We've discussed it many times in Fooldom -- brands are powerful. They have value to companies, often a lot of value. Investors would be smart to consider the brand oomph of companies they're looking at.

To understand the power of brands, play some games with your head. Imagine an animated movie that's just been released by Six Rivers Media (I made up that name) and one released by Disney (NYSE:DIS). Knowing little else about the films, which one would attract you more? For many people, the answer would be the Disney film, because most of us are familiar with the brand and trust it to deliver certain things. Even if you wouldn't choose the Disney film, you would likely have some associations with or expectations of it. The Disney name is a familiar brand to you.

Alternatively, imagine that Apple (NASDAQ:AAPL) has just released a digital television program recorder. Without knowing anything else about it, you would probably draw some conclusions, perhaps assuming that it will be easy to use and well-designed. This is branding at work. Brands linked with the perception of high quality and consumer popularity can boost sales and profits.

But all is not well in brand-land. In a recent issue of Wired magazine, former Fool writer James Surowiecki reported on troubling trends. For starters, there's the proliferation of brands -- so many that customers now face confusion, as retailers struggle to accommodate all the offerings. He pointed out that while in 1992 there were fewer than 20,000 labels on grocery shelves, in 2001 there were more than 40,000. While there were about 40,000 trademark registrations in 1983, there were more than 140,000 in 2003.

While consumers' preferences for name brands have long permitted companies to charge more for them, brand premiums have been shrinking. Surowiecki reports that five years ago, Sony (NYSE:SNE) DVD players cost 44% more than average DVD players. Today they cost just 16% more. In grocery stores, club stores, and supercenters, store brands such as Kroger's (NYSE:KR) Private Selection, Safeway's (NYSE:SWY) Safeway Select, Costco's (NASDAQ:COST) Kirkland, and Wal-Mart's (NYSE:WMT) Sam's American Choice are gaining ground. Surowiecki blames increasingly informed consumers who seek quality for this development.

What does this mean for investors? Well, we should no longer take brand value for granted. Companies will have to work harder to retain their brands' edges. Quality and performance of products count more than ever. Look for companies dedicated to offering high-quality products and services and to maximizing customer satisfaction.

Here are some more thoughts on the power of brands:

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Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart and Costco.