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ABSTRACT
Price-related consequences of the country-of-origin (COO) cue have received limited attention in extant literature. In
this study, the authors draw from equity theory and cue utilization theory and investigate (1) whether a brands COO
affects a consumers willingness to pay and (2) the extent to which the consumers familiarity with the brand moderates
this relationship. The results of three complementary experimental studies reveal that COO indeed has a positive
impact on willingness to pay. Furthermore, the authors find a negative moderating influence of brand familiarity on the
COO effect in a high-involvement setting but not in a low-involvement setting. The authors discuss the theoretical and
managerial implications of the findings, and they identify directions for further research.
Keywords: country of origin, willingness to pay, brand familiarity, experimental research
high-involvement situations. To the best of our knowledge, our study is the first to analyze in a comparatively
realistic point-of-purchase setting the extent to which a
branded products origin directly influences the price
that the consumer is willing to pay for the brand.
Second, on the methodological front, we illustrate the
application of the BDM approach and thus introduce
researchers to a promising procedure, which, though
used in other fields (e.g., Homburg, Koschate, and
Hoyer 2005), has not yet been applied in COO-related
research. Although the BDM method can realistically be
applied only when low-priced products are involved
because participants are actually obliged to buy the
productit nevertheless enables a researcher to study
actual buying behavior rather than simply purchase
intentions. This is important because there exists a gap
between what consumers say they are going to do and
what they actually do at the point of purchase (Carrington, Neville, and Whitwell 2010, p. 141).
Third, on the managerial front, we provide empirically
based insights into the extent to which consumers will
pay price premiums or expect price discounts, depending on the COO of the product. These insights are of
substantial value to international marketing managers
designing a pricing strategy, particularly when the consumer is confronted with product offerings from multiple COOs differing in their image. Thus, our studys
findings provide managerial support for decisions
related to customer value-oriented pricing, price differentiation, and market segmentation (Monroe 2003).
PRIOR RESEARCH
COO and Price
Price-related consequences of COO have been widely
neglected in extant literature because few researchers
have attempted to study the country image effect on
product price (Nebenzahl and Jaffe 1993, p. 161). The
handful of studies that address price-related issues in a
COO context focus either on consumers price tolerance
(Drozdenko and Jensen 2009; Nebenzahl and Jaffe
1993) or on actual sales prices (Agrawal and Kamakura
1999; Hulland, Todio, and Lecraw 1996). Price tolerance studies reveal a base price for a product associated
with a given COO and then ask consumers to indicate
how much more or less they would be willing to pay for
the same product if it were made in another country.
However, the base price may serve as an anchor (Simonson and Drolet 2004), and direct comparison of the
sumer is likely to obtain for a branded product associated with a particular COO and the sacrifice that he or
she must make to actually receive this benefit. Thus, the
outcome-to-input ratio refers to the comparison of the
expected benefit a consumer obtains from a branded
product that originates from a certain COO and his or
her WTP for that particular product. Because consumers
have different images for different COOs, their evaluations of products originating from the various COOs
also differ (Pappu, Quester, and Cooksey 2007). Bearing
in mind that country image refers to the overall perception consumers form of products from a particular
country, based on their prior perception of the countrys
production and marketing strengths and weaknesses
(Roth and Romeo 1992, p. 480), from a consumers perspective, a product from a COO with a favorable country image is likely to be associated with a higher benefit
than a product from a COO with a less favorable country image.
According to equity theory, consumers seek to establish
an equitable deal, so they adjust the input (WTP) they
provide in the exchange to the outcome they expect to
receive (benefit associated with the product from a given
COO). Therefore, consumers should display a higher
WTP when they receive in exchange a product from a
COO with a favorable country image rather than one
from a COO with a less favorable country image. Thus:
H1: Consumers WTP is higher for a given
branded product that originates from a COO
with a more favorable country image than
one that originates from a COO with a less
favorable country image.
METHOD OVERVIEW
We conduct three complementary experimental studies, using different countries and actual brands as
stimuli. Our first experiment focuses on the investigation
of COO effects for highly familiar and less familiar
brands under conditions of congruencythat is, when
the COO coincides with the home country of the
brand (Hubl and Elrod 1999). Specifically, we employ
a 2 (COO) 2 (brand familiarity) between-subjects
design and use brands that actually originate from the
respective countries. Our second experiment extends
the first experiment and examines the focal relationships in an incongruent conditionthat is, when the
COO and home country of the brand (i.e., the brand
origin) are different. Such incongruence is common in
todays marketplace because the globalization of markets drives numerous companies to consider production shifts to other countries (Funk et al. 2010) in an
effort to stay competitive (Jo, Nakamoto, and Nelson
2003). The new production places are usually countries
consumers would not associate with the brand, and
notably, they often have less positive country images
than the brands home country. While the first two
experiments are both conducted in a low-involvement
setting (mineral water), the third experiment investigates
the impact of COO and brand familiarity on WTP in a
high-involvement setting (sport shoes).2 Finally, we
undertake a follow-up study to Experiment 3, also in a
high-involvement setting (DVD players), to check the
stability of the results.3
All our experiments are separate and self-standing
studies, and we carried them out in the second half of
2008. Each experiment is based on a separate sample
of university students. While this inevitably places limits on the generalizability of the observed effects, the
use of student samples is justified because our focus is
on testing theoretical hypotheses rather than generating representative estimates of consumers absolute
WTP values. In this context, when the researcher is
interested in theoretical explanation, a homogeneous
sample is the preferred option. Lowering intersubject variance in this way enhances the likelihood of
finding support for the theory is true. In such
instances, student samples or other homogeneous
groups are preferred (Sternthal, Tybout, and Calder
1994, p. 208).
EXPERIMENT 1
Experimental Design and Stimuli
Experiment 1 uses a 2 (COO: favorable vs. unfavorable) 2 (brand familiarity: high vs. low) betweensubjects factorial design. The participants, postgraduate business and social sciences students from a wellknown German university, were randomly assigned to
the four experimental groups and received an opportunity to actually buy the branded products in the study.
They also received extra course credit for their participation. The sample consisted of 127 participants;
their average age was 23.6 years, and 70.1% were
female.
We chose mineral water as a product category for two
main reasons. First, it is an everyday consumer good
used by students and nonstudents alike, so the use of a
student sample should not pose a major threat to the
studys external validity (Lynch 1982). Second, the study
participants might be obliged to actually buy the
branded product with their own money (see our description of the BDM procedure), and mineral water is suitable because, in general, it is affordable to anyone. The
choice of a low-value product category follows previous
applications of the BDM approach (e.g., Wertenbroch
and Skiera 2002).
Regarding the choice of specific countries and brands,
we used actual branded products rather than fictitious
alternatives because participants might actually have to
buy the product. For the experimental manipulations,
we needed two countries that, on the one hand, differed
in their country images and, on the other hand, offered
mineral water brands varying in familiarity. Because
German consumers are mainly familiar with mineral
water brands from neighboring European countries, we
selected France as the country with a more favorable
country image and Austria as the country with a less
favorable country image. Using Roth and Romeos
(1992) well-established scale to measure country image
(see the Appendix), a pretest (n = 30) confirmed that
Frances image (MFrance = 5.13) is significantly more
favorable than Austrias (MAustria = 4.43; t(58) = 2.46,
p < .05).
For brand familiarity, we manipulated the experimental
conditions by choosing mineral water brands that actually originate from the two countries. For France, we
selected Evian as the well-known brand and Thonon as
the lesser-known brand. Pretest results (n = 30) revealed
a significant difference in terms of familiarity between
Procedure
For the WTP elicitation, we used the BDM approach
(Becker, DeGroot, and Marschak 1964), which offers
several benefits over other methods of WTP elicitation,
including incentive compatibility and proximity to an
actual act of purchase (Wertenbroch and Skiera 2002).
The incentive-compatible character of this method
prompts consumers to reveal their true WTP and
thereby solves the problem of respondents tendency to
indicate a higher or lower price than their true WTP, as
is the case in hypothetical WTP elicitation formats.
Participants consider a point-of-purchase scenario, in
which they might have to buy and pay for the product,
depending on their stated WTP and a randomly determined selling price. The actual price for the product is
drawn, lottery style, from an urn. The lottery tickets
represent price tags that indicate a range of prices; however, the distribution of prices remains secret to prevent
anchoring effects (Wertenbroch and Skiera 2002). Each
bid (WTP) above or equal to the drawn price forces the
bidder to purchase the product at the price determined
by the lottery. Participants with lower bids are not
allowed to purchase the product, nor are they allowed
to rebid.
To implement the BDM procedure, we first showed the
actual product to the participants in each experimental
group, along with a short product description that
reflected the brand and its associated COO. We next
informed participants of their opportunity to actually
purchase the product for the amount of money they
would be willing to spend to obtain it. We indicated that
the selling price had not yet been fixed and would be
determined randomly at the end of the study, through a
drawing of lots from the urn. Participants also understood that they could not influence the distribution of
prices in the urn. Finally, we asked them for the maximum amount of money they would be willing to pay for
the product. If a participants stated WTP was higher
Results
Manipulation Checks. To investigate the validity of the
COO manipulation, we conducted an analysis of variance (ANOVA) with the manipulated COO (France vs.
Austria) as the independent variable and the measured
country image (Roth and Romeo 1992) as the dependent variable. The COO manipulation check showed that
the country image of France is significantly more favorable than that of Austria (MFrance = 4.71, MAustria =
4.09; F(1, 125) = 16.34, p < .001). We used a similar
manipulation check for brand familiarity. As we
expected, the group of well-known brands (French
brand Evian, Austrian brand Rmerquelle; Mfamiliar =
2.88) is much more familiar to consumers than the combination of lesser-known brands (French brand Thonon,
Austrian brand Vslauer; Munfamiliar = 1.22; F(1, 125) =
59.70, p < .001). Thus, the manipulation of both independent variables was successful.
EXPERIMENT 2
Experimental Design and Stimuli
In Experiment 2, we extend and validate the findings of
Experiment 1 under conditions of incongruity between
the COO and the home country of the brand. We again
use a 2 (COO: favorable vs. unfavorable) 2 (brand
familiarity: high vs. low) between-subjects factorial
design and apply it to the same product category as in
Experiment 1, that is, mineral water. In the current context, a situation of incongruity exists when the company
decides to use sources (i.e., water springs) and bottling
plants in another country than the brands home country.
To manipulate the COO and brand familiarity, we
retained France as the COO with a more favorable country image with Evian as the familiar and Thonon as the
unfamiliar brands. For the COO with a less favorable
country image, we chose Turkey and kept the same two
brands that were used for France. Therefore, Turkey represents the incongruent setting because the COO is not
the same as the home country of the focal brands.
1.09 (.09)
1.05
1.00
.95
.95 (.09)
High brand
familiarity
.90
.85
.80 (.09)
.80
.75
.73 (.09)
.70
Favorable Country Image
Less Favorable Country
(France)
Image (Austria)
COO
Notes: Standard deviations are in parentheses.
Low brand
familiarity
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
2.40
2.80
3.20
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
Results
Manipulation Checks. To investigate the validity of the
COO manipulation, we conducted an ANOVA with the
measured country image (Roth and Romeo 1992) as the
dependent variable. Respondents evaluated Frances
country image much more favorably (MFrance = 4.70)
than Turkeys (MTurkey = 2.82; F(1, 127) = 164.01, p <
.001). We used a similar manipulation check for brand
familiarity, running an ANOVA between the two brands
(Evian vs. Thonon). As we expected, Evian enjoys much
higher brand familiarity among respondents (Mfamiliar =
4.14) than Thonon (Munfamiliar = 1.16; F(1, 127) =
265.33, p < .001). Thus, the manipulation of the two
independent variables of interest was successful.
As in Experiment 1, an analysis of the control variables
revealed that, apart from brand commitment, none of
them had any significant impact on WTP. Therefore, we
retained brand commitment, whereas we dropped the
other control variables from further analysis.
Test of Hypotheses. We again used an ANCOVA with
WTP as the dependent variable, COO and brand familiarity as factors, and brand commitment as a covariate.
We found a significant main effect of COO on WTP
1.05
1.00
.95
1.02 (.07)
.97 (.07)
High brand
familiarity
.90
.85
Low brand
familiarity
.80
.79 (.07)
.75
.74 (.07)
.70
Favorable Country Image Less Favorable Country
(France)
Image (T
(Turkey)
Turkey)
urkey)
COO
Notes: Standard deviations are in parentheses.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
Turkey
B: Brand Familiarity
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
In a second step, we extracted the (unstandardized) regression residuals and used them in a t-test analysis of the congruent and incongruent conditions. Because the t-test
revealed no significant difference between the congruent
COOcountry-of-brand condition (France) and the incongruent COOcountry-of-brand condition (Turkey) (t(127)
= .78, p = .44), no incongruity effect can be identified.
Thus, the observed COO effect on WTP is solely attributable to the difference in country images, whereas congruity does not seem to play a role.
EXPERIMENT 3
Experimental Design and Stimuli
Experiment 3 examines the impact of COO on WTP in a
high-involvement setting and further tests the moderating
influence of brand familiarity, as described in H3. Because
the issue of a production shift to another country is particularly relevant in the case of high-involvement products, we conduct Experiment 3 under conditions of incongruity between the COO and the brands home country.
Procedure
Participants received a questionnaire that presented a
short scenario that varied over the experimental treatment conditions. They were told to imagine that they
made up their mind to do more sports, such as running,
going to the gym, or the like, and therefore were plan-
Results
Manipulation Checks. To perform checks on the COO
manipulation, we conducted an ANOVA with the measured country image as the dependent variable. The
results revealed that the country image of the United
States (MUSA = 4.76) is significantly more favorable
than the country image of South Korea (MSouth Korea =
3.56; F(1, 249) = 87.82, p < .001).
We conducted a similar manipulation check on brand
familiarity. Consistent with our expectations, the results
showed that Nike is a highly familiar brand (Mfamiliar =
5.15) among respondents compared with Brooks
(Munfamiliar = 1.52; F(1, 249) = 726.80, p < .001). Thus,
as in Experiments 1 and 2, the manipulation of both
independent variables was successful.
Test of Hypotheses. Empirical evidence shows that contingent valuation is afflicted by overestimations in
response behavior (Neill et al. 1994; Vlckner 2006).
Hypothetical settings that offer no consequences for
participants decisions do not sufficiently motivate
respondents to reveal their true preferences: What
participants say they would do in hypothetical situa-
81.51 (4.04)
4.04)
81.02 (4.04)
81
79
77
78.21 (4.05)
High brand
familiarity
75
73
Low brand
familiarity
71
69
67
66.59 (4.17)
4.17)
65
Favorable Country Image
Less Favorable Country
(United States)
Image (South Korea)
COO
Notes: Standard deviations are in parentheses.
dependent variable. In addition, we used different measurement formats for our variables (Podsakoff et al.
2003). Finally, we employed Lindell and Whitneys
(2001) approach using the smallest observed correlation among the manifest variables as a proxy for common method variance (Podsakoff et al. 2003, p. 893).
All significant correlations between the covariates and
WTP remained significant after this adjustment, providing no evidence for common method variance.
Follow-Up to Experiment 3
One issue with Experiment 3 is that the more familiar
brand also comes from the country with the stronger
country image. Thus, the question arises whether we
would obtain a similar pattern of results if we were to
study a strong, familiar brand but from a weak COO.
To address this issue, we conducted an additional follow-up study on a high-involvement product category
(DVD players), in which we focused on a strong and
well-known brand (Samsung) that originates from a
country with a relatively poor country image (South
Korea). For the lesser-known brand, we selected another
South Korean brand, namely, LG Electronics. As in
Experiment 3, we chose the United States as the COO
with the more favorable country image to compare it
with South Korea. The sample consisted of 219 business
and social sciences students; their average age was 21.6
years, and 58.4% were female. Manipulation checks
In two of our studies, this result emerges from a relatively realistic buying situation in which participants
actually fulfilled the purchase act. This shows that the
COO effect does not disappear when actual purchase
behavior (in terms of real WTP) is the dependent
variable, rather than softer measures such as reported
attitudes and buying intentions.
Further research should try to replicate our findings
using other COOs and product categories as stimuli, as
well as respondents from different countries. For example, the strength of the COO impact as an informational
cue on consumers WTP may depend on the respondents
country or culture. Comparative research seeking to
identify such cross-national or cross-cultural differences
would be most welcome. Similarly, the extent to which
the COO impact on WTP is moderated by the product
type involved (e.g., utilitarian vs. hedonic) or the perceived globalness/localness of the brand (Steenkamp and
De Jong 2010) is also open to investigation. Replications
and/or extensions of our study using nonstudent samples
would also enhance the external validity and generalizability of our findings. Although Experiments 1 and 2
have been conducted under relatively realistic conditions
in which respondents actually had to pay for the product, they were still carried out in a laboratory setting.
Field study replications to validate our findings would
therefore be highly desirable. In such field studies, the
impact of environmental conditions (e.g., the availability
of substitute products) could also be studied when
assessing consumers WTP. Moreover, it would be worthwhile examining whether and how the COO effect on
WTP changes over time as a result of changes in country
image perceptions. Economic (e.g., economic crisis in
Greece), political (e.g., uprising in Egypt), and even natural events (e.g., earthquakes in Japan) can all be expected
to affect consumers images of countries and, in turn,
those of their products; as a result, consumer response
variables (e.g., WTP) may also be affected. Finally, attention to price-related outcomes other than WTP would
provide insights complementary to those generated in the
current study. Price sensitivity, perceived price fairness,
and price search behavior just are some examples of
variables that could be studied in conjunction with COO
and for which extant knowledge is limited.
MANAGERIAL IMPLICATIONS
From a managerial point of view, our findings hold
interest for international marketers in several respects.
First, if COO is a major factor that consumers take into
account when they make a decision about the maximum amount of money they are willing to spend on a
branded product, managers can use this information in
their pricing decisions. If their brand originates and is
produced in a country with a good reputation and
image, the implementation of a premium pricing
strategy should be easier because consumers WTP is
also likely to be higher. Although this suggestion might
appear intuitive, attitudes and behavior often differ,
and it is only through empirical support (such as that
offered by the current study) that one can determine
whether this is likely to be the case.
Second, communication activities about the COO can
facilitate pricing policies such as price differentiation. If
the firm finds itself in the fortunate position of benefiting from a favorable COO image, it should emphasize
the notion of COO in its communication strategyfor
example, by calling attention to the COO during
advertising activities or on the package design. With
such measures, consumers should notice and process
the COO as an informational cue, which in turn
should enhance their WTP. For example, in an interview with the Financial Times, the chief executive officer of the luxury group Tods stated the following
when being asked whether the Made in Italy label
will retain its luster: Yes, because it is still the maximum guarantee of high quality products such as ours.
Like the French for perfume, the Swiss for watches.
We have the hundreds, the thousands, of family firms,
micro-enterprises, almost a Renaissance model, that
guarantee that quality. Thats not easy to copy (Aspden 2011).
Conversely, if the brand is linked to a less favorable
COO image, the firm should highlight other product
attributes, rather than the COO, in its communication
strategy (Verlegh, Steenkamp, and Meulenberg 2005).
However, in deciding whether to emphasize the COO,
managers should also consider the product category. In
a low-involvement setting, our results indicate that an
accentuation of the COO seems to be promising. For a
high-involvement setting, however, it is advisable to
prime the COO within marketing activities, especially
if consumers are relatively unfamiliar with the brand.
Third, at a broader strategic level, the effect of COO on
consumers WTP, as shown in Experiments 2 and 3, indicates the need for caution in decisions about a change in
COO. In this context, the inability to identify an incongruity effect suggests that a discrepancy between the home
country of the brand and the country of production is not
NOTES
1. Operating income is defined as total revenues from
operations minus cost of goods sold and operating
costs (excluding interest expense and income taxes)
(Horngren, Datar, and Rajan 2012, p. 64). Operating
income differs from net income in that the latter also
takes nonoperating benefits (e.g., interest revenue)
into account from which nonoperating costs (e.g.,
interest) and income taxes are deducted (Horngren,
Datar, and Rajan 2012, p. 92).
2. Common method bias, which often arises when the
same respondent offers assessments of both the independent and the dependent variables (Podsakoff et al.
2003), does not pose a problem in Experiments 1 and
2. Unlike survey-based designs, we manipulate both
independent variables (i.e., COO and brand familiarity) experimentally instead of measuring them, and
respondents only provide data on the dependent
variable (WTP).
3. We conducted this follow-up study on the suggestion
of an anonymous reviewer, whom we would like to
thank.
4. Our analysis of the statistical power of the applied
ANCOVA model reveals a power value of .86 (a =
.05), which exceeds the recommended value of .80
(Cohen 1988).
5. Our analysis of the statistical power of the applied
ANCOVA model reveals a power value of .99 (a =
.05), which well exceeds the recommended value of
.80 (Cohen 1988).
6. We found the interaction effect of COO and brand
familiarity to be significant when examined with
ANCOVA (F(1, 243) = 5.04, p < .05). Regarding the
covariates, price consciousness (negative) (F(1, 243) =
6.99, p < .01), brand commitment (positive) (F(1,
243) = 4.38, p < .05), and product design (positive)
(F(1, 243) = 11.14, p < .01) revealed significant
effects on WTP.
7. We obtained the same results when we applied an
ANCOVA (F(1, 214) = 8.20, p < .01). In terms of
covariates, the latter revealed a significant negative
influence of price consciousness (F(1, 214) = 11.69,
p < .01).
Brand
familiarity (+)
Conceptualization
Country
image (+)
Variable
(Assumed
Influence on
WTP)
Measurement
.81/.87/.86
.95/.96/.97
.81/.86/.86
.92/.94/.97
Cronbachs a
Construct
Reliability
.80/.84/.87
.52/.63/.61
Average
Variance
Extracted
Purchase
involvement
Brand
commitment
Measurement
Conceptualization
Price
consciousness
Covariates
Variable
(Assumed
Influence on
WTP)
Appendix. Continued
.79/.80/.78
.90/.91/.89
.85/.87/.77
Cronbachs a
.80/.81/.79
.91/.91/.89
.87/.88/.79
Construct
Reliability
.57/.59/.56
.76/.78/.73
.64/.65/.50
Average
Variance
Extracted
Product
experience
Experience
with COO
Measurement
N.A./N.A./.94
.89/.89/.89
Cronbachs a
N.A./N.A./.94
.90/.88/.87
Construct
Reliability
N.A./N.A./75
.70/.65/.65
Average
Variance
Extracted
Notes: Cronbachs a, construct reliability, and average variance extracted values relate to Experiments 1, 2, and 3 respectively. N.A. = not applicable. CFA model fit was as follows: Experiment 1: c2(215) = 384.55,
RMSEA = .079, and CFI = .936. Experiment 2: c2(215) = 407.62, RMSEA = .084, and CFI = .930; Experiment 3: c2(329) = 976.46, RMSEA = .089, and CFI = .926.
Conceptualization
Product design
Variable
(Assumed
Influence on
WTP)
Appendix. Continued
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