Consumers can only remember a limited number of advertising and brand promotion messages. As the total volume of advertising they see increases, the effectiveness of any single advertiser’s spend decreases.
For example, if you are the sole competitor in a market spending $5 million on advertising, you will achieve high consumer awareness and strong recall.
Now, imagine there are five competitors, each spending $5 million. Although you might reach the same number of consumers as before, consumers are now overwhelmed by five times more advertising. This “noise” reduces recall, making your advertising less effective.
The same principle applies when competitors increase their spend. Suppose there are five products in a segment: you spend $4 million while each competitor spends $1 million, giving you a large share of the total $8 million advertising. This usually results in higher recall indexes for your brand.
But if your competitors raise their spend to $5 million each while you maintain $4 million, total advertising rises to $24 million. Your share shrinks, and consumers face three times more ads overall. As a result, fewer consumers remember your brand, and your advertising effectiveness declines.