Posted by: sanjayshetty | May 23, 2008

Satisfaction, Loyalty and Affinity

Satisfaction -> I like you

Loyalty -> I recommend you

Affinity -> I defend you

Ok now I know you’re wondering what the hell is he talking about.

Lets talk about companies thinking of the above.
Note: The following are just examples and don’t represent any factual data, I’m giving these examples purely for illustrative reasons, to help take a different view on the kind of companies which could possibly be good research candidates for investments.

Below is a list of feelings I have with respect to certain companies/Brands

Satisfaction Loyalty Affinity
Google Yahoo Dell, Microsoft
Pringles Oral-B Braun (products)
Duracell

 

The first row contains technology companies, all of whom I like, however as a consumer of these companies. I have different relations with most of these companies, some I just like, some I recommend to others, and some I go even beyond in defending (i.e. Have a very strong opinion about).

Now companies which are able to build strong affinity for themselves/their products are companies which can usually do good irrespective of how the economy is doing or if there is a general downturn. For e.g. I use an electronic toothbrush, ok now you didn’t need to know that right, however, when I looked for a replacement the only brand under which I was looking for one was Braun. Same goes with batteries I buy. I just pick Duracell and I’m so super duper happy with it. Same goes for my Dell laptop, there are just so many people I’ve not only recommended but convinced on why they should buy Dell laptops with their Complete Care Warranty which is just awesome.

Similarly I’m sure you have different products/companies/brands which you swear by. Start looking their numbers up, and I’m sure you’d find gems amongst them.

I recently started doing this exercise and noticed that quiet a few of the brands I like for e.g. all the items in Row 2 in the above table, they all belong to one company, P&G. Nope I’m not recommending P&G as a company, I haven’t even seen their balance sheet yet. However I definitely will. So if you’ve already studied it, please do share in the comments.

I trust you get the general idea on how to use the above idea to possibly find good candidates to evaluate as an investment opportunity. Start making your list of products/brands which make you happy and then evaluate the companies.

Happy hunting 🙂

Advertisements

Responses

  1. Hello there. I was sent a link to your blog by a friend a while ago. I have been reading a long for a while now. Just wanted to say HI. Thanks for putting in all the hard work.

    Jennifer Lancey

  2. P&G does not sell the products you mention through the listed subsidiary (P&G H&H). They were happy to take on investors when they needed it and later dump them by introducing their products through their (unlisted) P&G Home products. The only products the listed company sells India is vicks and whisper. These on your list ?

  3. Hi Jennifer,

    Thank you.

    pr-> I’m not talking about P&G H&H, I’m talking about P&G as a global entity.

    Vicks and Whisper, I’ve heard good things about, but no they are not on my list.

    Regards,

    Sanjay Shetty

  4. Sanjay,

    Really great information on your website, including the stock screener that I downloaded and am getting familiar with.

    Buying companies based in brand does really make a difference when you look at it from the long term view. For eg., Xerox in India. Nobody (general public) asks for photocopies, they refer to Xerox copies when they actually mean photocopies. I started implementing this idea some time ago based on what brands my kids were most familiar with and came up with McDonalds (at $33.00) and Disney (at $24.00) and I got pretty lucky with a particular company (Exide) recently. As per me, it was trading at a ridiculously low price (close to $6.00). Now at around $15.00, I still think it’s a pretty good investment, long term.

    Others I could think of are Pepsi and coke (observing the way kids are so familiar with them). There are so many other brands out there which I’m sure are pretty good investments for life.

    Sandeep

    Again, thanks for sharing your ideas and knowledge with us Sanjay.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: