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

You are approving next year's advertising plan, and the calendar shows heavy weight in the same weeks your rivals always go loud. The instinct is to match them. This research says the week you choose can matter more than the money you commit. The model behind the study predicts that a detergent brand advertising at twice its usual weekly level would see its sales gain nearly double, from about 4.4% to 8.4%, when its rivals dialed their combined advertising weight down for the week. Same spend on its part. The competitive calendar set the return.

When rivals are on air the same week, your ad's sales payoff can be cut in half. What drives the damage is how many of them advertise, not how much they spend.

In packaged-goods categories like detergent and cereal, how much your sales respond to your own advertising is cut roughly in half once a typical number of competitors run ads the same week. What hurts most is not how much rivals spend, but how many of them are on air at once. Before signing off on next year's advertising weight, ask whether the extra spending is buying you sales, or mostly diluting everyone's ads — yours included.

Data chart

Fewer rivals on air, bigger payoff from the same ad plan

Rivals dial down (five rivals)8.40Three rivals on air6.50Five rivals on air4.40

at the same total rival advertising, a brand's sales lift is bigger when fewer competitors run ads the same week, so the number of competing ads matters more than their combined spend.

Action guide

  1. Plan advertising weight around the competitive calendar, not a flat plan you set once a year.Anticipate the weeks rivals go loud and shift your weight into lighter windows, because the same total rival advertising costs you less when fewer of them are on air at once.
  2. Test concentrating your advertising into weeks you can own rather than spreading it evenly.In this detergent category, a rotation giving one brand the week to itself (full share of voice) lifted that brand's sales about 33% in its active week (roughly 11% per week averaged out), versus about 6.1% when brands all advertised together.
  3. Re-check advertising effectiveness with competing ads built into the analysis before you cut budgets.Leave competitors out and you understate the response, and you can wrongly conclude advertising does nothing at all.
  4. Coordinate the timing of your own brands in the same category.Because the count of simultaneous advertisers drives the drag more than the money spent, sister brands should avoid crowding into the same weeks and dulling each other.
  5. For a dominant brand, the same crowding effect the Big Idea warns about can work in your favor.The detergent brand Tide showed no clear lift to its own sales from its advertising, but that same advertising measurably pulled down sales of the smaller detergent brands Era and Solo — clutter that hurts a typical brand's own response can still be worth running when your scale means it costs rivals more than it costs you.
  6. Treat the sales-lift figures as directions to test, not promised savings.They come from running the fitted model under idealized schedules, and they measure sales response, not profit.

Evidence

  • When a typical number of rivals advertise the same week, a brand's sales response to its own ads falls by about half.
  • How many rivals are on air matters more for that drag than how much advertising they run in total.
  • Leaving competitors out of the analysis makes a brand's true ad response look roughly half its real size.
  • Ignore competing ads and cereal advertising looks useless; account for them and the effect shows up.
  • At the same total rival advertising, the sales lift was 6.5% against three rivals versus 4.4% against five.
  • First study to show competing ads cut actual sales, not just ad recall.

Key takeaway

Your ads pay off far more when fewer rivals are on air, so count the competing ads, not just your own weight.

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

Read the paper ↗

Evidence strength: Moderate (1991 weekly Dominick's Finer Foods scanner sales for 9 brands across two Chicago grocery categories, matched to spot-TV advertising data; a market-response model with a brand's ad response allowed to fade as more competitors advertise, plus out-of-sample validation). Generalizes most confidently to mature, frequently advertised packaged-goods categories with heavy competing TV advertising; less confidently to other media, non-grocery categories, other markets and eras, and to any claim about profitability or the causal effect of changing spend.