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Microsoft leads the fight against software piracy in China

Microsoft leads the fight against software piracy in China

01.06.2011

Microsoft has a major problem in China: its software is ubiquitous in the middle kingdom but nobody buys the real stuff. Figures are appalling: when Windows Vista was first launched a few years ago, over 200 million copies were bought worldwide within a month. The figure for China was 244.

Piracy and counterfeiting are major problems for brands in China. IP laws are weakly enforced and the infamous “Shanzai” (山寨) products, imitation brands that carry striking resemblance to familiar Western ones, are everywhere and often represent very credible and much cheaper alternatives to the real deal. Take the example of the iPed, a knock off of Apple’s iPad. It may be cheap but it runs on Google’s Android OS and has been praised by tech analysts for offering great value for money. This goes to show that brands have to step up their game to fight counterfeiters.
What can lead a customer to choose the fake version over the original? Price is surely one of the main reasons but when price is the primary motivation, the financial damage is often limited since those customers probably wouldn’t have bought the real deal anyway. In truth, brands suffer most when copycat versions are chosen not because of their price advantage but simply because consumers just don’t see the difference in terms of customer benefits between the copycat and the authentic, branded version. That is exactly the case for software and video games in China. To most customers, Windows is Windows, whether bought in a nice store for 500 RMB or at the fake market for 5 RMB. There is no perceived difference in value between both options.
In order to strike back, brands must establish a clear difference between the original and imitations in customers’ minds. In the case of software, that’s not an easy trick to pull off. After all, code is code, whatever the support. And even if there really were technical differences between both versions, the challenge would be to explain it to customers in concrete, understandable terms.
So Microsoft is facing a major challenge: it has to get customers to pay 100 times more for a genuine version of Windows. Luckily, the Chinese have one really big obsession: their kid. In China, the products with the lowest price elasticity are those that are status based or fear based. So if you want to get your customers to pay big money, just play the bogeyman.
And that’s exactly the approach Windows took for the latest TV ad in China. The entire ad is a split screen with each half showing a kid working on a school project using PowerPoint and then presenting it in front of the class. With a genuine version of windows, life is bright and your child enjoys the praise and admiration of his peers and teachers. With a fake Windows, life is greyish and your little boy is shamed in front of the entire class. This isn’t even simplification for the sake of argument: this is the exact storyline.
The ad manages to put in very real terms the difference between fake and genuine. It gives the product another dimension by presenting Windows as a tool to be used for advancement in life, one of the highest priority of the Chinese consumer, and thus worthy of a heavy investment.
So what do we learn from Microsoft? First, that when fighting counterfeited products, value perception plays an integral role. Brands must continuously strive to increase the perceived difference in value between branded products and imitations. They can do so by presenting themselves in novel ways and by redefining their customer benefit. Secondly, that value perception is rooted in cultural characteristics and that brands are only successful as long as their message is locally and culturally relevant.

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