In the framework of luxury marketing, counterfeits have been constructed as a constant threat – an irritating presence and a hostile intruder (Bian & Mouthinho, 2008; Keller, 2009). However, there now exists a minor but growing body of literature that has found counterfeits as potentially non-threatening or even beneficial for luxury brands (e.g., Barnett, 2005; Romani, Gistri & Pace, 2012). Building on this emerging stream of evidence, the goal of this conceptual paper is to explore how counterfeits act as advertising for luxury brands and how luxury brands could benefit from this. To understand the communicative potential of counterfeits, we construct our argument around Veblen’s (1899/1994) foundational notion of how the conspicuous consumption of luxury revolves around the creation of new styles by/for the elite consumers and the efforts of the masses to emulate them. In doing so, we differentiate the effects based on whether they contribute to the emergence of new luxury goods targeted to elite consumers or the diffusion of luxury to the masses. The emergence of luxury stems from the desire of elite consumers to distinguish themselves from the masses through conspicuous consumption (Veblen, 1899/1994). Counterfeits contribute to this phenomenon by accelerating the snob effect (Leibenstein, 1950) as counterfeits destroy snob premium of goods and drives elite consumers to seek new ways to distinguish themselves (Barnett, 2005). Counterfeits also accelerate the fashion cycle that luxury companies depend on (see also Sproles, 1981). They do so by induced obsolescence that destroys the status value of product designs when they are copied and by anchoring trends to design features that accelerate their diffusion and subsequent replacement (Raustiala & Sprigman, 2006; 2009). Another key component of conspicuous consumption relates to the diffusion of luxury to the greater public (Veblen, 1899/1994). Therein counterfeits can generate aspiration effect when non-elite consumers imitate elite consumers by consuming counterfeits and in so doing generate brand awareness and exposure among other non-elite consumers (Barnett, 2005; Shultz & Saporito, 1996) at early stages of diffusion. During latter stages of diffusion counterfeits can generate bandwagon effect (Leibenstein, 1950) as they confer the desirability of certain luxury goods and brands over others (Barnett, 2005;Bekir, El Harbi & Grolleau, 2008). Finally, counterfeits can generate herding effect as they signal which to consumers which goods are desirable and appreciated or ‘trendy’ at a certain point in time (De Castro, Balkin & Shepherd 2008).

Economic fluctuation has a remarkable influence on firms and their performance (e.g., Deleersnyder, Dekimpe, Sarvavy, & Parker, 2004; Srinivasan, Rangaswamy, & Lilien, 2005). Given the extreme conditions and frequency of recessions (since World War II, recessions have occurred every six years; Srinivasan et al., 2005), understanding what kind of marketing is effective across the different phases of the economic cycle is a crucial question for marketers (e.g., Steenkamp & Fang, 2011; Srinivasan, Lilien, & Sridhar, 2011). In business-to-business markets, characterized by a strong emphasis on long-term customer relationships (e.g., Grönroos, 1997), the ability to gain a deep understanding of customers and their changing needs is a central determinant of firm performance. Therefore, in such markets, market orientation (MO) provides a particularly important source of competitive advantage. During an economic crisis, MO may also serve as an effective shelter against declining firm performance, particularly in industrial markets (Alajoutsijärvi, Klint, & Tikkanen, 2001). The key rationale is that highly market-oriented firms are able to rapidly and accurately identify changes in the marketplace and respond to shifting customer needs and competitors’ actions (Narver & Slater, 1990). While a vast body of literature evidences MO in general to yield performance gains for firms (Kirca, Jayachandran, & Bearden, 2005), some recent studies (e.g., Kumar, Jones, Venkatesan, & Leone, 2011) have questioned this relationship. Recent empirical studies (e.g., De Luca, Verona, & Vicari, 2010; Noble, Sinha, & Kumar, 2002) also propose that the different components of MO (i.e., customer orientation, competitor orientation and interfunctional coordination) may result in different performance outcomes. Furthermore, recent studies have shown the economic environment to play an important role in determining the performance outcomes and, thus, effective forms of MO (cf. Smirnova, Naudé, Henneberg, Mouzas, & Kouchtch, 2011). In this study, using panel data of 140 firms from before and after the great financial crisis, we examine the performance implications of distinct forms of MO 1) over the changing economic cycle 2) among different types of business-to-business focused firms. Employing ordinary least squares regression analysis, our findings suggest that MO and its distinct components yield varying performance impacts from economic upturn to downturn. Specifically, the impact of MO increases during downturn, with interfunctional coordination boosting performance and competitor orientation becoming detrimental. Subsequently, employing configurational analysis (fuzzy set qualitative comparative analysis), our findings further indicate that the role and the most effective forms of MO vary across industry sectors, with MO having a particularly strong impact among firms operating in business-to-business services. We also conclude that, in a growing economy the role of MO has become more of a cost of competing (Kumar et al., 2011), whereas in an economic downturn MO still provides a valuable shelter against performance declines. Finally, our empirical findings are in line with contingency arguments, and suggest that the successful ways for a firm to relate with its markets depend on the dynamic firm- and industry-specific settings.