The Effect of Competitive Advertising Interference on Sales for Packaged Goods

Peter J. Danaher, University of Melbourne

Abstract

Competitive advertising interference can occur when viewers of advertising for a focal brand are also exposed to advertising messages for competing brands within a short time period, say one week for TV advertising. Although competitive advertising interference has been shown to reduce advertising recall and recognition and brand evaluation measures, no studies have examined the impact on brand sales. In this research the authors use a market response model of sales for two grocery categories for a large grocery chain in the Chicago area to study the extent to which sales are influenced by competitive advertising interference. The model enables the authors to capture the ‘pure’ own-brand advertising elasticities that would arise if there were no competitive interference. The results show that competitive interference effects on sales are strong. When one or more competing brands advertise in the same week as the focal brand, the advertising elasticity diminishes for the focal brand. The decrease depends on the number of competing brands advertising in a particular week and their total advertising volume. The authors find that having one more competitor advertise is generally more harmful to a focal brand’s advertising effectiveness than if the present number of advertising brands increase their total advertising volume.