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The country-of-origin effect (COE) is a psychological effect which occurs when customers are unfamiliar with a product (e.g., product quality) and the image of the product's country of origin has a "halo effect" on the customers' evaluation of the product.
The country associated with the product may be the country of the producing company's headquarters, the country of manufactory or assembly, the country of product design or the country associated with the brand name. A positive country image may allow marketers to introduce new products while quickly gaining customer recognition and acceptance. However, products made in developing countries are only marketable when they are offered at a far lower price than products offered by regional or global competitors, implying a negative country image and a negative country-of-origin effect.
Country-of-origin effects have no inherent intertemporal stability since country images may change. This is the case when customers become more familiar with the country, the marketing practices used to market the product improve, opr when the perceived quality of the products improves. One example of a change in a country image is the changing image of cars made in Japan which significantly improved during the second half of the 20th century. When customers become more knowledgeable about a country's products, the country image has less influence on the formation of those customers' beliefs about product and brand attributes. Also, demographics have considerable influence on the country-of-origin effect as the effect has been shown to have a particularly strong influence on the elderly, less educated, and politically conservative. Finally, country-of-origin effects are dependent on the category of the product due to country-of-origin effects being more relevant for "performance products" like cars or consumer electronics and less relevant for cosmetics or designer clothes.
