A Brand New Opportunity to Profit
Oct 5th 2012 8:45PM
Updated Oct 5th 2012 8:58PM
Smart entrepreneurs know that naming their business is an important component of their overall business strategy. "AAA Plumbing" might put you at the top of the Yellow Pages to attract harried homeowners looking for someone to quickly clean out a clogged drain, but Roto-Rooter has mindshare among consumers (and a catchy jingle) that generated $370 million in revenues for Chemed last year.
A rose by any other name may smell just as sweet, but you can't put a price on a top brand name. Well, actually you can. Every year the market researchers at Interbrand compile a list of the world's top brands and determine what they're worth. From perennial leader Coca-Cola (NYS: KO) -- it's been the top dog for 11 years running -- to No. 100 Gap (down from No. 84 last year), the best brands become enmeshed in our lives, evoking emotions and providing reassurance. You know the experience you have walking into a McDonald's (NYS: MCD) (No. 7 on the list) in New York City is going to be similar to when you walk into one in Singapore.
When branding your own business, you might never come up with something as memorable as Kleenex (No. 80), whose name has virtually passed into common parlance as a synonym for a tissue (or it would if Kimberly-Clark (NYS: KMB) didn't vigorously defend its trademark), but it's still one of the keys to breaking through to the consumers you're trying to target.
Just realize that branding isn't the be-all, end-all for being in business: You still have to deliver. And that's what the Interbrand list highlights: companies that've proven time and again they can deliver consistent quality in a way that generates trust.
But don't take that line of connection for granted. Companies can break that trust. As the report notes, Nike once stumbled by becoming the "poster child for sweatshops" and raising the ire of human rights activists. It had to go into "brand rehab," but is now on the list for the sixth straight year (No. 26). BP (NYS: BP) finds itself in the same situation, still reeling two years after the Macondo well disaster in the Gulf of Mexico and marking the third year of its absence from Interbrand's rankings.
The list is as fluid as business itself, with Facebook (NYS: FB) breaking through this year and Armani, for one, falling off.
For investors as well as entrepreneurs, the list provides a rich tableau of opportunity. Although American brands dominate the list, accounting for 53% of the top global names and eight of the top 10, European companies represent 34%, with Asia rounding out the rest at 10%. Notably, Samsung and Toyota are Nos. 9 and 10, perhaps a bit surprising if you recall the unintended acceleration problems that dogged the carmaker two years ago. That means you shouldn't be wary of looking abroad when you want to find stocks that have become part of the fabric of our existence.
Unlike the businessman who thinks he needs to come up with an exotic name to indelibly stamp his company into the mind of his customer, the list shows investors that the ordinary and commonplace can be a profitable avenue of investment. The saying "familiarity breeds contempt" shouldn't have you dismissing these big brands because you know and love them. Instead, they just may be the ones you need to add to your portfolio.
Looking under rocks
It's not just its IPO that has made Facebook such a valuable brand. Interbrand highlighted its role in feeding the Arab Spring uprisings and its ability to stay relevant to its 1 billion users. Now there's a new premium report on Facebook from the Motley Fool detailing the opportunities and challenges in store for its shareholders. The report includes a full year of updates, so click here to get started now.
The article A Brand New Opportunity to Profit originally appeared on Fool.com.Fool contributor Rich Duprey owns shares of Nike, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Coca-Cola, McDonald's, and Facebook. Motley Fool newsletter services have recommended buying shares of Nike, Kimberly-Clark, Coca-Cola, McDonald's, and Facebook. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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