The authors of this September 2015 article in the Journal of Advertising Research, Reo Song, California State University, Long Beach; Jeffrey Meyer, Bowling Green State University, Bowling Green, Ohio; Kyoungnam Ha, University of New Haven, West Haven, Connecticut, studied the relationship between product placement and the performance of movies.
Their study examined how product placements related to the performance of the media context through word of mouth about the movies. The authors analyzed whether advertising in the form of product placements in films impacted consumer enjoyment of the movie, and, in turn, whether the related positive or negative WOM about the film impacted box-office revenues.
The authors investigated the relationship between product placements and the performance of 122 movies released between 2000 and 2007 and found that product placements had both helpful and harmful consequences. This finding elucidates the heretofore unknown relationship between product placements and programming performance.
-Product placements exhibited a positive relationship with movie revenues, but when used in excess the relationship with revenues turned negative.
-The relationship between product placement and the benefits a consumer receives from media programing is robust across movies with different budgets and qualities.
Important managerial implications suggested by this research:
-Both media programmers and advertisers may need to reevaluate the widely assumed negative effects of product placements based on the findings of this study.
-Firms that produce media programing and those that place advertising in such media can enjoy a win–win situation from product placements, especially if those placements involve major brands that are familiar to consumers.
-However, too much of this positive can become negative. As the number of placements passes a saturation point (44, as the current study demonstrated), the relationship with movie performance turns negative. In particular, programing firms that give in to the temptation to allow too many placements may suffer weaker programing performance when holding all other factors constant. The average number of placements in the current sample was 16, suggesting that movie studios might understand both the positive and the potential negative effects of product placements.
-Studios should continue to limit the number of product placements to a reasonable boundary and avoid excessive placements (e.g., more than 50), which generally appear associated with poorer box office performance.
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