Brand origin and country-of-manufacture origin changes: do losses loom larger than gains?

Abstract

Purpose This paper examines equivalent changes in brand origin (BO) and/or country of manufacture (COM) on consumers' willingness to pay (WTP) by varying the decision frame (gain vs. loss). Design/methodology/approach Two experimental studies in a 2 (baseline origin) × 3 (business scenario) between-subjects design were conducted. The baseline origin determined whether the consumer would be faced with a COO gain or loss (i.e. a change to a country with a more or less favorable image). The business scenario described whether the COO change involved (1) a brand takeover (i.e. a change in BO), (2) a production shift (i.e. a change in COM) or (3) a brand takeover coupled with a production shift (i.e. a change in both BO and COM). Findings Consumers are loss averse, as the decrease in WTP following a COO loss exceeds (in absolute terms) the increase in WTP resulting from an equivalent COO gain (in BO, COM or both). However, while Study 1 reveals greater loss aversion due to changes in COM rather than BO, in Study 2, the magnitude of loss aversion is the same regardless of the type of COO change involved. Practical implications The results offer practical guidance for firms navigating cross-border acquisitions and production relocations, enabling more informed decisions that can balance cost savings, operational efficiency and other criteria with potential impacts on consumers' WTP. Originality/value To the best of the authors’ knowledge, this is the first study explicitly investigating loss aversion in a COO context by comparing equivalent positive (gain) and negative (loss) COO changes, distinguishing between changes in BO and COM and focusing on WTP as the central consumer response variable.