Why branding is a good moat

By | Investing

(Extracted from Double Your Profits: In Six Months Or Less by Bob Fifer)

If the cost of entry is $100 million to build a new plant or invest in product and inventory, and if a competitor’s entry into the market doesn’t work, the competitor can earn a fair portion of its money back by disposing of the inventory and finding another use (or buyer) for the plant. If the cost of entry is $100 million in advertising (because the entrenched product’s barrier to entry is brand image), and the entry doesn’t work, that $100 million is gone forever: There is no salvage value. That is why consumer brand images last so long: it is often too hard and too risky to try to overcome them.

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