
Emotional Purchases in Luxury and Consumer Behaviour
Emotions are central to managing a luxury brand. In this post, we’re looking at all of the implications of your customer’s emotive side.
Home » The Importance of the Country of Origin Effect
CEO and Founder,
440 Industries
The “Made In … ” label is something that we now much less likely to notice on everyday products, as fewer and fewer companies are able to maintain a cost-efficient domestic manufacturing production. Moreover, countries which in the past might have had a low reputation for quality in manufacturing are now stepping up their game and achieving standards of production which are easily comparable to the more developed economies.
The “country of origin effect” contributes significantly to the perceived value of a product, and fashion firms need to manage this element in a strategic way. The country of origin effect relates to the values that consumers traditionally associate to a country’s reputation for excellence, and delivers value both to a domestic and international audience.
Here are the main topics we are going to cover in this post.
1. The Country of Origin Effect
2. A brief history of the fashion industry in Italy
3. The “Made in Italy”
4. The business reality in Italy
5. Conclusions
As companies expand internationally, they get an opportunity to re-organise their value chain (as discussed in this post: A Brief Introduction to the Fashion Industry).
Moving a company’s manufacturing processes abroad can serve a variety of purposes: cost reduction, transport efficiencies or even avoidance of tariff barriers.
In international marketing, outsourcing production is a very effective strategy to reduce costs and achieve a more competitive price point. On the other hand, the degree of quality control and production standards of a product can be heavily impacted by this decision, as companies trade may end up trading quantity for quality.
In the world of fashion and luxury, some firms have decided to resist the temptation to exploit this cost-reduction opportunity and decided to maintain domestic production, knowing that if certain standards of manufacturing excellence are maintained, the quality of their products will gain a competitive edge against competitors.
The country of origin effect plays two vital roles in influencing consumer behaviour in both domestic and international markets:
The concept of “Made In” in fact is can be used elastically – to say the least-, to include a geographical denomination related to any of the segments of the value chain. This is the case for Apple, which for instance uses the expression “Designed in California, assembled in China” to reinforce the fact that the design stage (or the research and development stage within the value chain model) takes place in California, whereas the actual manufacturing – or mere assembly – takes place in China.
Each “Made In” label can covey different sets of values which connect to the intangible heritage of a country. In France, the COO associates products to forms of art. Made in Italy is a blend of design and comfort. Let’s look into Made in Italy a little bit further to see where this legacy of quality comes from.
Italy as a country has played a fundamental role in the evolution of fashion manufacturing, and the Made in Italy label has become a global synonym of quality manufacturing. Studying the development of the Italian fashion industry can assist us in understanding how this COO effect was created and maintained with the “Made in Italy” label.
To capture the trajectory of Italy’s fashion manufacturing evolution, we need to focus on three typologies of business players who were able to influence the growth of the Italian fashion industry over the last 50 years: designers, entrepreneurs, and the textile industries.
Moreover, the Italian fashion system underwent three distinct cycles, lasting an average of 15 years each:
Italian manufacturers were able to achieve premium price points by connecting the high-quality output of their production pipeline with the new, more inclusive vision of Italian fashion.
By making a comparison with those countries (such as India and China) which are now serving as manufacturing hubs for western brands, there is no reason to doubt that in time, these countries too will develop their own prestigious designers and influence fashion on a global scale.
As we have discussed, by looking at the evolution of the fashion manufacturing industry in Italy we can quickly identify all of the elements that made this country internationally famous.
The Made in Italy, is not a label that can be applied lightly or indiscriminately to every product manufactured in Italy. The Made in Italy is an abstract concept, leveraging on the history of fashion in Italy. Made in Italy is a signature that testifies a firm’s unique competitive advantages in terms of innovation, style, service, and price.
A Made In Italy label is a statement and a manifest, identifying a product with unique characteristics.
These values turn into perceptions for foreign consumers who associate lifestyle values to the Italian brands, such as la dolce vita.
The reality of contemporary the fashion industry in Italy is not only comprised of small family businesses, it features 4 distinct categories of players:
Over the last 20 years, the Italian fashion firms have grown tremendously and are now looking towards “the East” to outsource its second lines and bridge lines. In this context, it is likely that just like the Made in the USA, the Made in Italy will gain a more intangible value, connected to the inspiration of the product’s design more than its location of production.
The COO effect is a marketing tool used by companies to transfer the traditional values of a country their brand.
A company wishing to leverage this element in their marketing strategy should try and strike a balance: on the one hand, is should reinforce the value associations which are rooted in a country’s heritage, on the other hand, it needs to work on revitalising the country’s culture, bringing traditional and historical values back into the present.
In this sense, the COO is not a static element, but a dynamic one. Fashion firms should take on the responsibility of renovating the value of their culture and heritage, making it ‘resonate‘ with new categories of customers.
If you’re interested to learn more about the way in which brands use their country of origin to develop a luxury positioning strategy for their brand, look below, we have many more resources for you to explore. Enjoy!
I am an Anglo-Italian business lecturer and consultant based in Florence, Italy. In 2017 I started 440 Industries, an education and training company focused on fashion, music, and technology. Our mission is to help students, entrepreneurs and managers in overcoming the challenges of starting, developing and scaling their business in the creative industries. When there's a will, there's a way!
MORE ARTICLES FROM OUR BLOG
Emotions are central to managing a luxury brand. In this post, we’re looking at all of the implications of your customer’s emotive side.
If you’re interested in finding your niche in luxury markets, look no further! In this post, we’ll explain how to spot your market value!
When discussing fashion and luxury it’s very important to have a clear vocabulary to better articulate our thoughts and ideas.
Made in Italy is not a simple country of origin or a site of production it’s a legacy of heritage and quality that firms strive to maintain. Let’s see how.