When Competitors' Ads Cancel Out Yours

ConversionDanaher, P. J.; Bonfrer, A.; Dhar, S. K. · 2008Journal of Marketing Research
Topicsadvertising elasticity·competitive interference·clutter·grp·share of voice·cpg·media planning·over-advertising

Imagine you are approving a TV plan for a laundry detergent brand sold through a Chicago supermarket chain. Matching rivals' advertising feels safer. Should you match their weight or seek weeks and markets where fewer rivals advertise?

Competing advertising is linked to a smaller sales response to your advertising.

Data chart

Fewer rivals on air, bigger modeled sales lift from the same ad plan

Estimated long-term increase in weekly sales for All laundry detergent, in percent, when All runs twice its usual weekly television advertising, from fitted-model scenarios for a Chicago grocery chain in 1991.

Five rivals, 150 total rival ratingpoints (30 each)4%Three rivals, same 150 total (50each)7%Five rivals, 50 total rival ratingpoints8%
  • Fewer rival brands leave a larger lift at the same weight.
  • Less rival advertising weight also leaves a larger lift.

At the same total rival advertising, All's modeled sales lift is larger when fewer rival brands advertise that week.

Fitted-model scenarios, not a field test, for All at 50 audience rating points, twice its weekly average of 25. Rating points sum the audience ratings across television spots and measure advertising weight. Exact sales lifts are 4.4%, 6.5% and 8.4%, respectively (paper p. 221 and Figure 3, p. 222).

Data chart

Cheer's modeled sales response is smaller with rival advertising

Long-term percent change in Cheer's sales for a 1% increase in its own television advertising, at its median rival advertising and with no rival advertising, from the same fitted model.

0.07%Cheer at median rival advertising0.18%Cheer with no rival advertising,hypothetical estimate
  • No rival advertising is hypothetical and difficult to achieve.

Cheer's modeled sales response at its median level of competing advertising is much smaller than its potential response with no rival advertising.

Same-model comparison for Cheer, including effects that persist beyond the advertising week. Exact responses are .068% at Cheer's median rival clutter of 151.7 and .179% with no rival advertising; the standard model gives .080% (paper p. 220 and Figure 2, p. 221). These are model estimates; exclusive advertising would be difficult to achieve (p. 221).

Action guide

  1. Plan media weight around when rivals advertise.Before you blame the creative, pilot advertising in weeks and markets where fewer rivals advertise. The study did not test this plan directly.
  2. Require response models to include competing advertising.Have your analytics team include rival count, weight and effects on rivals' sales before recommending budget cuts.
  3. Test concentrated schedules against evenly spread advertising.Have your media team pilot exclusive advertising windows. The study did not test these schedules directly.
  4. Pilot separate advertising weeks for sister brands.Have your portfolio team test a schedule that keeps brands in the same category from advertising together. The study did not test this plan directly.

Evidence

  • In laundry detergent and raisin bran, modeled sales response is about half as large when rivals also advertise. Cheer's long-term sales change is about 0.07% per 1% more own advertising at median rival advertising, versus about 0.18% with none.
  • One more rival brand on air typically weakens modeled sales response more than current rivals adding weight.
  • For All, modeled sales response is about 0.16% per 1% more advertising with no competing advertising, versus about 0.08% in a model that ignores it.
  • At the same total rival advertising, All's modeled long-term sales lift is about 7% with three rivals versus about 4% with five.
  • A hypothetical rotation of three detergent brands with equal budgets assumes each shares All's sales response and sensitivity to competing advertising. Average weekly lift is about 11%, versus about 6% when all advertise together. Exclusive advertising would be difficult to achieve.
  • Tide's own advertising has no clear direct sales response and is associated with lower sales for two rivals. It may benefit Tide by weakening their advertising.

Key takeaway

Less competing advertising is associated with a larger sales response to your advertising.

Limitations

The evidence covers 1991 detergent and raisin bran sales at one Chicago grocery chain and spot TV ads, measuring sales response, not profit. Interference also occurs on spot TV, so switching from network TV does not guarantee avoiding it.

Source

Danaher, P. J., Bonfrer, A., & Dhar, S. (2008). The effect of competitive advertising interference on sales for packaged goods. Journal of Marketing Research, 45(2), 211–225. https://doi.org/10.1509/jmkr.45.2.211

Exact values behind the rounded figures: Cheer's long-term sales response is .068% per 1% more own advertising at its median rival advertising and .179% with none; its standard-model response is .080%; All's no-rival response is .160% and its standard-model response is .076%; All's scenario lifts are 4.4% with five rivals at 150 total rating points, 6.5% with three at the same total, and 8.4% with five at 50 total; the matched three-brand scenario gives 6.1% average weekly lift, versus approximately 11% under exclusive rotation.

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