Benefits-Drawbacks

What Is Trade Credit ?

Trade credit is a business practice where seller or supplier allows the buyer to purchase goods on credit without making immediate payment. It is a short term agreement (generally 15 to 90 days) and buyer should pay the bill amount before the due date. It is beneficial to new business firms and small traders for short term financing.          

Benefits Or Advantages Of Trade Credit

The main advantages of trade trade credit can be highlighted as follows:

Benefits Of Trade Credit To The Suppliers/Sellers

1. It Helps To Increase Sales

Trade credit encourages clients to buy more products and services because it does not require immediate payment. So, it helps the sellers to increase sales volume which leads to increase in the earnings of the business.

2. Better Customer Relation

Trade credit builds trust between the sellers and buyers which improves customer relation and loyalty. Better customer relation helps to increase repeated customers.

3. Attracts New Customers

Better of better customer relation and trust, it improves the image of the business. Good public image helps to attract more potential customers.

4. Competitive Advantages

Sellers who provide trade credit facility to their clients can increase their sales and gain more customers which helps them to compete with rivals in the market.

Benefits Of Trade Credit To The Buyers/Clients

1. Cost Effective And Convenient Source Of Financing

Trade credit may be the most cost effective and easy source of financing to start a new business because it reduces the capital requirement. It is very useful for those who cannot raise enough fund to commence  business. 

2. Better Cash Flow

It improves the cash flow and helps to maintain liquidity in the business. So, daily business activities can be performed smoothly without facing any financial problem.

3. Incentives And Discounts

Sellers offer incentives for early payment ro encourage their clients. Buyers also can enjoy the benefit of bulk buying.  

Drawbacks Or Disadvantages Of Trade Credit

The major disadvantages of trade credit can be highlighted as follows:

Drawbacks Of Trade Credit To The Sellers/Suppliers

1. Problem On Cashflow

The main disadvantage of trade credit to the seller is that it may negatively affect the cashflow and create liquidity problem. Suppliers may have to face difficulty to pay outstanding bills.

2. Monitoring Problem

It takes paper work, extra time and effort to maintain and monitor outstanding account receivable .

3. Risk Of Bad Debt

Another drawback of trade credit is that there exists a high chance of bad debt. If buyers fail to make payment, it negatively impact business. In this situation, sellers have to suffer from huge financial loss.

Drawbacks Of Trade Credit To The Clients/Buyers

1. Difficult To Obtain

Although trade credit is convenient source of financing, it is very hard for new businesses because they do not have past record. So, suppliers may hesitate to provide this facility to the new clients.

2. High Penalties And Interest 

If buyers cannot make payment on time, then suppliers may charge penalties and interest on debt. It becomes difficult for the clients to repay debt with interest.

3. May Affect The Image

It client fails to make payment by given deadline, then it negatively affect the credit rating that may hamper the image and goodwill of the buyer/client.

Pros (To The Supplier)

- It boosts sales and earnings

- It promotes customer relations and loyalty

- It helps to widen the market 

- It improves the goodwill and image of the firm.

Pros (To The Buyer)

- It is convenience source of short term financing

- It helps small businesses to main better cash flow

Cons (To The Supplier)

- Because of credit sales, supplier may face liquidity problem

- It may increase the bad debt because of default payment

- It requires extra time and work to maintain credit records

Cons (To The Buyer)

- In case of late payment, suppliers may charge higher rate of interest and penalties

- It is very difficult to obtain this facility for new business firms

What Is Retailing ?

Retailers purchase goods or services from wholesalers or suppliers and sell to the consumers.They are known as the link between suppliers and final consumers. So, retailing is an act of obtaining products from wholesalers and selling to the ultimate users. There are several benefits as well as some limitations of retailing which are discussed in this post.

Benefits Or Advantages Of Retailers

The main advantages of retailers can be described as follows:

1. Less Capital Requirement

It does not require huge investment to start retail business. Retailers buy goods from wholesalers in small quantity and sell to ultimate customers. It does not need large space to store goods. So, retailing can be commenced with little investment.

2. More Profit Margin

There is fixed margin of profit for wholesalers. Generally they earn 3% to 8%  profit on sale. But there is no fixed margin for retailers, shopkeepers may fix profit margin up to 20% in some cases.  

3. Credit Facility

Another benefit of retailers is that they get credit facility from wholesalers or dealers. But they sell products on cash which helps to maintain adequate liquidity in the business.

4. Better Customer Relation

Retailing is directly linked with the customers. Retailers can understand the interests, preferences and buying behavior of customers. It helps to build better customer relation and loyalty.

5. No Liability

In case of faulty or defective products, the manufacturer should replace the product. So, retailers do not need to bear the loss.

Drawbacks Or Disadvantages Of Retailers

The main disadvantages of retailers can be described as follows:

1. High Marketing Cost

Retailers should make investment in decoration of shop and display of goods to attract more customers. So, it requires more marketing or advertising cost than wholesalers.

       Also Read: 

Advantages And Disadvantages Of Wholesalers

Difference Between Wholesalers And Retailers

2. Selling Skill Required

It requires good selling skill to attract customers. Retailers should possess the art of good communication and convincing power to influence consumers. 

3. Very High Competition

Another disadvantage of retailing is that there is tough competition in the market because several retailers sell similar types of products. So, it is difficult to remain in the competitive environment.

4. No Economies Of Buying

Retailers buy small volume of products from wholesalers. So, they miss the opportunity to enjoy he benefit of economies of buying.

It is difficult to find out proper location to start retail store. It requires highly dense area with fewer competitors.

Pros And Cons Of Retailers In Short

Pros:

- Retailing business can be started with less investment and less space

- Retailers can enjoy more profit margin

- Retailers can get trade credit facility from suppliers which increases the liquidity in the business

- There will be no liability towards the buyers

- It helps to increase customer relation and loyalty

Cons:

- It consumes high marketing expenses

- Retailers have to face high competition in the market

- There will be no economies of buying

- It requires better selling and marketing skills to run retail business

What Is Wholesaling ?

In simple words, wholesaling is an act of selling goods to the retailers. Wholesalers buy large quantity of goods from producers or distributors and sell to the retail stores. Retailers buy goods from wholesalers and sell to the final customers. Therefore, wholesalers bridge the gap between manufacturers and retailers.

Benefits Or Advantages Of Wholesalers

The main advantages of wholesalers can be highlighted as follows:

1. More Discount And Allowance

Wholesalers buy large quantity of goods from manufactures. They can receive cash discount and quantity discount because of bulk buying. It helps to reduce buying cost and increase profit. So, wholesale business enjoys the benefit of large scale buying.

2. Less Marketing And Advertisement 

Generally producers market their products by using different methods of advertising. Retailers also use product display and demonstrations to attract potential customers. Wholesalers do not need such marketing activities because they buy from manufacturers and supply to retailers. So, it helps to eliminate marketing costs.

3. Profit Margin Is Fixed

Wholesalers do not need to worry about the profit because they earn fixed rate of profit. So, they should try to increase sales volume which helps to increase earnings.

Wholesale business does not face tough competition in the market because each wholesaler deals with specific product line from certain producer. So, there is less competition because of limited product line and fewer number of wholesalers. 

5. It Does Not Require Special Skill

Wholesalers do not deal with final consumers, So, they do not require selling skills to attract customers like in retailing.

6. Link Between Manufacturers And Retailers

Retailers cannot buy large quantity of products because of the lack of capital. Producers cannot sell small quantity of their products to each and every retailer in the market. In this situation, wholesalers buy products from producers and supply to retailers. So, wholesaling plays great role to bridge the gulf between manufacturers and retailers.

Drawbacks Or Disadvantages Of Wholesalers

The major disadvantages of wholesalers can be described as follows:

1. It Requires Huge Capital

Huge amount of capital is required to start wholesale business. It requires sufficient fund to buy large volume of goods. Adequate level of stock should be maintained to avoid shortage of product in the market. Truck or delivery van is required to deliver goods to different retail stores. So, it cannot be commenced with little investment. 

     Also Read: 

Advantages And Disadvantages Of Retailers

Difference Between Wholesalers And Retailers

2. Needs More Space

It requires more space to store large quantity of goods. Wholesalers need to spend huge storing expenses due to high commercial rent.

3. Less Profit Margin

There is less profit margin in wholesale business than in retailing. Usually wholesalers earn 2% to 8%  profit on sale, but retailers may enjoy 10% to 20% profit. 

4. Possibility Of Loss

Large quantity of goods should be kept in the store room safely and properly. Water, fire, and insects can damage the products . In this situation wholesalers have to face huge financial loss. 

5. No Direct Interaction With Customers

As we know that wholesalers do not sell goods to the final customers, it means there is no interaction between wholesalers and customers. So, wholesalers cannot understand the interests and preferences of audience.

Pros And Cons Of Wholesalers In Short

Pros:

- Wholesalers get more discount and allowance from distributors because of large scale purchase 

-  Wholesaling business does not require more marketing costs

- Wholesalers do not have to face tough competition like retailers

- Selling skill is not require 

- There will be a fixed profit margin

Cons:

- It needs huge capital investment and more space to start wholesaling

- There will be less profit margin than retail business

- There is no direct interaction with customers

What Is Traditional Marketing ?

Traditional marketing is a strategy that uses offline mediums such as radio, TV, newspapers, direct mail, telemarketing etc. for the promotion of products or services. It is the oldest and most commonly used mode of advertising. It has both benefits and drawbacks which are briefly discussed in this post.

Benefits Or Advantages Of Traditional Marketing

The main advantages of traditional marketing can be highlighted as follows:

1. It Is More Familiar Method Of Advertising

People can easily understand traditional marketing because it is one of the oldest and widely used techniques of product promotion. 

2. It Is Suitable And Accessible For All

One of the main drawback of digital marketing is that it is not suitable for those audience who do not have access to internet and social media platforms. But traditional marketing is suitable and accessible for everyone because it does not require internet service and digital devices. 

3. Reachable To Specific Audience Or Customers

Traditional marketing helps to target specific audience of certain location because it uses location radio, newspapers and TV channel to influence local people. So, it is suitable for the company to attract potential customers of certain region towards the products.

Drawbacks Or Disadvantages Of Traditional Marketing

The main disadvantages of traditional marketing can be described as follows:

1. It Is Expensive Method Of Advertising

Traditional marketing requires more cost and resources than internet marketing. It needs huge marketing budget to promote brand through radio, TV or newspapers.

       Also Read: 

Advantages And Disadvantages Of Digital Marketing

Advantages And Disadvantages Of Content Marketing

Advantages And Disadvantages Of Direct Marketing

2. Limited Number Of Audience

As we know that online marketing attracts large group of audience because it performs globally. But in traditional marketing gives emphasize to the specific audience of specific location. So, it is reachable to limited number of potential customers.

3. It Is Difficult To Measure The Performance

Performance of online marketing can be tracked and measured by using different online tools and applications. But in traditional marketing, it is difficult to collect data and information about the campaign. So, performance and conversion cannot be measured accurately in this mode of advertising.

Pros:

- It is the oldest method, therefore everybody can understand this strategy easily.

- This mode of advertising is accessible for all types of audience

- It is suitable to attract specific group of potential customers

- Product testing is possible through this strategy of marketing

- Success rate is higher than other forms of marketing

Cons:

- It requires more budget and resources 

- It cannot attract large number of audience like digital marketing

- Audience get limited information

- It is difficult to track and measure the performance

What Is Digital Marketing ?

It is a promotion of products or services through internet and digital media such as websites, search engine, mobile marketing, social media, affiliate marketing etc. This mode of advertising can attract audience more effectively than traditional marketing. Digital marketing has several advantages as well as some limitations which are discussed in this post.

Benefits Or Advantages Of Digital Marketing

The main advantages of digital marketing or online marketing can be described as follows:

1. It Is Easy And Convenience Method Of Brand Promotion

Digital marketing does not require more resources like in traditional marketing. By using internet and social media platform, message and information can be spread all over the world in just one click. So, it is simple and quick method of advertising.

2. It Requires Less Cost

Another benefit of online marketing is that it consumes less time, effort, resources and cost than traditional marketing approaches. It requires more marketing budget to promote through television, radio, newspapers and magazines. But in digital marketing, it can be done by using internet with small budget.

3. Digital Marketing Attracts Targeted Audience Effectively

Brands can be promoted through facebook, twitter, instagram, emails etc. Information can be shared globally within a minute which helps to increase targeted customers with less effort.

4. It Is Trackable And Measurable

Performance of this campaign can be tracked with the help of different online tools such as google analytics, sitemeter, statcounter, geovisite and other software. These tools and software provide different information like number of people visit the page or advertisement, their region, their response etc.

5. It Has High Conversion Rate

Internet marketing promotes products or services globally which attracts large group of potential customers. Because of more visibility, it increases engagement, leads and conversion rate.

6. Better Customer Relation

Digital marketing helps to understand the behavior and interests of customers. A marketer can treat them according to their behavior to satisfy them. It helps to build better customer relation which promotes customer loyalty.

Drawbacks Or Disadvantages Of Digital Marketing

The main disadvantages of digital marketing can be described as follows:

1. It Requires Special Skills And Knowledge

Digital marketing is not an easy task because it requires computer knowledge and social media managing skills. Good writing skill is required for content writing, photography and videography skill is required for video advertising. web development, search engine optimization skill is required to make websites and blogs. Marketers should handle social media platforms such as facebook, twitter, linkedin, pinterest etc. properly to promote products or services. 

2. It Is A Time Taking Campaign

It takes enough time to create and promote brand through digital marketing. It requires hard work and a lot of time to gains customer trust. 

       Also Read: 

Advantages And Disadvantages Of Direct Marketing

Advantages And Disadvantages Of Content Marketing

Advantages And Disadvantages Of Traditional Marketing

3. Very High Competition

Because of globalization, it is very difficult for the marketers to influence audience through online promotion. It is a complex task to create unique content and to grab people's attention in this competitive market.

4. It Is Not Suitable For All Customers

Digital marketing may not be suitable for all types of products. For example, if your product target elderly, it will be wise to advertise through traditional marketing because old people may not have access to internet and social media. This marketing strategy is not suitable for business such as beauty parlor, hair saloon, taxi service etc. 

Digital marketing is totally dependent on technology and trends. Any change in technology may affect its performance. If government makes changes in social media and internet policy, it may create big challenge for marketers. So, online marketing is affected by the change in technological and political environment.

Pros And Cons Of Digital Marketing In Short

Pros:

- It is simple, convenience and quick mode of advertising

- It can be performed by using less cost and resources

- It is environmental friendly because it does not use papers, plastics, boards etc. like in traditional marketing

- It can attract large group of audience 

- Its performance can be tracked and measured easily

- It is more flexible than other forms of advertising

Cons:

- It requires special skills and knowledge to carry out this strategy

- It takes a lot of time to make make content and materials

- Marketers have to face tough competition

- It is not accessible for all types of people

What Is Content Marketing ?

Content marketing is a process of creating and publishing online content such as blogs, videos, e-books, podcasts, articles, social media posts etc. to attract large group of audience. It is a long-term marketing strategy that helps to attract potential customers and generate online sales. Content marketing is one of the best alternatives of traditional marketing, in which marketers can earn long lasting income with less effort and cost.

Benefits Or Advantages Of Content Marketing

The main advantages of content marketing strategy can be described as follows:

1. It Attracts More Audience

You can promote your content through different social media platforms such as Facebook, twitter, pinterest, Linkedin, youtube TikTok , etc. Search engine optimization helps to drive more traffic to you blog or website. Publishing informative content, proper SEO and sharing in social media helps to attract large group of targeted audience. 

2. It Increases Conversion Rate

Because of high quality content and better promotion, it draws the attention of large audience. People start sharing your content through emails, and social media which makes the content viral on the internet. Because of wider coverage it increases visibility, generates leads and increases conversions.

3. It Is Simple And Cost Effect

If you have good writing skill, photography or videography skill then you can start content marketing. Content creators or bloggers can do their job from home. It is more cost effective than traditional marketing.

4. High And Long Lasting Income

Another benefit of content marketing is long lasting income. It can generate significant amount of income if you can produce better content because good content attracts more people. Evergreen contents (especially blog and website content) generate income for long period of time.

5. It Builds Customer Trust And Relationship

Content marketing helps to build trust and better relationship with customers. It increases customer loyalty, reputation and goodwill of your brand.

6. Best Alternative For Traditional Marketing

Most people feel irritated by display banners and other forms of traditional advertisements. They use ad blockers to get rid of such advertisements. But content marketing provides relevant information to the audience. So, it may be a good alternative for those clients who want to avoid display ads. 

Drawbacks Or Disadvantages Of Content Marketing

The main disadvantages of content marketing can be described as follows:

1. It Is Complex And Time Consuming

It requires very good writing skill to create written content, needs photography and videography skill to make audio visual content. Web development and SEO knowledge is required to promote the content on the internet. It takes more time to reach audience. So, content marketing is difficult and time taking process.

2. No Immediate Benefit

Producing valuable content is not an easy task. It requires good knowledge and research to find out useful content. It takes time to produce and promote the content in different social media platforms. So, it does not provide immediate benefit to the producer.

     Also Read: 

Advantages And Disadvantages Of Direct Marketing

Advantages And Disadvantages Of Digital Marketing

Advantages And Disadvantages Of Traditional Marketing

3. Requirement Of Special Skill And Knowledge

Content writing is a creative task. So, it requires adequate knowledge, good writing and other skills such as web development, search engine optimization skill, social media handling skill etc. 

4. It Is Not Suitable For All Types Of Business

Content marketing is not suitable for some business such as taxi service, hair salon, beauty parlor etc. 

5. It Is Influenced By The Change

Constant changes in trends, technology and peoples' interests, affects content marketing. It is very difficult to remain competitive in the changing environment.

Pros:

- It helps to reach more audience globally

- It consumes less time, effort and costs than traditional marketing

- It helps to increase traffic,which helps to generate lids, conversion and sales

- It improves brand awareness and customer loyalty

- It is far better than traditional marketing

Cons:

- It is a long term strategy, so it is a time consuming process

- There will be no immediate benefit 

- It requires special skills, knowledge and creativity

- Changes in trends ,technology and government policy may influence this marketing strategy

- It is not applicable for all businesses

What Is Direct Marketing ?

Direct marketing is a type of promotional campaign where companies directly communicate to a specific group of potential customers. Telemarketing, SMS marketing, email marketing, newspapers etc. are some examples of direct marketing. In this marketing strategy, companies try to attract customers by providing detail information about the product and services. It eliminates middlemen because producers directly make interaction with the customers.

Benefits Or Advantages Of Direct Marketing

The main advantages of direct marketing can be pointed out as follows:

1. Targeted Audience 

Direct marketing does not focus on large groups of audience. It tries to establish communication with potential customers and specific groups according to their interest and buying behavior. Direct contact with targeted audience increases that chance to succeed in the campaign.

2. It Avoids Middlemen

Direct marketing is business to customer (B2C) strategy that eliminates the role of middlemen and intermediaries such as distributors, dealers, wholesalers, retailers etc. in selling process.It sells products or services directly to the final consumers. It helps to save middlemen commission and shortens the selling process.

3. It Saves Costs

A company can establish direct communication with customers by using emails, telemarketing, internet etc. So, it saves marketing costs by lowering advertisements and promotional expenses. 

4. It Improves Profitability

Elimination of middlemen commission and less publicity and advertisement expenses can save significant amount of money. So, cost saving leads to increase in the profit of the firm.

5. Suitable For

Direct marketing is suitable for small and newly established companies with limited number of products. It is also suitable for those people who do not have time to visit retail stores for shopping purpose.

6. Effective Personal Interaction

It promotes personal interaction between the seller and buyer. It helps to gather information and feedback which helps to know the strength and weakness of the campaign. It helps the company to take appropriate steps to improve its operations.

7. Effective Measurement Of Performance

Direct marketing provides accurate feedback immediately to the seller. So, the effectiveness of marketing campaign can be measured by analyzing the result and feedback.

8. Helps To Increase Customer Loyalty

Because of personal touch and direct interaction, it helps to establish better relationship with customers. Personal connection between customer and company helps to improve customer loyalty.

Drawbacks Or Disadvantages Of Direct Marketing

The main disadvantages of direct marketing can be pointed out as follows:

1. Not Suitable For All Business

Direct marketing is not suitable to target large groups of customers. It is also not suitable for big business companies with strong brand value.

2. It Is Annoying And Intrustive Campaign

Most people feel annoying, irritating and intrustive because of unwanted telephone calls and emails received regularly from marketers. So, customers may dislike this marketing strategy.

        Also Read: 

Advantages And Disadvantages Of Digital Marketing

Advantages And Disadvantages Of Content Marketing

Advantages And Disadvantages Of Traditional Marketing

3. It Has Low Response Rate

Different marketing researches have proved that direct marketing has less conversion rate that other forms of marketing campaigns. It is difficult to identify potential customers and to collect data and information of an individual. If collected data lacks accuracy, then customer response rate becomes low and  campaign cannot be conducted properly. 

Pros:

- It only targets specific group of potential customers which helps to increase sales

- There will be a direct communication and personal touch with customers which eliminates middlemen

- It is a cost effective method of product promotion because it minimizes the advertising costs

- Earnings will be increased because of less marketing costs and elimination of middlemen

- It helps to maintain customer relation and increase customer loyalty

- Performance (success or failure) of the campaign can be easily measured

Cons:

- Some people may feel this marketing strategy irritating and annoying

- Although it lowers marketing expenses, it requires higher initial costs 

- Its response rate is lower than other forms of marketing

What Is Brand Extension ?

It is a marketing strategy in which producers launch new products or services in the market by using existing brand name. Brand extension helps the firms to introduce new products and influence customers because of  well-developed image of the core product and customer loyalty. There are some benefits as well as drawbacks of this marketing strategy which are discussed in this post.

Benefits Or Advantages Of Brand Extension

The main advantages of brand extension strategy can be described as follows:

1. Easy Market Entry

It is very difficult for new products to enter in the market because of cut throat competition. Brand extension helps the company to introduce new products because of the image and goodwill of the existing brand. 

2. It Increases The Chance Of Product Acceptance

As we know that good brand helps to increase the consumer trust and loyalty. Therefore, when company launches new product or service with existing brand name, it helps to increase the chance of product acceptance.

3. It Saves Costs

Brand extension eliminates costs required to develop new brand. It also minimizes advertising and promotional costs . So, it lowers marketing budget of the company.

4. Improve Brand Image 

Brand extension increases the visibility of the brand and helps to expand market by attracting new customers. So, it helps to increase image and goodwill of parent brand.

5. It Provides Premium Pricing Opportunity

Because of good reputation and image of the core product, company may charge premium price for its new product or service. So, company can earn more money from new product.

6. It Increases Profitability

It helps to widen the market of both core and newly launched product. It reduces marketing expenses related to advertising and promotional activities. Company may charge higher price for extended product. Market expansion, premium pricing and cost saving help to maximize the profitability of the firm.

Drawbacks Or Disadvantages Of Brand Extension

The main disadvantages of brand extension can be described as follows:

1. It May Damage The Reputation Of Core Brand

If new product fails to fulfill the expectation of customers, it loose the reliability of the core brand. Negative response of extended product may make huge damage to the image of core brand. 

       Also Read: 

Advantages And Disadvantages Of Branding

2. High Chance Of Confusion

Different variety of products or services under same brand name may create confusion to the customers. This may adversely affect the sale of both core and new product.

3. It Discourages Innovation

If producers only give focus on brand extension and try to introduce new products with same brand to save costs and time, it discourages research, development and innovation in the field of business.

4. Less Likely To Succeed

Different business and marketing research have proved that it is not suitable for all types of products. So, wrong practice of brand extension may lead to cannibalization, customer frustration and product failure. 

Pros:

- Due to the goodwill of the core brand, new product can be easily launched in the market and accepted by the customers

- It minimizes the marketing expenses such as advertising cost, packaging costs, promotional costs etc.

- It helps to widen the market

- It helps to increase the image of the company which encourages the company to launch more products with same brand name in the future

- Because of less marketing costs, market expansion and premium pricing, it increases the earnings

Cons:

- It increases the possibility of cannibalization

- It discourages innovation and company may lose the opportunity to create new brand

- Image and goodwill of original brand may be damaged

What Is Branding ?

Branding is a process of giving unique name, logo, symbol, mascots, design etc. to  products or services which helps to differentiate them in the market. Branding provides identity to the products which helps to create customer awareness. Coca-cola, Sony, Adidas, Nike, Puma etc. are some examples of successful brands in the market.

Benefits Or Advantages Of Branding

Main advantages of branding products can be highlighted as follows:

1. Branding Creates Customer Awareness

The main benefit of branding is that it helps create awareness by providing identity and differentiation of products and services. Customers can easily recognize and distinguish branded products in the market. For example, people can easily distinguish Coca Cola or Pepsi from other soft drinks.

2. It Promotes Customer Satisfaction And Loyalty

Branding ensures stability in taste, price, quality , design etc. of the products. Producers also give focus on regular supply of spares and parts of products so the customers cannot be cheated by low quality counterfeit products. So, stability in the price and quality and regular supply of necessary parts helps to increase customer satisfaction which leads to customer loyalty.

3. Branding Helps To Increase Profitability

Branding increases the image and goodwill of the company. So, a firm may charge premium price for its products and services. For example, price of iPhone and Macbook (products of Apple company) are higher than the price of mobile phones and laptops of other companies. So, high selling prices increases the profitability of the company.

4. Barrier For New Competitors

Because of customer satisfaction, social prestige and goodwill of the branded products, new companies hesitate to enter the market. So, strong brand creates barrier and discourage new competitors.

5. Easy To Introduce New Products

Established brand helps the company to introduce new products in the market easily because of loyal customers and strong image of the company. For example, PepsiCo (producer of Pepsi and Miranda) introduced Mountain Dew easily in the market because of the goodwill and reputation of Pepsi. 

Drawbacks Or Disadvantages Of Branding

The main disadvantages of branding can be highlighted as follows:

1. Requirement Of Huge Investment

Company has to invest huge amount of money for research and development purpose. It requires money to advertise the product in different media such as print media, radio, television, internet etc. Proper publicity strategy and promotional activities should be conducted to attract potential customers which needs adequate money. So, branding involves huge investment that leads to increase in the price of the products.

       Also Read: 

Advantages And Disadvantages Of Brand Extension

2. It lacks Flexibility

Customers become loyal and pay premium price because of specific quality, design, taste etc. of the branded product. So, company cannot alter or modify design, quality or composition of the product.

3. It May Create Monopoly

As we know that strong brands discourage other competitors to enter in the market. New companies don not want to compete with established brands. So, it may create brand monopoly in the market.

4. Consumes More Time And Effort

Branding process requires more time and effort to establish the product in the market. It consumes both time and effort to make market research, to design product and to influence or attract potential customers with the help of different promotional tools like advertisement, publicity, public relations etc. 

Pros:

- It provides unique identity to the products and services which helps the customers to recognize them easily

- Because of the stability in the quality, it helps to increase brand image and customer loyalty

- Company may charge higher price for branded products which increases the profitability of the firm

- It discourages new competitors/companies to enter in the market

- Branded products can be easily distinguished from other similar types of products in the market

Cons:

- It is very expensive because it requires huge investment

- There is a chance of brand monopoly in the market

- Branding process consumes more time, effort and resources

- It lacks flexibility because it is difficult for the company to change the quality of the product

 Benefits Or Advantages Of Market Segmentation

The main advantages of market segmentation can be highlighted as follows:

1. Market Identification 

It is the process of dividing the market into different segments and grouping the potential customers on the basis of demography, psychography, geography and behavior. It helps the marketer to identify the proper market and the right group of customers.

2. Market Specialization

Market segmentation helps to understand the needs, wants and desire of the customers. Marketers try to offer suitable products and services by developing right products, right price, suitable promotional techniques and better distribution channel to satisfy targeted customers. So, it promotes market specialization.

3. Market Expansion

Market expansion is possible with the help of geographic segmentation. So, it provides an opportunity to break into new market.

4. Customer Retention

Products and services are designed as per the needs and interests of the customers. So, market segmentation leads to customers satisfaction. Satisfied customers become loyal to the company. Therefore, it promotes customer life cycle and customer retention.

5. Better Strategies

It helps the marketers to design better marketing strategies, proper utilization of resources and better allocation of budget to satisfy the needs of the market. Better marketing strategy also help to deal properly with the competitors also.

6. Suitable For

Market segmentation is suitable for small and newly established firms because they cannot compete with large companies in the entire market.

Disadvantages Of Market Segmentation

The main drawbacks or disadvantages of market segmentation can be highlighted as follows:

1. Increased Costs

It requires more efforts, time and money for research and development, promotion and distribution. Costs also increase because of different marketing strategies in different market segments. Inventory costs also increase because of larger inventory of goods. So, market segmentation increases overall costs of the company.

It works properly if right and relevant market segments are selected . There may exist a chance of selection of wrong, irrelevant and very small segments . In such situation, company fails to identify right group of customers and cannot sell its products or services properly.

3. Change In The Market

Characteristic of market changes according to the change in the behavior, buying habit and income of the customers. Marketers may face difficulties because of these changes in the market.