Drive stock value through product placement in blockbusters

Wiles and Danielova studied the effect of product placement in movies on firm market value. 126 movies with the largest opening audience of 2002 were included in the test.

Some of the key findings were:

• On average, the total stock value of firms investing in product placement increased by 0,89% (the authors’ model explained 41% of the value variance)
• Firms should invest in tie-in advertising to increase results of the promotion. Tie-in is preannouncement of the product promotion in the film.
• Avoid placements in movies that absorb the audience while watching (e.g. complex dialogue) - the promotion is then less likely to be noticed.
• Of minor influence are also (1) brand equity - higher yields better result (2) movie violence - promotions in violent movies perform worse (3) critical acclaims - audiences find promotions to be more disruptive in artistic films.
• When it comes to execution, beware of placement with little connection to the plot and blatant exposure, which has proven to offend the audience and critics.

The authors findings suggest that product placement in movies with major audiences can have positive effect on firm market value. If your company is considering an investment: make sure the movie has potential of becoming a blockbuster (sequels are safer bets), and follow the guidelines above.

Source: Wiles M A, Danielova A. 2009. The Worth of Product Placement in Successful Films: An Event Study Analysis. JoM, Vol 73