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Executive Summary
As a result of growing consumer resistance to traditional broadcast advertising, firms are increasingly turning to alternative ways to reach consumers and enhance the value of their brands. One alternative that has received particular interest among many firms is product placement in films. However, managers remain uncertain of the legitimacy and the role of film product placement in their marketing strategies, and currently there is little evidence regarding whether firms’ investments in film product placements are worthwhile. To investigate this issue, the authors examine the economic worth of 126 product placements in successful films in 2002, using an event study analysis. To be included in the sample, the film had to earn at least $20 million during its opening weekend. Thirty-one films released in 2002 had opening weekend grosses above this amount, and of these films, 24 contained placements for products in which the product’s name was visibly legible on screen or audibly mentioned in the film. The event study technique compares the firm’s stock price movement at the event with its expected stock price movement. The stock’s abnormal return—the difference between the stock’s actual return and its expected return based on general market movement—provides an unbiased estimate of the event’s economic worth. To avoid developing a biased assessment of the worth of film placement, if the firm had other information that might affect its stock price, such as an earnings release, it was removed from the analysis, resulting in a final sample of 126 film placements. The results from the event study of these 126 product placements in successful films in the 2002 reveal an average abnormal return of .89% for the firms during the film’s opening. This indicates that product placement in a successful film is associated with positive movements in firm stock prices.

These results provide the first empirical evidence for managers regarding the value of product placement in successful films. In addition, this research offers new insight for managers regarding how product, film, and execution factors can affect placement worth. The authors find that the abnormal returns associated with product placement in successful films are enhanced by tie-in advertising campaigns and when the placement is for a high-equity brand. Product placement worth is also enhanced by the film’s audience size and when the product receives an audiovisual placement (i.e., when the product both appears on screen and is mentioned). However, the authors find that other film and placement execution factors negatively influence the placement’s worth. The value of film placement is reduced when audiences are absorbed in the film, when the film is critically acclaimed, and when the film has extremely violent content. Finally, the results  indicate that the worth of a placement is reduced when more products are placed in the film. For managers, this suggests that interference effects can result from other placements in the film, which can constrain the value they receive from their placement.

Biography
Michael A. Wiles is Assistant Professor of Marketing in the W.P. Carey School of Business at Arizona State University. He received his PhD from the Kelley School of Business at Indiana University and his BA from Dartmouth College. His research investigates how financial markets evaluate firm marketing actions and resource deployments and issues pertaining to new product development in the consumer packaged goods industry. His work has also been published in Journal of Retailing. Before earning his PhD, Michael worked as a consultant for Monitor Company, where he advised clients on marketing strategy issues in the pharmaceutical and consumer packaged goods industries.

Anna Danielova joined DeGroote School of Business at McMaster University as Assistant Professor of Finance after completing her PhD at the Kelley School of Business at Indiana University in 2004. She also holds a MA in Economics from Indiana University, a MS in Industrial Engineering from American University of Armenia, and a BS in Electrical Engineering form Yerevan Polytechnic Institute. Her research interests lie in the area of corporate finance. Her current research focuses on a firm’s decision to issue securities other than ordinary common stock and bonds. Dr. Danielova is also researching divestitures and internal capital markets. Her research has most recently appeared in Financial Management Journal. She has received several research grants, including the grant from Social Sciences and Humanities Research Council of Canada.

Journal of Marketing, Volume 73, Number 4, July 2009
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