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A Stock Market Blind Spot

26 September 2006 - Features - Editor

Statements required by the stock market need no mention of a company's brands, their shares and ranks. There is no place for them in the list of assets of a firm. However, no financial statement can show a surplus without them. It is ironic but true that the most valuable assets of companies on a stock market are intangible.

Top marketing professionals understand the value of brands for their careers depend on them. However, pressures to present a bright picture to the stock market may force top executives to prevaricate on investments needed to develop brands. Tax laws allow advertising and brand development expenses to be written off against the current year's profits, though the effects, if properly administered, last for years.

Brand values are subjective and very ethereal for stock market professionals. Surveys are not always unbiased and authoritative, and formal audits are difficult for outsiders to access. However, retail investors need to keep tabs on how brands fare, for they are the earliest and surest indicators of a company's fortunes. Knowledgeable and experienced people often decide to remain invested in companies which are willing to even take transient drops in cash flows in order to build brands of durable values.

Some stock market analysts focus on products when considering brands, but the process is even more important in services. Corporate branding is more important than that of individual components in industries related to travel and tourism. Consumer recall levels of corporate and service brands are very difficult to assess, especially in terms of understanding consumer decision making.

Small investors can assess brand values of all kinds by reviewing their own impressions as consumers, and by soliciting inputs from suppliers and members of the logistics chain. Observant people at retail outlets can provide invaluable insights in to trends in competitive branding. Branding matters in all sectors as long as people have the freedom to choose. It is therefore ubiquitous in a stock market environment. Relative rates of recall and trust are fluid, and hence it is necessary to monitor trends on an intermittent basis. Managements should always be pressed to provide as much detail as possible regarding their brand management achievements and plans.

 


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