Counterfeiting and anti-counterfeiting costs: an application of cost of quality concepts

We apply concepts from the Cost of Quality (CoQ) literature to brand protection and product counterfeiting and use these concepts to provide insights into the nature of anti-counterfeiting investments and the returns to these investments. We start by describing the evolution of the CoQ model and contribute further to this model by incorporating additional cost characteristics. We then apply CoQ concepts to counterfeiting to better understand how firms can invest in anti-counterfeiting and dynamically assess their return to such investments. Based on interviews with brand protection professionals, we also provide insights into how firms are allocating resources relative to this framework. While there are substantial measurement challenges in assessing returns to anti-counterfeiting investments, we show how the CoQ model can help to highlight important cost-benefit tradeoffs and dynamic effects over time, as well as the limitations of metrics in fully capturing difficult-to-measure costs and returns.