Pricing strategy & practice Translating country-of-origin effects into prices Ronald Drozdenko Ancell School of Business, Western Connecticut State University, Danbury, Connecticut, USA, and Marlene Jensen Lock Haven University, Lock Haven, Pennsylvania, USA Abstract Purpose – The purpose of this paper is to examine the effects of country stereotyping, bad press, and consumer ethnocentrism on the prices a country can command and be competitive. Design/methodology/approach – A total of 767 consumers were given prices for products in 11 different categories, then told each product was made in China. They were then asked how much more (if anything) they would be willing to pay if the product was made in Germany , the USA, or India. Findings – Price premiums were significant for all categories, and increased for those scoring higher on a Consumer Ethnocentric Tendencies Scale (CET Scale). However, completing the CET Scale before answering price questions caused respondents to have a lower price premium for US products. The size of the price premium was also positively correlated with the amount of exposure to negative news concerning Chinese products. Research limitations/implications – It is unknown how consumers would respond to categories not studied. Practical implications – The cost of setting up government controls and industry oversight is expensive. However, the cost of negative news with product recalls is also expensive. Countries who avoid such negative news may be able to price their products 14 percent to 100 percent higher. Originality/value – This study quantifies price premiums available to countries with a positive COO image. It also allows a manager to determine the feasibility of developing domestically produced products in specific categories, by identifying categories where consumers would pay a premium for domestically produced products. Keywords Pricing, Country of origin, Perception, China Paper type Research paper The question What’s in a (count ry) name ? And if a product from one country does not “smell as sweet” as a product from another, what does that mean for its pricing potential? This research move s beyond the ef fect of country of ori gi n (COO) on perceived product quality, and instead puts a price tag on a negative COO image. It asks how much higher a country with a positive COO image can price its products and still compete with products from a country with a poor COO. COO effects in the literature Earl y r es earch on COO tri ed to understand how the origina ting country aff ect ed consumer perc ept ions about products, regardle ss of whe the r tho se per ceptions were warranted. For example, Samlee (1994), found 60 empirical stud ies publis hed on COO effects jus t from 1965 to 1994. Many studied country of origi n effects and product perc ept ion (Al -Su lai ti and Baker, 199 8; Bil key and Nes , 198 2; and Tha kor and Katsanis, 199 7.) Some res ear cher s (e.g. Wang and Lamb, 1983) define COO effects as a negative consumer bias toward imported products. In fact, nationalism is a factor in a number of studie s whi ch fou nd consumers generally prefer products made in their own countries (Olsen et al ., 1993; Bannister and Sa unders, 1978; Chao and Raj endran, 1993; Gae deke, 1973; and Nagashima , 197 0). Levin et al. (1993) found a strong bias in US students for American-made cars over Japanese cars in the face of a “Buy America First” campaign. They concluded that nationalistic feeli ngs may domina te other COO perce pti ons. Becke r (198 6), however, found US consumers’ desire to purchas e American products dissipating in the face of perceived inferior quality. In addition, Ettenson et al. (1988) found only a minor COO effect for “Made in America” claims for a ladies’ blouse and a man’s dress shirt. Rel erso n (1966) was at the for efr ont of expa ndi ng COO eff ects research to include stereotyping of countries. St ereotypi ng in COO st udies can be defined as strong favo rable or unfav orable predisposit ions towar ds product s based solely on their COO (Hadjimarcou and Hu, 1999). For exa mpl e, Schooler (19 71) found a pos iti ve bia s towards produc ts fro m Ger many and the USA and a negati ve bia s toward thos e fro m India. Dorn offet al . (19 74) found a positi ve bias toward s ele ctr oni c products from Japan and mechanical products from Germany. Bannister and Saunders (1978) found UK consumers had favorable perceptions about products from West Germany, the UK and Japan, mediocre perceptions about French, Italian and US products and very poor perceptions of products made in Russia. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1061-0421.htm Journal of Product & Brand Management 18/5 (2009 ) 371–378 q Emerald Group Publishing Limited [ISSN 1061-0421] [DOI 10.1108/10610420910981 855] 371
