The Harvard Business Review publishes books about Management  and one that is always worth reading is on Brand Management. This particular book was first published in 1994 and the 1999 edition has further updates in it, the publisher is Harvard Business Review, Boston, Mass. A company sells something and it becomes successful, what is the next step? How do you protect the brand – do you use private labels to fight on the cost aspect? do you add a premium brand? do you add extensions to the line? or do you try to sell the company to someone else so they ask similar questions? The results in the marketplace will show which action is the best one, but understanding the tradeoffs or ensuring to extend profits, not just product lines is a key. There are many examples in the book which are great and many possible solutions exist.

One of the keys is understanding why people buy the brand. In one example, people bought the brand because their parents bought the brand knowing it was good, when someone began to change it, the consumer began to think why this one, why not another? Doing nothing was the best solution. In another case, the company went  downscale, but then the upscale customers asked why is this a premium brand? am I getting the value I thought I was? In another case, a extension of the line was introduced but demand for the product did not increase. If you were competing in the toothpaste category – can you get people to brush their teeth 3 times or more? but the two biggest brands can introduce brands to ensure your space is constantly squeezed – there is only so much room on the grocery shelf.

Linking to dividend paying stocks, some of the best dividend companies have great brands and if you own their shares you will pay attention to what they are trying to do. One of the keys is what competitive advantage does your brand have over the others to generate profits. What is the brand’s return on sales or profitability? how is the market share – knowing that large market share does not always mean profitability. Understanding the answer allows you as an investor to see if the company has the best strategy and execution of the strategy. If you think it is going well and margins are holding up, you can continue to hold the stock; if not, look for alternatives for companies that you believe and can see are doing better.

There are more questions than answers, till the next time – to raising questions