Like a lot of Americans my age -- old enough to have programmed the words "Planet Rock" to zigzag across the television-doubling-as-a-monitor on my family's Apple II, and young enough to have defended my Wombats against the jeers and taunts of my Nike- and Adidas-wearing classmates -- I'm now somewhere between brand vigilant and brand boggled.
I'm absolutely certain of one thing about brands, though: There's a lot of money to be made by identifying a great one early on. In 1980, my father bought $1,000 worth of PepsiCo stock. That investment today, adjusted for splits and dividends, is worth more than $75,000.
Before Michael's hair went up in flames
It's hard to imagine someone looking at those refundable thick glass bottles with painted labels and envisioning contracts with major fast-food chains. Then celebrity endorsements. And way off in the distance, 25 years down the road, something like a co-branding arrangement with an Apple iPod and iTunes service.
In fact, the more I look back at companies like Pepsi, the more I realize that the rules of identifying great brands early on have changed. It takes a different kind of foresight these days; it takes a vision capable of identifying the next IBM (NYSE:IBM) or the next Yahoo! (NASDAQ:YHOO). What follows are four attributes that I think will make or break brands in the years to come:
1. One word, Ben: plastics
Consumers are demanding more and more innovation. Take a look at the recent history of men's razors. It was probably around the time of his Pepsi stock purchase that my father must've thought to himself, "Hey, no more nicks with this clever little single-blade Bic safety razor." Then came two blades. And about five years ago, I thought Gillette's three-blade Mach 3 would be the last razor I'd ever buy.
In the past year alone, Schick has broken the four-blade barrier and Gillette launched the battery-operated M3Power. And despite a 50% price premium over what the company charges for the Mach 3, the M3Power has captured more than a third of the U.S. razor market in just over half a year.
2. Fast-break teams sell more stuff
Companies are beginning to speed up product offerings to meet consumer demand. Last month, I visited Paris with my wife and some friends. I was amused, but not surprised, to discover that of the top 10 French brands, five are brands dedicated to high fashion. They are Louis Vuitton (1), L'Oreal (2), Chanel (4), Lancome (8), and Hermes (10). It goes without saying that these brands are subject to the short-lived and fickle tastes of the world of fashion. In the old days, brands stayed relevant by offering new products on a seasonal basis. Now, the industry is seeing a shift to speedy new product offerings on a monthly basis.
And speaking of fast, while crossing the Seine, I spotted former Showtime Laker James Worthy. I didn't bother telling him about the time I traded in my Wombats for those blue, white, and yellow Converse high tops that he and Magic and Kareem made famous during the 1980s, and how, instead of getting clobbered on the playground, I started getting chosen to play in a few pick-up games here and there. Instead, I left Mr. Worthy alone (against my most profound of urges).
3. The new media massage
The splintering of the media has created an opportunity to engulf consumers in a vast and sophisticated integrated campaign designed to communicate a brand message. You might recall a time when Intel (NASDAQ:INTC) was unknown to all but a few computer manufacturers. Then, as a result of its famous Intel Inside marketing campaign, it became a household name.
This is what one former Procter & Gamble executive calls "surround-sound marketing." It can begin with things like in-store demos and pitches on Wal-Mart television, and expand to include new techniques like integrating Crest Whitening Expressions Refreshing Vanilla Mint into an episode of The Apprentice.
The objective is twofold: to target specific customers and to fit the medium to the message. If he were alive, Marshall McLuhan might say, "I told you so."
4. Start small. Then think total world domination
This kind of mantra can propel a brand to global megabrand status in a fraction of the time it used to take. Consider Starbucks (NASDAQ:SBUX), with stores now popping up around Paris. What could make Parisians get their coffee to go? How about a Seattle-area start-up that exploded into one of the most valuable brands on the planet in less than two decades. "Starbucks, based on the old model, shouldn't be able to happen," says Kelly O'Keefe, CEO at brand-strategy firm Emergence. But it has. And a few people who scooped up the stock in the early days made a fortune.
One of those people was Motley Fool co-founder -- and chief Rule Breaker -- David Gardner. David bought Starbucks in 1998. He also bought America Online (NYSE:TWX) in 1994 and Amazon.com (NASDAQ:AMZN) in 1997. Below I've listed the split-adjusted returns since he purchased these outstanding companies:
| Company | Date Purchased | Returns to Date |
|---|---|---|
| America Online | 1994 | 2,853% |
| Amazon.com | 1997 | 749% |
| Starbucks | 1998 | 336% |
It's hard to deny that David has a knack for finding great brands early on. Maybe he has an extra advantage because he and his brother Tom have built a great brand in The Motley Fool.
Whatever the reason, I'm thankful for it. And I'm particularly glad that David recognizes his own knack for discovering great brands, and that he shares his insights in a service called Rule Breakers that's dedicated to ferreting out opportunities like Pepsi in 1980 or Microsoft (NASDAQ:MSFT) in the mid-1980s. If you'd like to have a look at his current recommendations, why not try a free 30-day trial?
I think being privy to the kind of vision David shares in Rule Breakers may one day make it easier for guys like me to repeat the wisdom my father gave me. I can see it now: My kids come home after a few scrapes wearing their Wombats, and I say to them, "Kids who have a lot of money to buy nice stuff when they're kids are a lot less likely to have a lot of money to buy nice stuff when they're adults."
At the time, that brand of wisdom didn't mean much to me. Today, it means everything.
This article was originally published as "Spotting Great Brands Early" on Feb. 9, 2005. It has been updated.
Beirne White owns no shares in any company mentioned in this article, nor does he own a pair of Wombats anymore, and he's sad about it. The Motley Fool has a disclosure policy.
