Understanding Consumer Attitudes on Counterfeiting and Piracy Public Awareness Campaign Edelman/ December 2009

A 15 MONTH (2008 – 2009) PROCESS REVEALED A NUMBER OF KEY FINDINGS DESK RESEARCH: July 08 / Feb Analysed hundreds of consumer surveys that have been conducted worldwide since Conducted a first-ever global review of consumer awarness campaigns that have been implemented over the last 5 years. 3. Interviewed expert in the anti-counterfeiting field to collect best practices and learn implementation lessons for shaping an anti-counterfeiting programme. DESK RESEARCH: July 08 / Feb Analysed hundreds of consumer surveys that have been conducted worldwide since Conducted a first-ever global review of consumer awarness campaigns that have been implemented over the last 5 years. 3. Interviewed expert in the anti-counterfeiting field to collect best practices and learn implementation lessons for shaping an anti-counterfeiting programme. QUALITATIVE RESEARCH: March / July 09 Conducted focus groups to test a series of previously identified hyposes. To identify the drivers of counterfeit purchases, deterrent messages and communications tools. To understand the linkage between the drivers of counterfeit purchase and message effectiveness. 20 focus Groups coducted in Capital cities (London, Mexico, Moscow, Delhi, Mumbai and Séoul). QUALITATIVE RESEARCH: March / July 09 Conducted focus groups to test a series of previously identified hyposes. To identify the drivers of counterfeit purchases, deterrent messages and communications tools. To understand the linkage between the drivers of counterfeit purchase and message effectiveness. 20 focus Groups coducted in Capital cities (London, Mexico, Moscow, Delhi, Mumbai and Séoul). QUANTITAVE RESEARCH: April / July 09 Launched a series of quantitave surveys in 5 key markets UK, Russia, Korea, Mexico and India. Built on the combined insights from the global desk research and the focus groups and validating the hypotheses tested in the focus groups. Embraced development level diversity and addressed all product categories. Nationnally representative samples (1000 adults per country) QUANTITAVE RESEARCH: April / July 09 Launched a series of quantitave surveys in 5 key markets UK, Russia, Korea, Mexico and India. Built on the combined insights from the global desk research and the focus groups and validating the hypotheses tested in the focus groups. Embraced development level diversity and addressed all product categories. Nationnally representative samples (1000 adults per country)

WE ARE OPERATING ALONG A COUNTERFEIT CONTINUUM A LACK OF RESOURCE "There's no away on earth I'd be able to afford the real thing, so I'm not harming anyone" A LACK OF RESOURCE "There's no away on earth I'd be able to afford the real thing, so I'm not harming anyone" A LACK OF RECOURCE "There's no risk to go to jail" "If CF was a real plague the government would be doing something about it" A LACK OF RECOURCE "There's no risk to go to jail" "If CF was a real plague the government would be doing something about it" A LACK OF REMORSE "What's unethical is that I cannot afford the item I want" A LACK OF REMORSE "What's unethical is that I cannot afford the item I want"

EVERYBODYS DOING IT, WHY SHOULDNT I « Virgins » are consumers that reported they never bought CF in any of the 14 products categories tested « Casuals » are consumers that reported they bought some CF products « from time to time » or « seldom » for at least 1 product category « Regulars » are consumers that reported they bought some CF products « regularly » for at least 1 product category Comparison 5 Countries CF Consumer typology depending on their Counterfeit goods purchase habits

COUNTERFEIT PURCHASERS HAVE A PERSONALITY " HAPPY PURCHASERS " These consumers feel CF is a « smart purchase ». They have a playful relationship to CF and claim to be experts in finding the right copies. They usually purchase sophisticated products (fashion, electronics, software…) in small quantities. They are most commonly found in U.K. and Korea, but as well in emerging markets among highest income levels. " HAPPY PURCHASERS " These consumers feel CF is a « smart purchase ». They have a playful relationship to CF and claim to be experts in finding the right copies. They usually purchase sophisticated products (fashion, electronics, software…) in small quantities. They are most commonly found in U.K. and Korea, but as well in emerging markets among highest income levels. " ROBIN HOODS " These consumers refuse to accept the system the way it is, they consider branded products overpriced and contest the margins, distribution system and taxes. They feel big corporations are often unethical and see no point in protecting their interest. They can be found mainly in Mexico (often expressing strong criticism of the State) but also in Russia or Korea. " ROBIN HOODS " These consumers refuse to accept the system the way it is, they consider branded products overpriced and contest the margins, distribution system and taxes. They feel big corporations are often unethical and see no point in protecting their interest. They can be found mainly in Mexico (often expressing strong criticism of the State) but also in Russia or Korea. " INNOCENT PURCHASERS " These consumers feel they have a « moral right » to purchase CF products since they are in what they regard a difficult personal situation. They are commonly found in emerging markets (India, Mexico, Russia) but as well in more developed markets among lowest income levels. " INNOCENT PURCHASERS " These consumers feel they have a « moral right » to purchase CF products since they are in what they regard a difficult personal situation. They are commonly found in emerging markets (India, Mexico, Russia) but as well in more developed markets among lowest income levels. " STRUGGLING CONSUMERS " These consumers belong to the lowest income level categories. They are very often working hard to provide for their family. They don't see the issue in counterfeit and are sometimes unable to tell the difference between a genuine product and a fake. They concentrate on their basic needs and don't have the « mental space » or education to question the product origin. They can be found mostly in India and in Russia " STRUGGLING CONSUMERS " These consumers belong to the lowest income level categories. They are very often working hard to provide for their family. They don't see the issue in counterfeit and are sometimes unable to tell the difference between a genuine product and a fake. They concentrate on their basic needs and don't have the « mental space » or education to question the product origin. They can be found mostly in India and in Russia " GENUINELY FRUSTRATED " These consumers would like to be able to access genuine products but can't afford what they want to possess. They buy CF out of frustration but are not really happy about it. They would feel embarrassed to admit they don't have the means to access what they want. They sometimes « explain» their purchase behavior by a « justification speech » on exaggerated margins, good fake quality and grey market distribution system. They are commonly found in the U.K. and in Korea. " GENUINELY FRUSTRATED " These consumers would like to be able to access genuine products but can't afford what they want to possess. They buy CF out of frustration but are not really happy about it. They would feel embarrassed to admit they don't have the means to access what they want. They sometimes « explain» their purchase behavior by a « justification speech » on exaggerated margins, good fake quality and grey market distribution system. They are commonly found in the U.K. and in Korea.

SO, WHO EXACTLY IS THE CP PURCHASER?

CP PURCHASERS ARE A DIVERSE POPULATION Spanning all age groups and income levels

THEIR PURCHASES ARE INFLUENCED BY A NUMBER OF FACTORS DRIVERS 1. Cannot afford genuine (77%) 2. Genuine is over priced (66%) 3. Didn't know it's fake (50%) DRIVERS 1. Cannot afford genuine (77%) 2. Genuine is over priced (66%) 3. Didn't know it's fake (50%) DETERRENTS 1. Health risks (60%) 2. Waste of money (52%) 3. Genuine offer better services and warranty (46%) DETERRENTS 1. Health risks (60%) 2. Waste of money (52%) 3. Genuine offer better services and warranty (46%)

PURCHASERS HAVE A PERSONAL CONNECTION WITH COUNTERFEIT PRODUCTS The closer the risk to the purchaser, the greater their concern

THEY CAN BE ENGAGED AT THE POINT OF SALE

PURCHASERS LISTEN TO VICTIMS AND EXPERTS, BUT NOT AUTHORITY FIGURES LEAST CREDIBLE SPOKES PERSONS 1. Police (13%) 2. Judges (8%) 3. CEO (7%) LEAST CREDIBLE SPOKES PERSONS 1. Police (13%) 2. Judges (8%) 3. CEO (7%) MOST CREDIBLE SPOKES PERSONS 1. Person harmed by CF (68%) 2. Mothers that have harmed their children (56%) 3. A medical expert (48%) MOST CREDIBLE SPOKES PERSONS 1. Person harmed by CF (68%) 2. Mothers that have harmed their children (56%) 3. A medical expert (48%)

TO ENGAGE PURCHASERS THE PROGRAM MUST BE FLEXIBLE ENOUGH TO…... ADDRESS SPECIFIC RISKS 1. To their health 2. To their property 3. To their jobs 4. To their investment 5. To their personal reputation 6. To their community... ADDRESS SPECIFIC RISKS 1. To their health 2. To their property 3. To their jobs 4. To their investment 5. To their personal reputation 6. To their community... AND ALLOW TAILORING TO ADDRESS: 1. Socio-economic composition 2. State of regulation 3. Most impacted sectors 4. Drivers and deterrent mix 5. Credibility of spokespeople 6. Point of purchase 7. Media landscape... AND ALLOW TAILORING TO ADDRESS: 1. Socio-economic composition 2. State of regulation 3. Most impacted sectors 4. Drivers and deterrent mix 5. Credibility of spokespeople 6. Point of purchase 7. Media landscape

CF Products availability & Market potential for CF (TOP 5) CF Purchase Habits CF Distribution channel (all products, index based on CF market share and purchase location in the country) DVDs & CDs (96%) Perfume (88%) Computer software (88%) Clothes (87%) Luxury items (76%) DVDs & CDs (71%) Computer software (55%) Clothes (46%) Luxury items (42%) Perfume(35%) Availability (% of consumers saying they have an EASY access to CF for this kind of products) In a regular storeIn the streetsAbroad /on Holiday.Online MEXICO36%42%17%5% 5 COUNTRIES AV.51%24%14%11% A CASE IN POINT: MEXICO Never purchaseCasual purchaseRegular purchase MEXICO13%74%13% 5 COUNTRIES AV.20%66%14% CF Market Potential (% of consumers saying they ALREADY PURCHASED some CF for this kind of product )

Spokespersons credibility Top reasons for CF purchase & Top deterrents for CF purchase Cannot afford genuine (80%) Genuine is overpriced (61%) Dont have access to genuine products(48%) CF products are as effective (44%) Dont know its CF(33%) Can damage you health (74%) Genuine provides more warranty & services (74%) Poor quality can damage your equipment (60%) You waste your money (59%) You set a bad example to kids around you (57%) Drivers (% of consumers choosing the item as the top reason why people buy CF) Deterrents (% of consumers choosing the item as the main argument they would use to stop a friend from buying CF) A person that got seriously harmed by CF (64%) A doctor talking about the risk of CF for ones health (64%) A mother who harmed her child with CF lotion (63%) A policeman saying CF is controlled by criminals (12%) A government official saying CF is harming the economy (13%) A judge saying CF business breaks many laws of the country (14%) 3 most credible 3 least credible A CASE IN POINT: MEXICO

GOVERNMENT MUST PLAY A ROLE AS BUSINESS HAS LOST THE ABILITY TO LEAD UNILATERALLY 15 E139. Thinking about the role that business should play in helping to solve global issues such as energy costs, the financial credit crisis, global warming, or access to affordable healthcare, which of these following three statements is closest to your view? Business has to partner with governments and advocacy groups to solve these global issues, it cannot do it alone; OR Business should focus on what they themselves can do on these global issues, whether or not governments or others partner with them ; OR Business should not play a part in helping to solve these global issues (Informed publics in 20 countries)

SO WHATS THE SOLUTION? A surround sound approach needs to be engaged – combining awareness and regulation Industry and government must work in lock step Purchasers must see there are real repercussions for purchasing CP products A personal connecion needs to be made with the purchaser with a call to action You have to make a personal connection with a call to action The message needs to be supported by proof points - cost to health, jobs, personal, property and the economy It must be scalable across sectors and geographies and from global to local