assessment developed by
Laroche et al. (2005), and we found that participants had a significantly higher positive
image of Switzerland vs India (M_Switzerland ¼5.65 vs M_India ¼4.58, F(1, 45) ¼5.29,
po0.01).
In a further pre-test, we evaluated whether consumers would view the following products
as more likely to be counterfeit if they originated from India (higher COI) vs Switzerland
(lower COI): running shoes, computers, pharmaceuticals, cosmetics, DVDs, and watches. We
used a single-item, seven-point Likert measure, anchored by very unlikelyto likely,to
measure the likelihood of each of these products being counterfeit if they originated from the
two countries. With the exception of cosmetics, which indicated no significant differences
between the two countries, all product categories were rated as more likely to be counterfeit
if they originated from India vs Switzerland.
We manipulated price by having two different price points, $15 and $6. We chose these
dollar values because we wanted to emphasize that one item was significantly higher priced
than the other. Before the study began, we held a discussion with 12 seminar participants
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from an undergraduate course in international business. The participants were given the
experimental scenario and told that two price points had to be chosen that would persuade
consumers to choose one product over another. Based on the discussion, a concern arose
that if the prices were too different, they would be considered different versions of the
same product. In further discussions, participants agreed on the $6 and $15 because these
options led to perceptions that the products were still largely the same but had somewhat
different prices. We wanted to avoid the scenario where consumers would attribute the price
differences to two different products, and our discussions indicated that this was the case.
Procedure. Our study design involved a three-cell (COO: Switzerland vs India vs no
country) between subjects by two-cell (price: $15 vs $6) within subjects experimental design
for a total of three unique cells. Each participant purchased either from India, Switzerland,
or no country, and each participant chose between $15 and $6 versions of the product in
question. There were no participants that purchased from more than one country, thus each
group was independent of each other. The participants were randomly divided into the three
country conditions. Cell sizes ranged from 52 to 57 participants per cell, for a total of
163 participants.
The participants were asked to read a BBC news story that alerted consumers to the
presence of counterfeit drugs from Switzerland, India, or no country, depending upon which
cell the participant was placed in. The news story was taken from an actual article written
by the BBC on February 3, 2009, but was slightly modified to specify that the counterfeit
drugs were anti-malarials and that the COO was either Switzerland or India, or there was no
mention of any country. Participants were asked to rate the storys credibility using a four-
item scale assessing credibility (α¼0.86). On average, the participants in the pre-test gave it
a rank of 5.34 on a seven-point Likert scale.
Following the rating, the participants were given a hypothetical scenario where they
were told they were travelling in Asia, and they needed to purchase some anti-malarial
medication while on their trip. They were told they had $35 to spend on this medicine, which
could be purchased in either of two stores in the same shopping area. One store was selling
the medicine for $15, while the other was selling it for $6. Participants were also told that
one, both, or neither of the versions could be counterfeit, and it was up to them to determine
the likelihood that either could be counterfeit and to purchase as much as they wished to,
subject to their income constraints. The only stipulation apart from the income constraint
was that the participant must purchase at least one unit of the anti-malarial medicine.
Before making their choices, participants were asked to state their personal degree of
assumed probability that each version of the product, the $15 medicine and the $6 medicine,
was counterfeit. Finally, depending on which cell the participant had been assigned to, the
participant was told that both versions of the medicine were from Switzerland, or they were
told they were from India, or there was no mention of COO. It should be noted that we used
fictitious names for the retailers and no brand names for the medicines in order to mitigate
potential confounding effects of cues other than price or COO.
Results study 1
We conducted a one-way ANOVA to test H1a and H1b.H1a proposed that lower priced
products from a country with a positive image (Switzerland) are more likely to be perceived
as counterfeit than lower priced products from a country with a negative image (India).
Specifically, consumers will attach a higher probability of the $6 medicine being counterfeit
if it is from Switzerland than if it is from India because of differing expectations that
they have of those two countries. We found the difference for $6 drugs to be significant
between countries (F(1, 82) ¼13.60, po0.01, M_Swiss ¼71.90 vs M_India ¼58.29), and
thus, H1a was supported.
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Alternatively, in support of H1b the reverse pattern occurred for the $15 counterfeit
goods. H1b stated that higher priced goods from a country with a positive image were less
likely to be perceived as counterfeit than lower priced goods from a country with negative
image. We found that consumers perceived the $15 medicine from India as more likely
to be counterfeit (M_India ¼43.52) than the similar medicine from Switzerland
(M_Swiss ¼26.76). Furthermore, in order to check the robustness of our findings,
we compared them with the no-countrycondition and found a similar interaction between
the no-country condition and India (F(1, 92) ¼6.83, po0.05) to that between India and
Switzerland. When no COO was mentioned, the probabilities of the $15 version and $6
version were 68.7 and 30.07 percent, respectively, which was similar to the probabilities
given for the medicine from Switzerland. For a summary of these findings, see Figure 1.
H2a proposed that when consumers suspect they may be purchasing high-risk
counterfeit goods and are given a choice between two different prices for the same product,
their consumption choices will vary based on the COI. We proposed that consumers would
more likely to purchase a greater quantity of the more expensive medicine if it originated
from Switzerland than if it was from India. This hypothesis was not supported
(F(1, 84) ¼0.18, p¼0.91, M_Swiss ¼1.32 vs M_India ¼1.27).
Our final hypothesis (H2b) advanced the argument that consumers would not choose a
greater quantity of the lower priced item if it originated from a negatively perceived country
(India) vs a positively perceived country (Switzerland). Our results indicate that H2b was not
supported. The relationship in H2a was, in fact, reversed, and consumers chose more of the
low-priced products from India (F(1, 84) ¼4.45, po0.05, M_Swiss ¼0.5 vs M_India ¼1.36).
The disconnect between COI and price suggested that the low-priced medicine from
Switzerland was more likely counterfeit than the low-priced medicine from India.
The interaction between country and price was significant but the opposite of the
high-priced case (Figure 2).
It should be noted that familiarity with the COO was tested for and accounted for in our
study. Previous work has found that the more familiar consumers are with a country, the
more likely they are to have positive associations of it (Han, 1989). To rule out the possibility
of country familiarity confounding our results, we included a single-item measure to gauge
participantsfamiliarity with either India or Switzerland. An analysis of variance found no
significant differences between the groups in terms of country familiarity, and a regression
80
70
60
50
Perceived Probabilities
40
30
26.76
30.07
43.52
71.9
68.71
58.29
20
10
0High Price Low Price
India Swiss No Country
Figure 1.
Probabilities of
counterfeit products
(USA sample)
301
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inferences from
a positive COI
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analysis revealed that familiarity was not significantly related to COO perceptions (F¼1.38,
p¼0.17). Therefore, familiarity with one of the countries used in this study was not
significantly related to our findings.
Study 2
Our previous study only allowed us to infer how US consumers would react to a violation of
their COI expectations for another country. We have not yet examined how consumers react
when products from their own country are found to be hazardous. Additionally, we have not
examined how consumers from a country where low-priced products and counterfeit goods
are a regular occurrence use the COO cue. The findings from Study 1 would be enhanced if
we could demonstrate that consumers from the COO also use the COI as a signal to
differentiate between products. Consumers from India have accumulated knowledge on
products that originate from India, and their expectations may differ from the expectations
of a non-Indian. For example, American consumers may view Indian goods as low quality
because they are inexpensive. Indian consumers, however, regularly see lower priced goods
in the market and thus may not attribute low prices to low quality ( Jin et al., 2006).
Additionally, consumers in India may be less likely to question the authenticity of
low-priced products because low-priced products may be more prevalent than in other
places (Harris, 2015).
In order to test the robustness of our study, we replicated our study in India with an
Indian sample. A total of 134 students were recruited from a large research university in the
Indian state of Bihar. The students were offered a 300 Indian Rupee coupon for Flipkart in
exchange for their participation in the study. The design of the study was exactly the same
as in Study 1 with one exception. We used a different measure of country image than
Study 1. The COI measure developed by Laroche et al. (2005) was not developed to test
perceptions of consumers toward their own country. We replaced our original measure with
a measure created by Jin et al. (2006) that was developed to measure the perceptions of
Indian consumers toward products from India.
We asked 28 Indian consumers for their perceptions of products that originated from
India. We also asked a separate group of 28 Indian consumers their perceptions of products
that originated from Switzerland. Our results revealed that Indian consumers had a
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0High Price Low Price
India Swiss No Country
1.36
1.32
1.27
1.22
0.82
0.5
Ave No. Chosen
Figure 2.
Number of drugs
chosen (USA sample)
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significantly higher positive image of products from Switzerland than they did of India
(M_Switzerland ¼5.59 vs M_India ¼4.52, F(1, 55) ¼20.90, po0.001).
The remaining 77 participants were divided into three groups and were asked to read the
same BBC article as those in Study 1. One version of the story stated that the counterfeit
drugs originated from India, a second version stated that the drugs originated from
Switzerland, a third version did not state a COO. We tested the credibility of the story
among our sample; there were no group level differences revealed, and on average the
participants gave the story a rank of 5.10 out of seven points. After rating the credibility of
the story, each participant then stated their personal degree of assumed probability that
each version (the $15 and the $6 version) were counterfeit. Following their statement of
probabilities, the participants then chose quantities of the $15 and the $6 medicine to
purchase given their budget constraints. Lastly, participants were asked to complete the
CETSCALE measure so that we could measure their level of ethnocentrism toward India.
Results study 2
We conducted a one-way ANOVA to compare the perceived probabilities of the $6 drug
from Indian vs the $6 drug from Switzerland. Similar to Study 1, we found the difference for
$6 drugs to be significant between countries (F(1, 51) ¼5.33, po0.05, M_Swiss ¼58.17 vs
M_India ¼48.00). A similar analysis was conducted for the $15 drug from both countries;
again significant differences between countries were revealed (F(1, 51) ¼4.15, po0.05,
M_Swiss ¼27.23 vs M_India ¼40.00). We controlled for each participants level of
ethnocentrism and found that it was not a significant factor in either analysis. For a
summary of these findings, please see Figure 3.
We next compared the choices that participants made between $15 versions of the
product and $6 versions of the product from either India or Switzerland. No significant
differences between countries were revealed in terms of the number of $15 drugs chosen
(F(1, 56) ¼0.19, p¼0.66, M_Swiss ¼1.13 vs M_India ¼1.26). We tested for differences
between the number of $6 Indian versions of the drug vs the $6 Swiss versions of the drug.
In study 1, we found that participants chose more units of the $6 drug from India; the results
from Study 2 mirrored these results. We found that participants chose significantly more of
the $6 versions from India than they did from Switzerland (F(1, 56) ¼3.02, po0.05,
M_Swiss ¼1.5 vs M_India ¼2.19). Consumer ethnocentrism was controlled for in both
comparisons and again it was found to be a non-significant factor (Figure 4).
High Price Low Price
India Swiss No Country
70
60
50
Perceived Probabilities
40 40
33.88
27.23
48
54.5
58.29
30
20
10
0
Figure 3.
Probabilities of
counterfeit products
(Indian sample)
303
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negative
inferences from
a positive COI
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Summary of results
The results from both studies revealed that consumers perceived the lower priced drug
more likely to be counterfeit if it originated from a country perceived positively.
Both of our studies also revealed that if the higher priced product originated from a
country perceived positively then it was less likely to be perceived as counterfeit
compared to a country perceived negatively. We further explored consumer perceptions
by comparing the results from Study 1 to Study 2. No significant differences were found in
terms of perceptions for the $15 drug between the two samples. For the $6 drug from
Switzerland, participants from the US. placed a significantly greater probability on the
drug being counterfeit than participants from India (F(1, 65) ¼7.73, po0.01, US.
sample ¼71.90 vs India sample ¼58.17). The same pattern was revealed for the $6 drug
from India, the US sample perceived the $6 drug as more likely to be counterfeit than the
Indian sample (F(1, 67) ¼(F(1, 65) ¼3.63, po0.05, US sample ¼58.29 vs Indian
sample ¼48.00).Thisindicatesthattheeffectswefoundmaybereducedbythe
knowledge one has of their home country.
In terms of the number of drugs chosen, there were no differences in the $15 drugs
chosen between the two samples. However, we found that the Indian participants chose
significantly more of the $6 versions under both scenarios. Indian consumers chose
significantly more of the $6 drug from Switzerland than American consumers did
(F(1, 46) ¼2.96, po0.05, US sample ¼0.5 vs Indian sample ¼1.5). They also chose more of
the $6 drug from India than American consumers did (F(1, 46) ¼9.98, po0.01, US
sample ¼1.36 vs Indian sample ¼2.19).
These combined results reveal that price and COO were salient cues for participants in
the US and in India, but the Indian participants rated the likelihood that the $6 drug was
counterfeit lower than the US sample. They also chose more of the $6 drugs than their
American counterparts. This is not surprising given that India is a low cost economy where
many goods are sold at a price lower than they would be sold in other economies.
The results indicate that price may not be as strong an indicator of authenticity as it is in
certain markets. In both studies participants rated the Indian versions more likely to be
counterfeit which indicates that even in the consumers home market COO remains a salient
signal to differentiate between authentic and counterfeit products. We summarized all of the
results in Table I.
High Price Low Price
India Swiss No Country
2.5
2
1.5
1.13
1.17
1.26
1.5
1.7
2.19
Axis Title
1
0.5
0
Figure 4.
Number of drugs
chosen (Indian
sample)
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Discussion
The debate over the relevance of the COO has valid arguments, both for and against.
Opponents argue that the COO is simply not a relevant feature in consumersdecision-
making processes (Samiee et al., 2005). However, when a product crisis occurs, especially one
that concerns products manufactured abroad, the media is quick to point toward the
COO as a factor linked to the manufacture of the harmful products (Bapuji, 2011).
To illustrate this point, we cited the example of toys manufactured in China using lead-
based paint and the subsequent negative attention given to their COO. Through a scan of
media reports, our study found that this was also the case with counterfeit goods. While we
agree that, in regular purchases, the COO may not be a salient factor that consumers use to
evaluate the product, the potential for harm that arises in the case of a poorly made or
counterfeit product will make the COO salient to consumers who seek to avoid purchasing a
sub-par product.
Previous research has demonstrated the important role that price and COO can play in
consumer expectations of product performance ( Johansson et al., 1994; Haubl, 1996), as well
as the impact that these perceptions may have on choosing to purchase or not purchase
products from certain countries (Beamish and Bapuji, 2008). Our study advances this
research by linking the COI with positive and negative inferences. A positive COI can harm
perceptions toward lower priced products; this was the case when American consumers
evaluated low-priced products from Switzerland, and this also happened when consumers
from India (a low cost economy) evaluated the same goods from Switzerland. The effect was
lessened for the Indian consumers, but they still considered the lower price drugs from
Switzerland more likely to be counterfeit than the lower priced ones from their own country.
A negative COI can harm perceptions toward higher priced products because consumers
may expect low-priced products to originate from the country. This was the case when both
Indian and US consumers evaluated the higher priced drugs from India.
The results, unexpected from previous research, suggest that consumers actually are
more willing to buy more of a low-priced medicine originating from India than a similar
low-priced medicine originating from Switzerland. This finding reveals that a positive image
can harm perceptions of low-priced products that originate from that country. This is
because the positive COO creates consumer expectations and the low price violates those
expectations which then increases the perceived probabilities that such a low-priced product
is counterfeit. The finding is a fairly novel one because it reveals that a positive image can
harm perceptions of low-priced products that originate from that country. In reality, the
lower priced product may be legitimate, but the positive COO taints consumer perceptions
toward it and increases the perceived probabilities that these products are counterfeit.
Conversely, when high-priced products originate from a country that has a positive image,
then this situation is congruent with expectations toward that country, and consumers
perceive that these products are less likely to be counterfeit than if consumer expectations
Country of
origin
COO:
India
Price: $15
COO:
Switzerland
Price $15
Significant
differences
COO:
India
Price: $6
COO:
Switzerland
Price $6
Significant
differences
Probabilities Probabilities
US sample 43.52 26.76 Yes* 58.29 71.9 Yes**
India sample 40 27.23 Yes* 48 58.17 Yes*
Number chosen Number chosen
US sample 1.27 1.32 None 1.36 0.5 Yes*
India sample 1.26 1.13 None 2.19 1.5 Yes*
Note: *,**Significant at the level of po0.05 and po0.01, respectively
Table I.
Summary of results
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had been violated. Expectations were violated when high-priced products originated from a
country that was perceived negatively, and consumers gave these products a higher
probability of being counterfeit, which supports H1b.
Our final two hypotheses examined consumer choices once consumers became aware of
the COO. Prior criticisms of COO research state that it focuses primarily on consumer
perceptions but not on their actual consumption behaviors. We attempted to shed light on
the consumption decision by using a choice scenario wherein consumers were required to
use their judgment based on both price and COO and then chose accordingly so they would
avoid purchasing the high-risk, counterfeit goods. The interaction between price, COI and
probability of counterfeit showed striking results. When given a choice between two high-
priced drugs from India and Switzerland, consumer from the US and India chose the one
from Switzerland, more likely authentic. By contrast, when given a choice of a low-priced
drug from India or Switzerland, consumers from both of our sample countries chose the
cheaper drug from India rather than the one from Switzerland. This is a consequence of
the perception that a low-priced drug from Switzerland is more likely counterfeit than a
low-priced drug from India. Interestingly this was also the view held by the Indian sample
toward products form their own country. Buyerscounterfeit judgments are influenced by a
divergence between COI and price, not just a low price.
Theoretical contribution
The majority of prior research on the COO heuristic maintains a positive relationship
between the country image and the product (Han, 1989; Haubl, 1996; Laroche et al., 2005).
However, this relationship can be violated, and our research demonstrates that this violation
can occur when counterfeit drugs are thought to originate from certain countries. When the
violation occurs, it is unclear what the resulting impact would be on consumer perceptions
toward the product and subsequent choices. Our work informs these instances by revealing
that the conflict (i.e. between consumersperception of the COO and their expectations
toward the product) raises questions about the product and can thus reduce consumption.
We capture this conflict by first increasing concerns of a harmful product and then
examining low-priced products from a country with a positive image and high-priced
products from a country with a negative image.
In both instances, the expectations of the products do not match the expectations for the
products that are produced. When this violation occurs, a positive COI can become a
liability, which also alludes to the possibility of a negative COI becoming an asset.
Consumers indicate preferences for higher priced goods from a country with a positive COI
vs a country with a negative COI. Alternatively, they prefer lower priced goods from a
country with a negative COI vs a country with a positive COI. For example, under conditions
where consumers are fearful of purchasing counterfeit versions of the product, higher priced
versions from a country with a negative COI would suffer, even if these products were
legitimate versions.
Managerial and policy implications
The findings from this paper deliver several implications for practitioners and policy
makers alike. A country that has a positive image may produce both lower priced and
higher priced goods, and our results reveal that when the authenticity of those is questioned,
questions arise about the lower priced product. Firms are consistently exploring justifiable
methods to increase prices (Campbell, 1999), the presence of counterfeit goods in the market
may provide the impetus for firms from a country perceived positive to increase the price of
products so as to enhance perceptions of quality.
From a managerial perspective, when counterfeiting becomes a significant concern
within a dangerous product category, firms can use this problem to increase their prices.
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Conversely, products that are manufactured in countries with a positive image run the
risk of sparking consumersdamaged perceptions toward their lower priced
goods. This situation poses a dilemma, as firms often seek to exploit low costs
by manufacturing in developing countries, yet, by developing their products in such
countries, the manufacturing firms may fall victim to the effects of the counterfeit products
that also originate from these markets.
It appears that, for firms manufacturing high-risk products, it may be wise to consider a
mixed strategy, such as that advised by Chao (1993), where firms divide the country of
design from the country of manufacture and make salient the country of design to minimize
the impact of any negative COO effects. Furthermore, for high-risk products, such as
counterfeit drugs, the consumption of such products produces negative externalities that
can affect an entire population. Generally, if counterfeit drugs are sold on the market,
they are sold at a price that falls below that of their legitimate alternatives (Aldhous, 2005).
Our study reveals, however, that consumers are less likely to view a cheaper drug as
counterfeit and will be more likely to purchase it compared to its more expensive alternative
if it comes from a country that has a negative COI.
Counterfeit drugs often contain little or no active ingredients. Thus, when consumers
take them to help combat a virus, for example, there is a chance that the virus will
overpower the small dose of the active ingredient, thus creating a more powerful disease
(Aldhous, 2005). Furthermore, firms that attempt to produce high-priced items in countries
that have negative COI may see the value of their products decline if a lower priced version
of the product becomes available and the consumer (mistakenly) suspects that the legitimate
products may be counterfeit. This scenario creates a dilemma for manufacturers that seek to
take advantage of a low-cost economy, but who worry that by doing so, they may decrease
the perceived value of their products.
Limitations and future work
Our study was limited to one product and two countries. In order to succinctly demonstrate
the impact of high levels of perceived risk, we used only one product. However, the scope of
counterfeit products that exist in the marketplace is much wider than is represented by this
one product and also presents different degrees of risk, depending on the products intended
usage. A counterfeit purse, for example, may be perceived as high risk if the consumer
perceives that the purse will break when they are at a formal event and thus lead to
embarrassment. Conversely, the same product may be seen as low risk if the purse is
intended merely to be a souvenir. This variation in risk was not captured within our study.
Our study presented a simple model tested with an experimental methodology.
One possible extension would be to examine COI effects when the consumer can choose
multiple products that originate from multiple countries, such as in the auto industry, as
alluded to by Rhee and Haunschild (2006). We hope our work encourages additional
research in quasi-experimental settings where COI expectations are violated.
Conclusion
Consumers may not think of the COO when they purchase branded goods such as cars or
electronics. For the consumer, the COO may simply not stand out as a prominent or
differentiating attribute. However, depending on the product and the issue, COO can
sometimes represent a significant factor, as evidenced by the recent case of lead-painted
toys manufactured in China. When the COO becomes salient, its impact on consumers
product perceptions and choices depends on whether the product violates the consumers
pre-existing expectations of the country. When these expectations are violated, a positive
COI can become a liability.
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Further reading
Heslop, L.A., Lu, I. and Cray, D. (2008), Modeling country image effects through an international
crisis,International Marketing Review, Vol. 25 No. 4, pp. 354-378.
Corresponding author
Kashef A. Majid can be contacted at: kmajid@umw.edu
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1. KoEunju Eunju Ko ejko@yonsei.ac.kr MoonByeong-Joon Byeong-Joon Moon bmoon@khu.ac.kr
MagnussonPeter Peter Magnusson peter.magnusson@fiu.edu Departments of Culture and Design
Management and Clothing and Textiles, Yonsei University, Seoul, Republic of Korea School of
Management, Kyung Hee University, Seoul, Republic of Korea Florida International University,
Miami, Florida, USA . 2017. Guest editorial. International Marketing Review 34:2, 162-165.
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... Compared to BO, COM has a close relationship with industry normative conduct, such as manufacturing and assembly, that contributes to the functional value and overall quality of products (Cattin et al., 1982;Chandrasen and Paliwoda, 2009;Li et al., 2000). Consumers establish stereotypical beliefs of manufacturing locations (COM) (Maheswaran, 1994;Allman et al., 2016) that are particularly salient when product categories are prone to crises or risk (And ehn and L'Espoir Decosta, 2016; Majid, 2017). For example, food products are reliant on a supply chain that is socially, politically and economically embedded in the local networks that undertake the management of raw materials, processing, storage and transportation. ...
... From an institutional perspective, the cues of "domestically-made" signify closer ties with the institutional forces in home countries and reinforce the ethnocentric view of tighter regulations, stricter standards and better management and human forces at home countries. Consumers tend to rely on their stereotypical beliefs of COM to infer product quality, especially for product categories that are prone to systemic risk (And ehn and L'Espoir Decosta, 2016;Majid, 2017). ...
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... label moderates the relationship between consumer ethnocentrism and purchase intention weakening the impact of ethnocentrism on the evaluation of products made in a culturally similar country (Balabanis and Siamagka 2017). Congruence and fit is an important facet of COO, this interactive aspect of COO has positive influence on the perception of quality of pharmaceuticals made in Switzerland (Majid 2017), Familiarity of COO also plays a role in consumer behavior, increased familiarity with a COO strengthens the relationship between consumer animosity and brand avoidance (Khan and Lee 2014). ...
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