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So what does McDonald's sell?

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If you guessed hamburgers, fries and milkshakes, guess again.

Your second guess is probably wrong too. Because I know with today's marketing obsession with "lifestyle" marketing, most people believe that McDonald's sells a feeling of comfort and a family-friendly atmosphere. Just look at their Happy Meals, their creation of Ronald McDonald, their Disney promotion tie-ins and their "You Deserve a Break Today" jingle. But again, if you thought this, you would be wrong.

Pure and simple, McDonalds sells real estate. In 1968, McDonald's operated just 1,000 restaurants. Less than 40 years later, it operated over 30,000 restaurants and opens 2,000 new restaurants every year. As I said, it sells real estate. If you still don't believe me, Ray Krok's (the owner of McDonald's) right-hand man and business partner, Harry Sonneborn, once stated, "We are in the real estate business. The only reason we sell...hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent."

And What about Nike? What do they sell?

Given that Nike does not own a single sneaker factory or have a single person directly involved in manufacturing their sneakers on their payroll, it is most definitely not shoes. They outsource every single step of the manufacturing process so they can spend the greatest percent of their annual budget every year on marketing. Nike's largest budget percentage is overwhelmingly allocated every to their designs and marketing department. And what do they do?

They are Nike's idea factory. Nike sells dreams, pure and simple.

Before Nike paid Michael Jordan more than enough money that he could ever possibly know what to do with, the sneakers every kid wanted on their feet when they went back to school were Adidas. Nikes were what kids wore when you couldn't afford Adidas. Back then, Run DMC cut a track titled "My Adidas", not "My Nikes". Adidas had the respect of the hip-hop community, not Nike. When Nike realized that the key to success was to sell not shoes, but the concept that wearing Nikes would make you a better athlete, would make you stronger, run longer, run faster, give you more endurance, even make you jump higher "just like Mike", only then did they started selling more shoes than anyone else. In fact, before they hired Michael Jordan to promote their ideas, Nike was losing so much money that they almost went bankrupt. In fact, this strategy proved so successful that Nike even coined a term for it.

They call this process "bro-ing" (Source: No Logo, by Naomi Klein, p. 75). They would take their prototype shoes to the inner-city playgrounds of Philly, Chicago, and New York, approach young kids, and say "Hey bro, check out the shoes" to build a buzz around them (this stuff is just too good to ever make up.) Nike shoe designer Aaron Cooper stated that when he went on a "bro-ing" expedition in Harlem in New York City, that kids would tell him that Nike was the most important thing in their lives. Number two was their girlfriend. Nike determined from that point on, they were going to "bro" people to death. Since that decision, Nike has long replaced Adidas as the "it" sneaker among the "in-crowd".

So what do the big global investment firms sell?

The big investment firms employ some very sharp minds as well. They understand that selling a customer a dream and not reality will gather more assets. That's why they don't attempt to sell you great returns even though this the number one thing that every investor wants. How else can you explain why most investment firms always tell you never to expect more than 6% to 10% maximum returns a year from your stock portfolio? Do those returns sound dreamy to you? Because if this was their major marketing campaign, how many private wealth management clients do you think they would have?

Can you imagine a slogan: "Because we make you 8% a year"?

Somehow I don't think that slogan would drum up much business. So the global investment houses, just like McDonalds and just like Nike, have figured out a way to sell you something else instead. Because they are not interested in trying to earn more than 6% to 10% a year for you, and this concept could never be sold as a dream, they sell you trust, and in the case of a post 9-11 America, sometimes even shamelessly sell national pride. Just look at some of the slogans they have used.

Prudential. "Growing and Protecting Your Wealth". Merrill Lynch. "We're bullish on America". And Goldman Sachs: "We Stress Teamwork in Everything We Do."

The message has always been, "Trust us, because we know what we're doing. Since we're the authorities, if we can't earn you more than 6% to 10% a year, then you certainly won't be able to do any better on your own." And in the case of Merrill Lynch's slogan of "We're Bullish on America", if that's true, I'd like to take a look at their CEO's stock portfolio in mid-2006 and see exactly how much of his portfolio is allocated to the U.S. stock markets.

A simple way to determine what is the core of a company's mission is not to read their mission statement, but to observe what companies spend all their time and money doing. McDonald's spends all their time and money building new restaurants. Conclusion: McDonald's #1 goal is to sell as much real estate as possible through selling what enables their tenants to pay rent - fast food. Nike spends all their time and money developing new marketing campaigns and doesn't even have one single employee on their direct payroll that makes sneakers. Conclusion: Nike's #1 goal is to build the strongest message possible that the Nike brand is the "it" brand to own.

And global investment firms spend all their time and money training their financial consultants how to gather more assets, not how to make more money for their clients. If you really are skeptical of this, just call up you financial consultant and ask him (or her) how he spends all of his time every day. Ask him (or her) to describe an average day to you and calculate how much of every day is actually spent in activities that will maximize the return of your portfolio versus how much of every day is spent in activities that will maximize the amount of additional assets gathered for the firm. And therein lies your answer.

Almost every global investment firms' #1 objective is to gather as many assets as they can, not to maximize the returns of your portfolio.

This article may be freely reprinted on another website as long as it is not modified, changed, or altered in any way and as long as the below author byline is included along with the active hyperlinks below:

JS Kim is the Managing Director of SmartKnowledgeU, a fiercely independent investment research & consulting firm that uses proprietary strategies to create wealth during this ongoing financial & monetary crisis. JS Kim's predictions over the past 3 years have been so startling accurate that the Financial Times, Reuters, and the International Business Times often reprint his articles.

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