Question

Which of the following is most likely to be a disadvantage for a retailer in developing customer loyalty through offering popular national brands?

1) The costs associated with offering popular national brands are very high.
2) There is often a huge reduction in the profit margin for the retailer.
3) Other competitors can purchase and sell the same popular products.
4) Training employees to operate the new product or service involves time and effort.
5) It leads to brand cannibalization.

Answer 1

One disadvantage for a retailer in developing customer loyalty through offering popular national brands is brand cannibalization, where the introduction of a new national brand competes with the retailer's existing national brands. This can lead to a decrease in sales and potential customer confusion.

Step-by-step explanation:

One disadvantage for a retailer in developing customer loyalty through offering popular national brands is brand cannibalization. Brand cannibalization occurs when the introduction of a new national brand competes with the retailer's existing national brands, resulting in a decrease in sales for the retailer and potential customer confusion.

For example, if a retailer is known for selling a specific national brand of soda and decides to introduce a new national brand of soda, customers may choose the new brand over the existing one, leading to a reduction in sales for the retailer.

In addition, other competitors can also purchase and sell the same popular products, reducing the retailer's exclusivity and making it harder to differentiate themselves from their competition.