FIH, you say, “We value famous brands. Famous brands command more money. Everyone knows that and companies use branding as a competitive advantage. Sure, brand doesn’t necessarily mean quality. But in general, it’s a tried and true way of building marketabilty and increasing profits. All else being equal, good branding is always better.
I believe that if a family has to pay $200k extra for good branding, or a child has to compete harder, it’s worth the premium. It’s like a company spending boatloads of money and creativity on marketing, resources that don’t go into research to make the product better. That’s my marketplace point of view.”
OK, let’s take your branding/marketplace analogy one step further. Say there’s a top ice cream brand, like Ben & Jerry’s, available for sale. Is Ben & Jerry’s brand worth the same to, for example, GE as it is to Kraft Foods? Each potential buyer would look at its own balance sheet and see if they can afford the acquisition, how it would fit into their long term goals, product portfolio, what their perceived ROI is, etc. So maybe Kraft Foods sees Ben & Jerry’s as an outstanding acquisition and is willing to spend almost anything for the brand because it fits with their business model, they like the ROI, etc, but GE looks at the brand and takes a pass, as it doesn’t fit with their business model, mission, they think the ROI stinks, etc.
Just because something has excellent branding doesn’t mean it’s automatically the best fit or choice for everyone.
Taking it a bit further, what if a company knows it needs to make multiple acquisitions in order to thrive (i.e. a family needs to send 3-4 kids to college? You said it’s worth $200,000 to make a choice based on brand, but what if it’s 3-4 x that amount for multiple kids?) In that case, most companies would realize they shouldn’t choose the top brand but instead should spread their limited resources out over 3-4 lower tier ice cream brands (Are Dreyers, Edy’s and Breyers available? If so, they probably have a better ROI than Ben & Jerry’s, ha!)
I could go on and on with your marketplace analogy, but you get the gist. With the college education buying decision, the “all things being equal, pick the best brand” idea does not work for many reasons. First is that things are never all equal. Too many nuances per kid, per school, per family, per finances, etc.
