How can advertising become a barrier to entry?

Marketing Dec 22, 2020

Expert Solution

In an industry where the incumbent's firms spend a lot in the advertisement, it becomes costly for new competitors who must compete effectively with the existing firms by matching their advertisement budgets. The high cost of entry represents a potential barrier to entry.
Advertising helps create brand loyalty: It becomes very difficult for new companies to compete with one which has established a loyal customer base due to their heavy advertisement. This acts as a barrier and it pushes away the new entrants.

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