We Study Billionaires - The Investor’s Podcast Network - In-B-Tween : Brands and Competitive Advantages (Investing Podcast)

Episode Date: July 8, 2015

This In-B-Tween-isode covers the importance of competitive advantages.  The specific competitive advantage we discuss is the power of a brand.   Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

Hey, how's everybody doing out there? This is Preston Pish, and I'm going to be talking to you about competitive advantage during this week's Inbetween a So during the next couple of Inbetweenisodes, we're going to be talking about the importance of competitive advantages and why every business needs to be thinking about a way to increase their competitive advantage. So this week's discussion is going to be covering the reasons why a brand is an enormously powerful competitive advantage. So I'm going to start off with a story, and this is a story that Warren Buffett often tell. so I'm going to make sure that he gets credit for this. So he says, let's imagine that your wife is shopping at a store,

and she comes across a stack of discount DVDs for the kids. She's been wanting to buy a new movie for the upcoming vacation, so the children have something to watch in the car. When she's looking through the dozens of choices, she doesn't really recognize any of the titles. So instead, what she does is she immediately selects the one that has a Disney emblem stamped on the outside of the case, and that's the one that she selects. So what just happened?

with that story. And what we can say generally is that she made a selection completely based off of the brand. You see, a brand is an enormous competitive advantage that many beginners fail to value when they're first starting out with investing. And the difficulty in valuing a brand is that it's not something that's tangible that you can really necessarily put a number to. That means it's very difficult to quantify a dollar figure to this real value that's being added by the company by having this brand.

So when we look at the different types of competitive advantages out there, there's a whole bunch of them. And these are what we're going to be covering in the following weeks in between us, so just to name a few of them. So the brands are a competitive advantage. Trade secrets like at Coca-Cola. This stickiness factor, like using Microsoft Office is a perfect example of stickiness. Patents are intellectual property or commonly referred to as IP. Volume of sales, which produce a price advantage like at Walmart or at Amazon. or an optimized distribution network, which produces a price advantage, also like Amazon.

So those are some of the big ones. Those are what you're really striving for in a business, because whenever you have that, you can have a margin built into your product that most people can't compete with, which gives you that competitive advantage. And that's truly what's going to give your business some life. So billionaire Jeff Bezos has a fantastic quote about brands. And this is how his quote goes. A brand for a company is like a reputation for a person.

person. You earn a reputation by trying to do hard things well. I think the important thing for people to realize is that a brand doesn't happen overnight. In fact, most billionaires view a strong brand is one of the most important competitive advantages that a business can build. A company builds a brand over long periods of time by being consistent, by constantly delivering value to the customer well before the business tries to increase the bottom line of their profit. And most importantly, a company ultimately builds a brand when they develop a long-lasting trust with the customer. And trust is really the key word here. As many people know, trust isn't something that's simply given on a whim. It's something that is cultivated over years of

favorable customer experiences. So this is the key question. What is your personal brand? What experience are you creating with each person that you interact with? And if you're a business owner, what kind of experiences your customer having with your brand and your company every time they do business with you? And I think that's the key question that we've got to get at here. And you've really got to think about yourself and how you answer that individually. What is my personal brand? What is the brand that I'm creating for my business if you are a business owner? So here's a quote. And I think we'll end on this because it's really relevant for the coming generations and for businesses in the future generations. And this is by Richard Branson. And

Branson says, the brands that will thrive in the coming years are the ones that have purpose beyond profit. I hope you guys enjoyed this week's in between a episode. And what we're trying to do is pack a lifetime of experience into only five minutes.