Brand Loyalty and Barriers to Entry

It is generally believed that selling or promotional expenditures (abbreviated as advertising in what follows) are an important source of entry barriers. Bain [1, 281-82], for instance, concludes: Thus product differentiation advantages of established firms loom larger than any other source of barriers to entry, and especially large as a source of high and very high barriers.... This superiority of established firms typically hinges in important or major degree upon the susceptibility of buyers to persuasion through heavy advertising or other salespromotion effort. It also seems to be generally believed that an important mechanism through which advertising erects these barriers is based upon its ability to create loyalty to the products of existing firms and thus to have dynamic effects on demand. This view has been summarized by Comanor and Wilson [3, 425]: