The Worth of Product Placement in Successful Films: An Event Study Analysis

Abstract

As a result of the diminishing effectiveness of broadcast advertising, firms are increasingly turning to product placements in films and television to promote their products. A growing stream of product placement research has conducted surveys of consumer and practitioner views on the practice and experiments to gauge product placement's impact on brand awareness, attitudes, and purchase intent. However, there is no evidence of whether firms’ investments in film product placements are worthwhile. The event study of 126 product placements in successful films during 2002 reveals a mean cumulative abnormal return of .89% during the film's opening, indicating that product placement in a successful film is associated with positive movements in firm stock prices. Cross-sectional analysis of the returns offers new insight into how product, film, and execution factors influence the placement's worth. The authors find that placement abnormal returns are enhanced by tie-in advertising and brand equity but are inhibited by audience absorption, critical acclaim, and violent film content. Placement modality, character associations, and blatancy also significantly affect the placement's value.