Consumer Response to Diffusion Brands and Luxury Brands: The Role of Country of Origin and Country of Manufacture

ABSTRACT

This article contributes to the literature by examining the differences in consumer response to high-tier luxury parent brands (e.g., Prada) versus their low-tier diffusion brands (e.g., Miu Miu). The study investigates the contrasting effects of congruence versus incongruence and utilizes two scenarios of incongruence: (1) When country of origin (COO) is a developed economy and country of manufacture (COM) is an emerging economy; (2) when COO is an emerging economy and COM is a developed economy. By means of three interrelated experiments, the authors find the following: (1) When there is congruence between COO and COM, diffusion brands are preferred more than parent brands; (2) in contrast, when there is incongruence between COO and COM, parent brands are preferred more than diffusion brands. The authors also find that this differential impact of luxury diffusion versus parent brands is stronger for hedonic products as compared to utilitarian products. The findings have important implications for understanding consumer preferences as well as devising marketing strategies for global diffusion brands introduced by the luxury parent company.