Combat software theft with marketing

Journal of Public Policy and Marketing, Vol 23 Issue 1, spring 2004, World Business, 28 March 2006, 04:32PM

Intellectual property piracy - through counterfeit DVDs and CDs, sharing of computer software and the like - is a significant international issue and a particular problem for US companies. Research indicates that part of the difficulty is attributable to the apparent willingness of otherwise law-abiding people to change their attitudes when it comes to intangible objects.

For example, an individual would be less concerned about stealing $1,000-worth of software from Microsoft than about taking a $10 computer mouse from the same company. It is suggested that this is because there is a greater inclination to pay for certain types of goods and services than for others and that what distinguishes the two groups is their cost structure.

Consumers feel they do less harm by not paying if their failure to pay hinders sellers' ability to recover fixed costs (FC) than if it prevents them from recouping variable costs (VC) and so feel less obligated and are less likely to pay voluntarily for a high-FC, low-VC product than for a high-VC, low-FC product.

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In addition, there is evidence to suggest that people view costs differently depending on whether they are directly and explicitly associated with individual level consumption or are part of what can be construed as the cost of doing business. It also appears that people perceive failure to pay VC as inflicting more harm and are thus more likely to pay the costs that they associate with the specific unit they use or possess.

Essentially, it comes down to psychology. Consumers are more likely to perceive a failure to pay for a product with a relatively high VC as inflicting a loss, whereas a failure to pay for a product with a relatively high FC is more likely to be perceived as causing the seller to forego a gain.

It follows from this that decreasing the perceived VC in the mind of the consumer can lead to a decrease in the harm that consumers believe they would cause a seller by not paying for a product. Consequently, by changing the way it distributes software, a company could alter consumers' perceptions of the harm associated with failure to pay for the programme and thus change their payment intentions.

This means that it might be possible to combat intellectual property piracy with marketing initiatives rather than more law enforcement.

Source: Why are people so prone to steal software? The effect of cost structure on consumer purchase and payment intentions
Joseph C Nunes, Christopher K Hsee and Elke U Weber
Journal of Public Policy and Marketing, Vol 23 Issue 1, spring 2004

Review by Roger Trapp

This article was first published on World Business