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Touched by an Angel: Understanding The Los Angelization of Marketing Practice in the Product Placement Industry

Cristel Antonia Russell and Michael Belch*

MSI Working Paper Series #4-1136

DO NOT CITE WITHOUT THE AUTHORS’ PERMISSION

*Cristel Antonia Russell is assistant professor of marketing and Michael Belch is professor of Marketing, both at San Diego State University, 5500 Campanile Drive, San Diego, CA 92182-8239 (crussell@mail.sdsu.edu and mbelch@mail.sdsu.edu). This research was supported by a grant from the Marketing Science Institute.

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Touched by an Angel: Understanding The Los Angelization of Marketing Practice in the Product Placement Industry

“It’s an industry where everyone thinks that they’re an expert

until you talk to them and you realize they have no idea what’s going on.” (A9 interview quote)

A review of the trade and popular press over the past few years quickly reveals the interest in

and growth of the product placement industry. Despite the numerous articles published on the topic

--including the academic literature-- there are many misnomers about product placement. Our

research aims at uncovering the underpinnings of this fast-evolving and somewhat nebulous

industry.

The strategy of placing branded products in entertainment media and services is not a new

concept. Historically, marketers' approach to using entertainment vehicles to promote their products

was manifested by sponsor-owned shows. Starting in the 1930s, consumer product manufacturers

invested in the production of radio programs to reach their target audiences (Lavin 1995). This

phenomenon was particularly visible in the “soap opera” genre, a term that actually testifies to the

blending of advertising of soap products and programming. Radio programs were developed directly

by detergent companies, notably Procter & Gamble, to promote their brands by integrating them

into the scripts (Stern 1991). When soaps moved to television in the 1950s, the close connection

between programming and advertising continued and marketers kept direct control over the shows’

story lines and creative design (Barnouw 1975). The practice of show sponsorship began to fade as

advertisers realized they could better reach their target markets by spreading their advertising

budgets across many shows rather than by spending it all on one (Savan 1996). In the past decade,

however, in reaction to the escalating advertising clutter on television and increasing advertising

costs among other issues, the trend has somewhat reversed and advertisers have returned to

sponsorship. However, today’s forms of sponsorship are usually much more subtle, and the line that

separates programs from advertisements is becoming increasingly blurry.

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Product placement epitomizes the blurring of the lines between advertising and

entertainment and, for this reason, has been characterized as a type of hybrid advertisement

(Balasubramanian 1994). There are many working definitions of product placement in both the trade

and academic literatures. For our purposes, we define product placement as “the purposeful

incorporation of a brand into an entertainment vehicle.” This definition reflects the fact that the

practice is not restricted to television and movies (Wasko, Phillips and Purdie 1993) but also occurs

in radio shows, music videos, video games, plays, songs, and even novels (e.g., Friedman 1985). It

also takes into account the different modalities in which the brand may be presented and the

multiple degrees of brand integration (Russell 2002).

What may have triggered increased interest in product placements was the use of Reese’s

pieces to attract the alien in the movie E.T. the Extraterrestrial. Originally offered the opportunity,

M&M’s declined to participate, opening the door for Reese’s (Darlin 1995). The results are almost

legendary. As the success of the movie and the placement led to increase in awareness of the brand

as well as sales increases of 65% (Winsky 1982), the potential value of product placement was

discovered. (It should be noted that Coors beer—which also had a placement in the same movie—

reported no significant impact/success).

Product placement has now grown to an estimated $360 million dollar industry by 2000

(McNatt and Oleck 2000), and a part of the marketing mix of over 1,000 brands in the U.S.

(Marshall and Ayers 1998). Beyond E.T., its use has increased rapidly since 1983, when sales of Ray-

Ban sunglasses surged after Tom Cruise wore them in “Risky Business.” The feat was repeated in

2000, when a 39% increase in sales occurred after Tom Cruise wore Oakley’s in “Mission:

Impossible 2” (Earnest 2000).

Proof of the increased popularity of product placement is the boom of a specialized product

placement industry. In the U.S., most product placement firms are located in the Los Angeles area,

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hub of the entertainment world. The industry has become more institutionalized, as demonstrated

by the emergence of several professional trade associations such as the Entertainment Resources

and Marketing Association (ERMA) in the U.S. and the Entertainment Marketing Association in the

U.K. (Curtis 1996), that involve placement agents, studio representatives, and marketers.

As noted, and for a variety of reasons, interest in product placement has soared. Since 2000,

no less than 1,291 articles have appeared in the academic and trade literature discussing a range of

topics including reasons for growth of the industry, examples of placements, and success stories. As

interesting as these stories may be, however, few have advanced the understanding of managers’

objectives for using product placements, or demonstrated whether such placements are truly

effective, and whether placement efforts are truly “strategic.” Academic research to date has focused

on consumer responses to product placements in multiple contexts and using multiple approaches

(for a recent review see DeLorme and Reid 1999). Our research differs by its focus on the

managerial side of product placement which, as we will show, reveals a rather different perspective.

Our purpose was to examine the objectives sought by managers when using product placements and

to determine how these managers evaluate the success and/or failure of these efforts. Given that

most reports indicate that the use of placements is here to stay and will likely proliferate (assuming

an increasing share of the communications budget), understanding its value (if any) is critical (Karrh,

McKee and Pardun 2003).

Our analysis draws from the extant literature on product placement and from a qualitative

investigation of key players in the industry, including product placement agents, clients, studios and

production companies. We use the combined secondary and primary research data to review the

evolution of the product placement industry in North America, describe key trends and insights into

the practices, and examine current means of assessing product placement efforts. We draw from our

findings to suggest an approach for more strategically evaluating the effectiveness of such efforts.

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Research Objectives

The purpose of this research was to investigate the structure of the product placement

industry and determine how participants in the industry plan, use, and evaluate their placements.

More specifically, the research had the following objectives:

1. to outline the current structure of the industry;

2. to identify the objectives sought when using product placement; and

3. to determine the means by which the effectiveness of product placement efforts is measured.

Methodology

Our methodology was two-fold. First, extensive secondary data were collected including

academic and trade literature as well as some proprietary data that was made available. Second,

qualitative primary interviews were conducted with participants across the product placement

industry. For this second phase, structured interview questions were designed for each of the

participants in the product placement process—producers, agents and clients—with each designed

to obtain the desired information, but altered to be specific to each group. The original design was

modified slightly after a few interviews to improve upon the original instrument.

Structured face-to-face and telephone interviews were conducted with those responsible for

product placements. Names were obtained from a variety of sources including directories, the

ERMA organization, and references obtained through our secondary research. However, the most

effective means of obtaining names was through referral—that is by asking those in each of the

industry segments to provide names and contact information, as well as an introduction. All

participants were screened prior to the interview to ensure that they were the decision maker in the

process. All interviewees were guaranteed anonymity. In all, 54 members of the industry were

interviewed, comprising key players of each group, as shown in Table 1.

INSERT TABLE 1 ABOUT HERE

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Interviews ranged from 20 minutes to an hour and a half, with the average interview lasting

approximately 35-40 minutes. With a few exceptions, all interviews were simultaneously conducted

by the two authors, trained in interviewing, research methods and advertising and promotions. All

interviews were transcribed. The transcripts were reviewed, tabulated against the secondary data and

thematically organized and analyzed.

The next section discusses our findings regarding key characteristics of the industry: (1) the

nature, evolution and logistics of the product placement industry; (2) a social exchange perspective

on the relationship aspect of the industry, (3) perspectives on the role product placements serve in

the marketing mix, (4) means of evaluating placements’ effectiveness. As shown in Table 1,

participants were assigned a code so as to facilitate the readers’ industry identification, while assuring

confidentiality.

1- The Nature, Evolution And Logistics Of The Product Placement Industry

Estimating the monetary size and scope of the product placement industry is a difficult task.

Because the development of the product placement industry is relatively recent, there is great

diversity in the types and sizes of agencies that handle placements, the types of companies that use

placements as part of their marketing mix, and the ways the studios are organized to deal with

placements. Furthermore, as discussed earlier, product placements are invading many media, from

literary works to rap songs. For ease of presentation, this investigation focuses on the television and

movie industry, the traditional and most common media for product placement. Attempts to assess

other media and other forms are not possible at this time as most of these efforts have been

employed for too short a period of time to attempt to assess their value.

Figure 1 depicts the multiple participants in the product placement industry (which also

comprised our sampling frame). Per ERMA, the industry’s trade group, current estimates are that

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approximately 38 specialized product placement agencies exist in North America. In addition, the

association involves 11 studios / production companies and lists 14 active client members. There are

many additional players in the industry, from integrated marketing communications agencies that

have an entertainment marketing department to companies involved in product placement to a

degree. Let us begin with a brief review of how product placements happen and an analysis of the

involvement of each of these entities.

INSERT FIGURE 1 ABOUT HERE

Studios/Production Companies

These are the actual producers of movies and TV programs—for example DreamWorks,

Universal Studios, or Disney. To show a brand in television programs and movies, the studios must

receive permission from the companies whose brands they use. “For a typical movie, there could be

100 to 150 placements in a production that the studio has to obtain to get production off the

ground” (A12). The bases for identification of potential for product placements are scripts. These

scripts are sent by the studios to clients whose permissions are needed, sometimes through the

intermediary of product placement agencies.

In most cases, products and sometimes even brand choices are made by the studios

(directors, producers, and/or sometimes actors). The directors and producers have artistic

objectives. The inclusion of product placements, they contend, provides a more realistic scenario for

their scripts. Specifically, they believe that the use of unreal brands or “brand X,” for example,

would likely create a distraction from the movie, with attention focused on the un-natural and

unfamiliar brand. Simply put, they believe that real products create more realistic scenes and, follow

a process similar to that described in Solomon and Greenberg’s study of prop selection for set

design (1993). The following quote explains some of the factors that come into play when making

such product and brand selections:

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S2: “When we start a film I meet with props, sets wardrobe and the producers and the director and discuss what it is that we need to do to create the scene to make it number one, what are our character choices. What does his house look like? What does his wardrobe look like? What kind of soda does he drink? Is he a root beer guy or a Pepsi guy or a Dr Pepper type of person? Does he drink foreign beer?”

Most of these studios have job positions specifically dedicated to the identification of

product placement participants for their productions. Scripts circulate between agents and/or clients

to notify them of potential opportunities for placements. Many scripts allow for opportunities for

additional placements to be added and/or written into the script itself.

Increasingly, however, studios seek out financial assistance through their product placement

opportunities. While it is illegal to pay for product placements on television shows, payment is

allowed for movie placements. Television is also more complicated because it is also selling regular

commercial time and thus must worry about conflicts of interest:

A6: “It's a little harder for T.V. because they have their own standards and practices, and they also have people who are paying for commercial time.” In those instances where fees are paid (1% of on-air product placements; Schiering 2003),

the money generated goes straight to the bottom line. Another form involves the provision of the

product as payment in a fashion similar to trade deals made in the media industry—that is, providing

products and services in return for having the product shown at no direct cost. This form of

payment reduces the studios’ costs and overhead (for example, provision of computers, drinks,

food, etc. to be used in the movies, and/or by those on the set). In addition, these products and

services also provide non-monetary values by creating goodwill, keeping set employees satisfied, etc.

However, in many instances, simply sending products out to a placement agent or directly to the

studios often means foregoing any control over the way the brand is portrayed. Even large

companies (C6) told us that they find out about placements from their agent only after the fact and

sometimes even after the entertainment property is released or the program airs on television.

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How much leeway studios give clients and their agents in the actual portrayal of the

placement is a major issue, as recent legal battles have shown. In the 1996 movie Jerry Maguire, for

example, Reebok had negotiated an integrated product placement deal involving positive references

to its brand and even the airing a commercial as part of the movie (Elliott 1997). The movie

outcome and its rather unfavorable portrayal of Reebok led to a successful lawsuit against Tristar

Studios, a small victory in light of the likely damage to the Reebok brand. Sometimes, studios are

willing to compromise. However, we noted clear differences between the large studios and the

independent ones, related to the power structure in the industry, a notion illustrated in the following

quote and to which we will come back:

S2: “ Independents seem to need more help because a lot of the budgets are smaller so they want a lot more work from you, a lot more help from you, where a studio film might have a bigger budget so you know it is drop in the bucket for them…. Independents with a low budget might be more inclined to change (the script).” Finally, although our sampling frame did not directly include artists or directors, we were

reminded several times that these parties play an important part in the decision of using the brand.

C5: “there are many actors out there that will not allow you to use their likeness to promote a product.”

Product Placement Agencies

Analogous to advertising agencies, product placement agencies serve as the intermediary

between the production houses and potential clients. Like other agencies or boutiques, they are paid

a fee for their services by the client companies they represent. After meeting with producers to

promote the use of products, they become agents for the producers (Bohn 1986). Because the

development of the product placement industry is relatively recent, there is great diversity in the

types of agencies that handle placements. We separated the agents we interviewed based on whether

they were focused on product placement or integrated marketing communications. For the most

part, smaller outfits are focused on placements whereas larger outfits are integrated marketing

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communications agencies with a product placement or entertainment marketing division. Most of

the agents we interviewed have been in the industry for over one decade and had seen, and often

taken advantage of, its tremendous growth opportunities. In the early days, product placements

happened rather randomly, as the following quote describes:

A2: “What was happening in the very beginning, is that people in this business, there were only a handful, were becoming friendly with editors and production people and going on set, seeing daily’s, and as soon as they would see a product in the daily’s, they would pull up a client and say “would you like to see your beverage in this film and would like to see Al Pacino holding your thing”

In fact, many of today’s placement agents started as prop masters on the studio side and

realized the opportunity for an intermediary to streamline and improve the communication channels

between studios and companies, hence the many agency start-ups in the 1980’s. The need for

simplifying communication channels and introducing channel intermediaries was expressed by one

of the agents as follow:

A8: “Finding that there was no one really streamlining the information of what the studios were doing both to the agencies and corporate America. Most of the efforts occurred one at a time, someone from Universal calling someone from Coke. And just trying to find ways to help them communicate better.”

Today, with the number of players increasing every day, these intermediaries have almost

become necessary, although a few consumer goods companies are large enough that they conduct

business in-house, usually from a Los Angeles-based entertainment marketing division, which

inherently operates like an integrated placement agency (e.g., Apple Computers, Anheuser Bush).

Interestingly, many of the interviewees commented that companies that keep the business in-house

are those “that realize the value of it.” Indeed, as we will discuss later, fitting product placement into

the broader brand management scheme is difficult for product placement agencies and definitely

better suited to in-house entertainment marketing directors who understand the brand, its target

market, and the other components of the marketing strategy. While specific advantages may accrue

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to in-house agencies, some of the smaller agencies believe that, although the industry is becoming

more competitive, smaller agencies may actually have an advantage in the day-to-day logistics of

getting products placed:

A7 “I do not want to be a big agency. I do not think that the client gets proper representation… (I have a) more intimate client base.”

The role of placement agents, however, has increased, and now also includes education of

current and potential clients about the practice, as many potential clients are not yet familiar with the

workings of the industry. Perhaps the evolution of the product placement industry can best be

understood through the evolution of Hollywood studios themselves, as one of the agents we

interviewed stated:

A9: “It is very important when talking about product placement, that you’ve got to know the history of the studios and how they work and what’s gone on.”

The logistics of the placement through the agency also occurs via scripts. In many instances,

the agencies are provided with advanced copies. They review those scripts looking for product

placement opportunities, matching existing clients to these opportunities, or seeking new

participants. Our observations clearly indicate that small placement agents are not trained as brand

managers and their criteria for deciding whether one of their clients’ brands is appropriate for a

program or movie is primarily based on the opportunity for the product category. For instance, one

of the agents interviewed was responsible for the placement of a small candy in a now well known

episode of Seinfeld. She simply contacted one of the clients she was representing whose product fit

the profile and recommended the placement to them.

A6: “We read the scripts, and we try to match which clients work well within the movie. We try not to make it unrealistic. If it's supposed to be there, then it should be there. It's natural when you open a refrigerator and have some labels pointing toward you and some pointing away from you. What is not natural is when they open the refrigerator and because they didn't get the rights, or the permission, or product placement, they turn all the labels backward”

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On rare occasions, the agent has been successful in getting products or advertisements for

the products written into the script. For example, in the baseball movie “Major League” an American

Express commercial was integrated into the script in such a way as to make it a natural and

unobtrusive part of the movie. This, however, requires a close collaboration at all levels and is more

likely to be orchestrated by integrated agencies than small placement agencies or even directly via the

client company’s marketing department (C3).

Clients

The companies that make use of product placements range from the very small to Fortune

100 corporations like FedEx and Procter & Gamble. Like companies that employ advertising and

public relations agencies, these organizations often seek exposure for their products through the

medium of product placement. The nature of this exposure though, as we will later discuss, differs.

Some of these companies handle product placements through their own in-house departments.

Others –usually through the marketing department-- work with a product placement agency or the

entertainment department of an integrated agency.

Clients review scripts received from their agents or directly from studio and production

companies. Their perspective, however, tends to differ from agents’ because they have to ensure that

the placement fits with the rest of their brand strategy. Still, different levels of sophistication clearly

exist among companies that use product placement as the following quotes establish:

C3: “We really don’t pick based on who the characters are…. We just want to make it make sense. I think that we’re more conscious of how we want our brand portrayed than anything else.” C1: “I used to be a brand manager… It gives us a huge advantage because I am privy to all the information that is going on. I know what the strategies are and I’m an insider. So, I have much better view of what the objectives are than if I were to hire somebody to do that for me. But I also sit in on their planning meetings. That’s why I know what their objectives are for the next year.”

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Some clients appeared to have rather sophisticated models for selecting programs:

C4: “Every year, when the studios announce all of the shows that are planned for the next season, we look at the networks. We realize that UPN is not going to have the same visibility as an ABC or a CBS. We look at what we have in terms of dollars for products for placement. We look at what we have in terms of allocation of products, and we have to put them on the right products that we think A) have the buzz, B) have the visibility, C) have the long term feasibility to stay on the air, because as you know, many shows get pulled after 2 or 3 episodes, if they’re lucky. We try to find not just proven shows, not just things like Friends or Will & Grace, but we look for different shows that are on the cusp of or have a lot of buzz or feature new talent that we think may have some legs. Of course, we look at the ratings on the shows. If we’re getting played on a program that runs on Lifetime or TNT, the rating points on that are so much smaller than network television, that you have to say to yourself, “is it worth it?” In my mind, it’s still a viable audience because even if you have an audience of 3 million people, that’s still 3 million people. Because an audience on Lifetime is primarily females; we’re reaching a core audience of females, probably from 18 to 49, that we may not be reaching on another program. So, you can’t discount it because it’s not highly rated. But the higher rated shows: do we want to be on ER and CSI and Friends, absolutely.”

One consequence of the inconsistent role of product placement in the marketing mix is the

lack of standardization of the person in charge of it within client organizations. Although many of

our client-based informants were marketing directors or the like, we were told repeatedly that “there

is no real set title; (it) could be director of corporate communications, director of advertising, or

marketing, brand manager… sometimes PR” (A7). Some clients, who may not think of product

placement as fully integrated with the rest of their marketing activities might rely on their agents.

Surprisingly, these were not just the small clients but also large consumer goods companies. These

differing levels of involvement, of course, have direct consequences on the sophistication with

which product placement deals are orchestrated:

A12: “Some clients have a very strong sense of what they want to target, and other clients rely on you.”

Summary

In summary, the product placement industry has evolved from a simple means for studios to

cut costs and marketers to expose their products to a more sophisticated industry in which product

placement agencies assume the role of traditional advertising agencies. For some companies, the

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frequency of use of product placements warrants their own in-house department, in which the

product placement becomes an integral component of the marketing communications program. As

the industry has grown, product placement has become more than a tactical tool and is increasingly

being integrated with other communications mix components. As a result, greater sophistication is

required for making strategic product placement decisions, as we will discuss later on.

2- A Social Exchange Perspective On The Relationship Aspect Of The Industry

Throughout our interviews, a key theme transpired in the industry structure-- that of

relationships. Perhaps a reflection of the Hollywood subculture, the product placement business is

often driven by relationships established between clients and/or agencies and studios. This notion is

crucial to understand the dynamics of the industry because it affects whether placement agreements

happen and the way they unfold. In particular, the success of product placement agencies is based

on the development of relationships with clients and production houses. Priorities are given to those

agencies that have cultivated these relationships. Social relationships permeate the industry and tend

to drive product placement decisions much beyond the rationalization of what brand best fits what

script, or on the financial aspects of the decision, as is indicated by the following quote:

A9: “you have to understand the business to know product placement, you know. 95%, if not more, of all placements, are done from a relationship that the product placement agency has with the art department.”

Because the notion of relationships is so central to the placement industry, we approached

our analysis on the basis of social exchange theory. We witnessed strong dyadic ties within the

industry, characterized by frequent and intense repeated exchanges, and reflecting a highly

embedded interogranizational structure (Granovetter 1985). As in previous business-to-business

research in the marketing and management areas (Morgan and Hunt 1994), we found commitment,

trust and power to be key drivers of repeated exchanges between clients, agents, and studios.

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As in most environments, power is important in the product placement industry. However,

the nature of entertainment productions allowed different forms of power on the client side. We

found that it was not only company size, diversity of product portfolio, and market leader position

that gave a particular client a position of power, but also the power of strong brand images. Some

companies, even small ones, benefit from a distinct niche image that appeals to movie makers and

TV producers. For instance, Macintosh seems to be the computer brand of choice in Hollywood

productions, because of its hip image and cool designs. Other computer manufacturers recognize

Apple’s edge and have even agreed to modify some of their products to look “cooler” for the

movies, as Gateway did with the development of a pink laptop specifically for Legally Blonde

(Ebenkamp 2003). On the other hand, large manufacturers have their own advantage, be it the

variety of their brand portfolio or their instant brand recognition, as the following quotes illustrate:

C1: “With many movies, there are different characters and there are different drinking situations. Where a Heineken may fit in one scene, it may not fit in another scene. If you’ve got a bunch of policemen sitting around in a bar after work drinking, they’re most likely not going to be drinking Heineken…. Whereas I can provide them with Budweiser or Bud Light for those scenes. I could also provide them with Michelob. Or a scene that’s even more up-scale, if it’s a nice dinner, or a dinner party, or whatever… (I could) provide them with a malt liquor, I could provide them with a flavored alcoholic beverage, Bacardi Silver, which we produced. I can provide them with a non-alcoholic beer, if they should need that in a certain scene…”

C3: “ So when [people] think about using some kind of (INDUSTRY) company, (BRAND) is probably top of mind to everybody…. If we didn’t have such a strong brand, we would maybe be the type that you just mentioned. We may be out there, pandering for any kind of opportunity we could to get our name out there.” Clearly, power positions are shifting due to the increasing integration across companies

(media giants). Although this phenomenon was not expressed often in our interviews, those who did

viewed it as an emerging trend likely to affect future transactions. For example,

S2: “ Seagram’s owns Universal so you cannot show anything but Seagram’s products”

Another important tool for shifting the power balance is to develop long-term relationships

with few partners. Agent – studio relationships were often described as close and committed

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relationships. Commitment was often expressed in relation to the economies of scale of having a

single supplier. From a studio standpoint, it often makes sense to be able to rely on the same agent

for props.

A12: “they were buying media during X-Files, and we started that relationship with Fox way back when, and it's still ongoing. So, basically whenever X-Files needs computers they come to us.” The closeness of these relationships is likely tied to the inbreeding and evolution of agents

who started on the studio side and thus are still well-connected and, to some extent, vested in the

production side of the placement equation. Trust is foremost in product placement deals because

the nature of the production logistics creates great uncertainty regarding the exact outcome of a

placement.

A5: “One of the most important points that I want to emphasize is trust. Pertinence and trust.” Sometimes, however, pertinence and trust are not one and the same, leading to potential

conflicts in the exchange process. As pointed out by one agency owner:

A5: “It is very difficult to explain to your clients what they can do with product placements, and to which point they must ask for it and when it is really too much and they must stop and the producers have to explain to them what it is that they can gain from placements. For them, of course, it’s revenues, but for us, we want to establish a partnership when these people, work together. Currently what is not working is that there is no collaboration, because the producers want money and the clients want visibility, visibility, visibility-- it has to be pertinent and they have to have a way to integrate themselves to the plot and it has to have value.”

As discussed earlier, client- studio relationships occur with or without the intermediary of an

agent and many discussed the evolution of such partnerships. Sometimes, that relationship appeared

to rely more on trust and social relationships than on pertinence, as the following excerpt indicates:

C4: “We have a great relationship with them [the studios] as well. I know the whole cast, I know the producers. We work with them directly. We supply them products for use behind the scenes. (…) So we have a very mutually beneficial relationship with them, and we like each other, and they like the products.”

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It is sometimes the artists who request certain products. In fact, the recent surge of brand

references in rap songs has been attributed not to negotiated contracts but rather artists’ genuine

affinity for the product or even name dropping in hopes of generating interest from potential

sponsors (Skinner 2003). Hollywood stars are of course not immune to this practice and many of

Seinfeld’s now classic placements are said to have occurred merely because Jerry Seinfeld liked the

brands (Padnick 1997). Consumer good companies, realizing the importance of close relationships

with talent, cultivate these opportunities by sending them free goods and establishing partnerships

with the hopes that the talent will ask for their products to be used in their productions, in return, as

in the following example:

C4: “Sandra Bullock came in the office, we spent some time with her, we hit it off, gave her some products for her own personal use. She came back to us a week later and said, “I’m filming a movie. I’d love to get you guys involved with this thing.” Great! Products have been put forth, provided to the folks in the production and we’re actually looking, based on how the placement turns out, we may do a 4th quarter promotion tied around the products that are in the film.”

Power also expresses itself in terms of money. Cost cutting has always been part of the

reason why studios use product placements and the industry is still “looking to cut costs... whatever

it takes” (C5). Product placement deals can bring in that much needed production and marketing

support. Of course, this leaves out many of the smaller companies who simply cannot compete.

O2: “it’s a lot harder to battle against Budweiser in the motion picture product placement world…. You’re not going to get in nearly as many movies, because Budweiser has a lot more contacts. The few you get in, if you don’t pay, you’re going to get buried, you’re not going to get good placements. The few you do, you’re going to have to pay.”

Cross-promotional opportunities and financial support play into the power structure in the

exchanges by potentially affecting the product placement deals themselves. For instance, although

many directors do not want blatant product placements in their productions, if the placements bring

in lot of promotional support, they may compromise their values, as illustrated here:

A12: “Lots of deals get killed for reasons like the director, or producer, or writer, or actor they get too blatant and they don't want to be. But, on the flip side, these people are also just

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people. They see the benefits and they are probably doing well. If they think the placement is too blatant but is also going to deliver a very good promotion which will give them additional millions of dollars worth of media, they most certainly will sometimes set aside their creativity.”

Early entry is definitely an advantage in the product placement industry as we found that,

regardless of size, the companies that are most active (and most successful) in Hollywood are those

that thought about it first and established relationships early on:

C5: “Fortunately we developed a good relationship a couple of years ago before they thought about it…I really have a good relationship with them (the studios). That's what is really necessary, because while they don't have control of their director...they do have control over which brand of product they place in their movie. It's all about who you know.” C4: “the production houses themselves are probably starting to look for perhaps a little bit more of a closer relationship, sort of more hand in hand.”

The focus of relationships is accentuated by the nature of the Hollywood business and we

were often reminded that “Hollywood is one of those relationship-type of industries” (C1)

C4: “This is a town based upon relationships. I think you need to physically be here, to be honest with you, to cultivate those relationships and to derive the benefits from them.”

Los Angeles-based agents and clients expressed the benefits of being in the “in-crowd,” of

the rather shielded and somewhat restricted entertainment world. Members of the in-crowd like to

name-drop, throw “invitation-only” cocktail parties, and/or entertain on private yachts. This

exchange is as much driven by their own ego gratification as by business motives. The dynamics of

the industry are described rather well in the following quote:

C4: “I wanted to proactively go out there and cultivate relationships with different folks from all levels, whether it be celebrity talent, whether it be producers, writers, property masters, etc. Sort of covering all gamuts of the business. We have been able to forge relationships with many of these people by the sheer ability to sort of be here in town. (…) We’ve been able to forge these relationships with people, so that it’s not just about writing a check to be a part of something. We’re getting invited because of who we are and how we treat people, not because we have a lot of money in the bank account. We’re being asked to participate and being given opportunities because we’ve been good to people. Because we’ve been generous with people and because they respect us and we respect them. It’s a very give and take relationship.”

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This “Los-Angelization” of marketing practice may also prove to be a drawback, as some

informants expressed their dislike of the Hollywood “wow” and attitude. In fact, many of the New

York and Chicago-based agencies view their geographical location-- away from Hollywood-- as an

advantage. Their position is that they can be more objective, and business oriented, and not

overcome by the personalities and social aspects of the transaction. They also stated that, by being

closer to their clients—many of whom are not based in Los Angeles-- they are able to better

understand the role of product placement in the overall brand strategy and communication mix.

This last point regarding the role of placements in the marketing mix is by far one of the key

determinants of how product placement should be viewed and its effectiveness assessed and we now

turn to our findings regarding this issue.

(3) Perspectives On The Role Product Placements Serve In The Marketing Mix

The product placement literature has long acknowledged some of the obvious advantages

that placements offer clients’ communications programs including (1) their low cost relative to other

media; (2) the potential for high exposure in non-commercial contexts; (3) and the likely frequency

of exposure. As a tool to reach consumers, product placements often also serve to bypass

regulations –for example, scenes showing the actor or actress smoking a cigarette is legal whereas

advertising for the products is not (Sargent et al 2001; Pechmann and Shih 1999)--, and to capitalize

on source associations (Karrh, McKee, and Pardun 2003). Placements have also been perceived as a

method for reducing the threat of zipping and zapping commercials raised by Tivo and other PVR’s.

In addition, the growth of integrated marketing communications has led to increased expenditures in

a variety of media other than traditional advertising, and product placements are employed to

support these efforts. Consequently, product placement tends to be viewed as a promotional tool

and evaluated against more familiar promotional techniques, including advertising. As we will show,

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however, not only do these perspectives inaccurately reflect the nature of product placement

exchanges but they also bias the ways in which placement efforts are evaluated.

The popular and trade press often report that product placement is becoming part of the

strategic marketing mix (Buss 1998). The reality of the industry is that strategic goal setting rarely

drives product placement decisions. We were often reminded that “Each client is different. They all

have different objectives” (A7) and indeed, motivations for venturing into product placements vary

widely. Sometimes, small companies figure it is the only way for them to get large exposure with a

relatively small budget, as this quote illustrates:

A7: “And you have the people that really have no clue, but they want to get involved somehow because they have a small marketing budget.” Other times, they simply do it to align themselves with what their competitors are doing.

A12: “They see either other brands getting lots of exposure and that interests them, or they see their competition getting exposure and that prompts them to want to participate as well.”

The most frequent and honest answer, however, was:

C5: “You get involved because somebody's mother said something...you know they said oh this is a great idea. People find the money and then they hand it over to you, and you have to do it.”

And indisputably, we found that there is much hype about product placement but little

science or strategy behind it. Beyond their obvious and much advertised potential role as a

promotional tool, promoting awareness and interest in the brand among consumers, our research

uncovered many additional reasons for product placements. Within the marketing mix, product

placements may supplement public relations efforts, both internally and externally, support the sales

force and/or motivate dealers, as well as serve in an integrated promotional campaign (to support

new product introductions or sales promotions). Perhaps because the practice of product placement

evolved as a by-product of public relations (Balasubramanian 1994; Pardun and McKee 1999), it is

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not always integrated in the communications mix. We were even told that sometimes the “strategy”

behind placements is:

A7: “Agencies can do a kind of cookie-cutter approach and do like a shot-gun approach by throwing (products) everywhere and whatever sticks is what they end up with”

Product Placement As A Communications Element.

As a communications tool, product placements should serve a specific function in the

overall communications program. In a well integrated program, the role of product placements

should be delineated, with specific objectives established. Surprisingly, this situation was not typically

described in our interviews. For the most part, objectives were either not formally established, or

stated in anecdotal terms. In fact, many expressed frustrations with not being able to readily “load

product placement into the system” (A13) and indeed, product placement simply cannot be treated

the same as other communications tools, an issue we will return to when discussing measurement of

effectiveness.

C5: “Traditional advertisers would have a difficult time envisioning what it might mean to buy a 30-second spot on Friends, that would run for ever; every time the episode is on syndication, that would be on DVDs of the program, and that has immediate potential for “a worldwide campaign”.

A12: “It is a cheaper alternative and they will become part of the content, which will exist forever.” Perhaps because of the short time experience of using product placements, the low cost, or

because of the basis on social relationships rather than business acumen, product placements usually

have not been subject to the objective setting process. Many of those responsible for placements see

themselves as serving a specialized function not as brand or communications managers. Our

informants often had a difficult time expressing exactly what role product placement plays in the

marketing mix. Many articulated product placement in rather general terms, as a “very viable piece

of advertising form of advertising” (S2) or simply “a part of advertising” (C1). For some, it is simply

“branding,” although they realize that it cannot be the sole instrument for achieving this objective.

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C3: “(our top executives) are all about the X brand, protecting the brand, going out and developing the brand and things like that. But we don’t think that product placement is the A, number one way, to get out our brand.”

Small placement agencies often lack the sophistication of trained marketing managers but

nonetheless attempt to match their clients’ target audiences with the demographic profiles of the

likely audience for the movie or TV program and, to the best of their ability, to match their product

placement efforts to their clients’ stated strategic marketing plan. Still, as the following quotes

illustrate, small product placement agents rely on very basic, perhaps simplistic, means of matching

the placement to the remainder of the marketing program:

A7: “We do our best to target programs that would have their demographic.”

A9: “You have to go in there with your total strategic planning, in terms of letting them know you’re results oriented, how tangible the program is, how it’s closely monitored, if you give Nielsen or BBS figures, or audience figures, number of impressions, you send videos to the account, try to make sure that the brand fits the demographic target of the client, that your program has captive audiences” Because of the relative flexibility that product placements afford or perhaps as an excuse for

not easily integrating with other parts of the communications mix, many small agents expressed the

unique benefit of placements as fitting into any existing marketing mix or as playing a role of its

own:

A9: “(product placement) is something that can exist in any creative that a company already has existing. It doesn’t have to follow any methodology of what the company’s advertising is already about. It can be totally separate, unique.”

As a result, many placements happen by mistake. Only with the client’s involvement in the

planning process will truly integrated, carefully planned placements really happen.

C3: “A lot of times it’s placement that we didn’t really chose…. We get kind of a lot of product placement just by accident…. At other times, there’s been great opportunities for us to showcase new technologies that we’ve had…. It was great, but it was really scary for us because we’d never done anything like that. We were really very nervous about how that would affect our brand. It was a two-year process of going back and forth and looking at scripts. We only had so much that we could say, you can’t do this or we want you to do this or that kind of thing.”

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Even then, inexperienced clients tend to be afraid because the rules in product placement are

different and the message communicated is not as controllable as that of company-controlled

messages, a risk shared with public relations efforts. In fact, several agents recounted instances

where deals fell through at the last minute because the clients were not comfortable with the way

their brands were portrayed. Such aborted placements included a high plot placement that

realistically integrated the brand into the entire plot of a popular situation comedy but that the client

deemed potentially negative and thus opposed (A13).

C4: “we usually pick maybe 4 or 5, 6, 7 different shows that we want to have direct relationships with where we say, not only do we want to see our products on there, although they may already be on there, we want to support it in a way, whether it’s behind the scenes production purposes or whether it’s sort of how we get to weave our products into a scene that’s not just a phone on a table, but there’s a feature or technological advancement that is featured or incorporated as part of the program or film.” This quote speaks to the fact that product placement is increasingly used as a promotional

tool and, as discussed earlier, studios often use product placements as a basis for cross promotions.

A number of movie studios require that the company placing a product provide much of the

marketing effort behind the movie, essentially reducing or eliminating the marketing costs of

promoting it themselves (e.g., McDonald’s promotion of Disney’s Finding Nemo). As a direct result,

cross-promotions have become increasingly popular, especially to recoup today’s enormous

marketing costs in the cinema industry.

C1: “What the studios are looking for is – the industry has very much become all about opening weekend and opening a film big and recouping as much money as they can. Well, to do they have to spend a lot of advertising dollars and it can cost them as much to advertise to promote the movie as it does for them to make the movie…. if they can get other people to pick up those costs, why not?” Clients often enter the realm of entertainment marketing via small product placements that

eventually develop into larger promotional programs. For this reason, integrated communications

agencies tend to view product placement as “the entry drug into more extensive entertainment

marketing plans” (A13).

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4) Means of Evaluating Placements’ Effectiveness

While there has been some recent academic research on the effects of product placement on

consumers (e.g., Russell 2002), industry practitioners have yet to develop tools to systematically

assess the effectiveness of placements. In fact, there appears to be a strong reluctance to adopt any

such measures, as most clients have been convinced that it is not possible to get accurate measures

or because impressions and/or ego involvement objectives are viewed as sufficient. The agencies

themselves are not advocating any form of measurement, possibly because they are rarely held

accountable for their performances. At the same time, with one exception, all informants lamented

the lack of standard means of assessing effectiveness and the availability of data. Thus, anecdotal

evidence prevails and we even found that many clients or agents may in fact have data but “are not

really proud of the numbers (A8).” Thus, there is a tendency, throughout the industry to “only talk

about the good things (A8).”

Still we discerned two distinct audiences for product placement and believe the distinction is

crucial to evaluating placements’ effectiveness. Some articulated their product placement efforts in

terms of the external consumer audience exposed to the end-product of movies and TV shows. In

addition, however, many identified the internal audience at large, comprised of the company’s

employees, its distributors, and sometimes B-to-B, as a direct or indirect target audience for product

placements. Most research product placement research has, understandably, focused on the former

audience, the end consumers, but we found the latter to be of perhaps greater importance when it

came to evaluating placement efforts.

Consumer Effects.

To evaluate placements’ effects on consumers, most practitioners rely on lay beliefs that a

well-placed brand is “more like an implied endorsement by that character” (A7), that the effect of

placement is generating “buzz” (C4), or that it is just all about perceptions.

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A5: “I understand why advertisers think that way, because there are no specialists currently on PP in the market, there is no data, so it’s all about perception. We operate on the basis of perception and the clients have their own perceptions, we have our perceptions, the broadcasters have their perceptions, the producers have their perceptions, so we don’t get anywhere.” C2: “ All we can do is by customer feedback and also things that ... customer comment.”

C2: “There's just no real way to monitor that. (…) We don't have any other statistics other than word of mouth and what people say when then come in (to the point of purchase)”

A9: “They might seem evasive to you because you’re thinking that they just don’t want to give this confidential information and be quoted. They just don’t know!”

In most instances, client informants reasoned that the limited financial investment they make

in product placement did not necessarily warrant that they pay a lot of attention to the returns

Schiering 2003).

C5: “I don't attempt to measure it. It's like a branding for me. If you see a 1% increase over a year you're happy with it, it's worth the minimal amount that you spent on it… We try to measure, but you know there's just so much going on in so many different area that you really can't rely on your assessment. But our investment I'll tell you is extremely minimal.”

Many realize that evaluating product placements’ effectiveness simply “cannot work the

same way than when you buy a 30-second spot” (A5): it cannot follow the process used for other

methods, including advertising equivalencies. Some companies, however, strive to establish such

equivalencies and force placement valuations into existing models of advertising effectiveness.

A12: “What they do is they realize or recognize the value of what we've done in comparison to how much they would typically spend in advertising.”

Such analogies, as flawed as they may be, often result in expressing effectiveness in terms of

awareness (O1) and exposure (C4). The relatively unscientific term “eye balls,” and “media

impressions” came about regularly in the conversations. When pressed to explain what objectives

clients or management (for in-house placement departments) sought in the way of product

placements, the majority of the comments had to do with the exposures that product placements

could lead to, or in the vernacular of the interviewees the “eyeballs” that they afford. Indeed, the

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primary objective in most cases was to get the product seen, and exposed to consumers—

particularly in association with a celebrity, which would provide the image desired (Karrh, McKee

and Pardun 2003).

We interviewed several research organizations, including research departments within

integrated communications agencies or companies with in-house placement departments, that had

models in place for determining the “media value” of a placement. Most models (O5, A13, C1)

compute factored impressions as a function of media impressions (Nielsen ratings for television or

box office + video + cable viewership for film) and as a function of the level of the placement itself.

Such levels are determined mostly based on exposure and potential for recall and more prominent

placement or auditory placements are perceived as better. In fact, the only primary research

organization we interviewed – the only one in existence in the US to our knowledge -- collects recall

data as the sole means of measuring impact (O2).

Borrowing from attempts to measure sponsorships and other public relations exposures,

some clients have considered the use of media equivalencies. For the most part, however, these

measures have not met with much acceptance.

C4: “I’m not a big fan of advertising equivalency. I think it’s an archaic way of doing a measurement. But for some ways, it does give you a sort of round-a-bout idea of where you’re at and what your visibility is at.” A8: “Usually the most important thing is to get the exposure and to get the media impressions.”

Clearly, the perceived value of a placement is as an implied endorsement. While exposures

constitute the main objective, association with the celebrity are highly sought—particularly when the

buyer is willing to pay for this association.

A7: “The amount of impressions you get from a placement as opposed to - for a small amount of money. For example, a show like Friends can have sometimes 20 million viewers on it. And if I place a (BRAND) in Joey's apartment on the microwave - on his microwave and it shows up on the television show then it counts towards what I contracted with my

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client as a guaranteed exposure - one of their guaranteed exposures. And once they have 10 exposures - and this is just for simple math reasons, they are not real numbers - but let's say the account is $ 100,000 and I promised them 10 exposures, that means each exposure - or if I only get them 10, that would give us $10,000. So, let's say one of those exposures happens to be on Friends and there is the (BRAND) in the foreground for 15 seconds. Well, a 15-second spot on Friends is $250,000. One of their exposures is $10,000. And, it remains in television property and it will be rerun to that. And, a commercial where there is that company selling their own product saying aren't we great, then the 30-second spot goes away as opposed to being in Joey's apartment for several episodes. It is being more like an implied endorsement by that character.”

Beyond these somewhat anecdotal anticipated effects, we have found that measuring

effectiveness is especially complicated because (1) product placement is a unique tool, (2) because it

is viewed as playing multiple roles in the marketing mix, and (3) because of the lack of directly

measurable impact data.

Evaluating The Value Of Placements On Consumers

None of the parties involved in this process seem to be any more sophisticated in assigning a

value to the product placement than they are in measuring effectiveness on consumers. Value

assessment is essentially a subjective measure.

A2: “whatever the market will bear, whatever a client, based on the pitch, will believe it is worth. And it is really based on how good you are to convince them based on the director, the cast, the previous information we had, the release date, the promotional window.

C3: “a company policy - that we just don’t pay to be in the movies.” A5: “Especially since we don’t know what works!” A5: “Find arguments for my clients and to interact with the producers and the diffusion people to show them the advantages but before all to know how much it should cost. And how much it is worth.”

One of the most sophisticated companies involved in product placement reported using

recall measures as well as some focus groups to “see how placements were perceived” (C1) by the

target consumer audience. The importance of such a qualitative perspective has been noted in

research academic research efforts (DeLorme and Reid 1999) but attempts to capture the net effect

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of a placement remain limited. When combined with a cross promotions, placements can be

evaluated more readily, using “direct response tools rather than advertising equivalency” (A14).

Important Variables For Estimating Product Placement’s Effects On Audiences

Despite the lack of true measures of effectiveness, our informants echoed many of the

variables identified in previous research on the effects of product placement on viewers (Karrh,

McKee and Pardun 2003; d’Astous and Chartier 2002). The notion of plot connection (Russell 2002)

was often brought up as the need to “organically weave the brand into the plot” (A13). Of course,

such plot connections are not always feasible, as they encumber the production side’s artistic

freedom:

A5: “We get to a point where what we requested is too constraining for the producer and then we dream of the facility of execution of this, because if I am Coke, for instance, and I want a product placement in this sitcom and I want this character to handle it, I want to be integrated to the plot, now we enter the intimacy of the writers”

The concept of plot connection was perceived as potentially inappropriate if the placement

seemed unnatural or if it did not “fit”. Across the board, the informants seemed well-aware of the

potential pitfalls of product placement, in particular the overuse of the medium and the risk of

inappropriate placements. Although many agree that placements enhance the realism of productions,

many productions run the risk of involving too many placements or too blatant placements.

A12: “You don't want to go over the top. You don't want it to seem like a commercial, and our clients are aware of that…. (if) they feel that it's too commercial they just won't put you in there.” C4: “So that they become a part of the show, but they’re not an obvious placement. That’s the one thing that I don’t want to ever see happen. I don’t ever want to see such a blatant product placement in a project that people go, “God, it’s so annoying to see it like that.” It should have a feeling of subtlety to it.”

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These quotes speak to the potentially reduced effectiveness caused by an over abundance of

product placements as they become too common, irritating and a blatantly obvious attempt to sell.

Subtlety is the key strength of product placement, as illustrated here:

C1: “I’m not too sure that (advertising) media dollars are the best spent for me to promote my beer because one, it then shows that this is a business and it is advertising and it’s just not a natural thing in why that product ended up in the movie.” Clients and agents alike recognized the risk that over-saturation could eventually lead to wear

out among consumers:

C3: “I think that people are getting tired of seeing people drink the Pepsi in front of them. They’re there for entertainment and they’re there for other reasons besides a product being pushed in their face.” C4: “I think what happens is consumers are a lot smarter than we give them credit for sometimes. They’re very cognizant of what they’re seeing. You gotta be careful that you don’t overdo it. It can’t be a turn off for people.” A6: “That's disgusting. It stops the magic of the show itself.” In fact, many product placement practitioners explained that they avoid cross-promotions

that may attract too much attention to the product placement. The risk for many advertisers who

want to “try to get as close to content as possible” (A13) is that the quality of programming may

decline at the expense of increasingly commercial content.

C1: “ we don’t like blatant placements, …because all that is going on, the consumer is starting to see through it. Starting to realize that all this is paid advertisement. We don’t really do a whole lot with the promotional end of it, just because it is a bit commercial.” C3: “our tactic is kind of less is more… It’s something that’s not thrown in your face… We really want it to make sense in a movie because we don’t want to overexpose ourselves to that.”

Clients, realizing the potential damage of negative placements to a brand, were particularly

careful with the ways their brands are portrayed.

C5: “We try definitely to keep them out of certain types of movies, and we have a written agreement which states we will not be placed in an x-rated movie or an R-rated moving that we feel is not appropriate.”

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C2: “a lot of them on demographics for our target audience, but the ones that we mainly turn down are ones that have not necessarily violence, but sexual contact that we don't like or maybe we don't want our product associated with.” C3: “we really scrutinize the script and if we feel that the language is a little off-color, or it’s racist in some way, or it’s kind of biased towards something, we just won’t do it. We just say no. We’re very picky. Maybe even a little snooty, to say we’re not going to let our brand be used that way or we don’t feel like this is the correct way to use us and we just turn them down. We say no, thank you for thinking about us, but we’re not interested.”

Clearly product placement decisions must also be made based on the internal audience, as

the following excerpt shows:

C4: “Truthfully, I work for a company that has a 70-something year existence and I would never want to be on a program that would be embarrassing to them. There’s a lot of things we turn down. We turn down opportunities all the time that don’t feature the products appropriately. We have had things that we don’t think will keep people happy. We just had a music video with an artist that is very controversial, who I personally love, but I don’t want to have to deal with employees or stockholders that say, “how could you possibly have given that product to this person to use.” And I have to respect that. I have to remember who my audience is. My primary audience is my internal employees and our stockholders, as well as our customers…. I do feel I have an obligation to all of them…. I learned that the hard way. I have been involved with certain things, when we first got out here, and we were just so pleased to be in anything-the fact that anyone knew who we were out here, that we said yes, probably more than we should. And there were a couple of opportunities where people came back to me and said, “Oh, I don’t think that was a good idea.” And I have to say, looking at it more objectively now, 3 years into it, “You know what? They probably are right.” This time, now we sort of look at things and we analyze them and say, “Does this make sense? Is this what we want to do? Is this where we want to be seen?” I also think, not like I’m going to have someone calling me and bitching at me, but I’m going to think to myself, “Can I understand how this could possibly disturb or upset somebody? Or is it in a way that it would not appear appropriately for who our company is and what we’re about?”

Non-Consumer Audiences

Interestingly, and perhaps less obvious, are some of the “byproducts” of product

placements. Placements, while serving as an external communications function, often provide a

platform for public relation campaigns, sales promotions, and even new product introduction.

Within public relations, we found that placements may serve both an external and internal role. The

external PR function treats placements as an opportunity to obtain press releases and business

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exposure. In fact, some companies handle it like other PR components through a PR firm (Pardun

and McKee 1999)

A12: “It can lend credibility and give the clients a PR angle, if that's what they're looking for. It can give the client a basis for a back-in promotion.”

C2: “we had a public relations firm, too, that we paid a retainer to who would also take our product placements that we did get ... and they would take it even further. They would get us some publicity in newspapers and other trade magazines that are important to us.”

Yet, repeatedly, we found that product placement serves internally as “company hype” (C5),

“employee pride” (A 15), or as an ego booster for higher level executives.

A7: “Perhaps it could be an ego thing. Say for example we have a company that wants us to just get them several mentions so that when they are at a cocktail party they can talk about their company being mentioned on The Practice.”

In addition, placements can improve morale and productivity of employees and franchise

operators alike, as the following quotes illustrate.

A6: “… now they go around saying "my company was in the movie," and they feel good about that, and their productivity goes up.”

C2: “the franchise operators, they're the ones that keep pushing us to continue the relationship.” Because of the increasing opportunities (and requirements) for cross-promotions, product

placement sometimes tends to be associated with sales promotions. Although television-based cross

promotions have occurred in the past (Friends and Diet Coke, Survivor and its "Visa Immunity

Challenge”), such deals are more difficult because television programming does not provide a long

advanced notice. Movies thus tend to be the vehicle of choice for cross-promotions. Increasingly,

these tie-ins require early and often costly involvement.

A8: “The ideal situation is to be about six to nine months ahead on a movie and to be able to lock in some of your promotional business before you start shooting so that you can be involved in placement.”

A9: “when you find a partner that will partner with you on a leveraged promotion, they won’t pay two cents [for the placement itself]. They’ll just do a leveraged promotion. That’s

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the business. What’s $100,000 if you can get somebody to commit to $5 million in cross-promoting your movie on television?”

It is this last statement that is gaining impetus in the product placement industry. Rather

than looking for companies to pay for placements, studios are seeking partners to defray the cost of

marketing their movies and television programming through promotions. Whenever possible,

companies are looking to McDonalds, Burger King or PepsiCo to cross-promote the entertainment

property, in the process saving the studios money while also allowing them to capitalize on the

marketing expertise of product marketers. Cross promotions have now become an integral—and

sometimes necessary--- component for getting one’s products placed. All informants, both on the

client and agent side, see product placements as evolving rapidly toward cross-promotions and fully-

integrated branded content.

C4: “it’s getting more aggressive than ever before” C2: “taking product placement a little further and actually doing promotions with some of the movies” A12: “there will be a continued push from the studios in terms of films to get promotional partner for exchanging of placements.”

A7: “the studio would like to maximize the partnerships that are created through placements, and it helps them to promote the film, and it gives us an opportunity for brands to align themselves with that” Possibly because of product placement’s inherent ability to demonstrate the product in

natural usage context, it is often used as a vehicle for new product launches. The case of the BMW

Z3 is, of course, one the most famous such cases in recent years but there are many other more

subtle examples.

C4: “We’re putting products in there that are timed to market at the same time the film is going to come out, so that we can increase our opportunity for awareness and we can create a demand for product.”

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Product placement is also particularly suited for new product launches because it provides a

rich emotional context for brand building. However, as with the cross-promotions, such efforts

require great coordination regarding the timing of the releases, which is why many companies are

actually going back to sponsorship, the soap opera way. In 2002, Roxy—a manufacturer of surf and

snowboard clothing—announced plans to produce an MTV series Surf Girls which features

snowboarding and surfing not currently available on network or cable TV (Tkacik 2003).

A12: “Whereas a movie, on the other hand, they'll have a build up to the movie two months before it's released, that is the studio will be build up the movie's release two months prior to it being released, and then it might be in theaters for four or six weeks. So, there's a longer window where it will be applicable.”

Conclusions

A9: “it might be sophisticated for a few companies, but there’s another 300 companies that aren’t at that level, yet.”

The above quote pretty well summarizes the state of the art of the product placement

industry at this time, though it should be noted that it is in a constant state of flux.. Like other young

industries, those in the product placement business are still searching for the best model under

which to operate. As a result, changes occur rapidly. Seniors in the industry believe that it will be

another few years before we can truly assess the effectiveness of product placements or, as it is

increasingly referred to, product integrations.

Our research allows, however, a number of conclusions to be drawn regarding the industry

and some recommendations for advancing the process of measuring effectiveness. The product

placement industry is very much a reflection of the Los Angeles/Hollywood subculture and personal

and social relationships tend to drive the business. Few, if any, concrete objectives are established

and, as a result, there is no sophisticated operating model for how product placement should be

evaluated and no one seems to be measuring the effectiveness of the implementations. Many agree

on some of the threats that exist, such as the potential for over-exposure of placements and the

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increasingly skeptical consumer audiences. Our research indicates, however, that there are multiple

target audiences for product placements and that, based on these audiences, there are various

(though not formalized) objectives sought. This last finding forms the basis of our

recommendations.

Recommendations: Rethinking The “Los Angelization” of Marketing Practice

C5: “As money becomes more available, I think it's going to get worse again instead of better.”

All indications are that the industry is alive and well and will continue to prosper. All parties

involved recognize the rising attractiveness of placements on television and in the movies. Many

advertisers, concerned about the impact of Tivo and other PVR’s which allow consumers to zip

through or zap commercials, are examining the increased use of product placements as a means of

getting their products noticed. Revenues from PVR services reached $20 million in 2001 are forecast

to hit $1.2 billion in 2007 (Elkin 2002). As a result, many predict that product placements will

increase in this medium. Digital insertions also increase the range of placement options in post-

production.

As the industry grows, so does the number of media where product integrations are

becoming common place. Developers of sports and car racing videogames have long sought to

include brands associated with their sports, like Gatorade or Nike, to make the games look and feel

more real (Gunn 2001). Users cite the ability to target a specific segment as well as the hours of

exposure as positive benefits of employing this medium. One videogame company, Brandgames, even

develops custom-built videogames that prominently feature a product or brand, starring an animated

brand mascot (Nakamura 2000). Music videos and songs have taken up celebrity endorsements with

increasing references to brands. From Run-DMC's 1987 My Adidas song to today’s Busta Rhymes’

Pass the Courvoisier, hip-hop artists have helped the sale of certain products simply by wearing them in

videos or mentioning them in their materials (Holloway 2002). Next generation product integration

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also involve developing the entertainment property for the brand, instead of the other way around,

such as BMW and SKYY Vodka’s short feature films and the US Army’s official videogame

America’s Army. Brands are essentially becoming entertainment properties in their own rights. This

trend is only emerging and reiterates the pressure for marketing professionals to establish clear,

measurable objectives for product placements.

A9: “the advertising community would love to figure out more ways to break Hollywood.”

As the product placement industry matures, it is critical that a more formalized model be

established if larger corporations with larger budgets are to become more involved. To effectively

use product placements, the placements must be considered as part of the overall communications

strategy, perhaps even as part of the overall marketing strategy. Essentially, they are a medium, and

should be integrated into the media plan.

As in any strategic planning, the target audience should be identified first. Like any other

communications tool, product placements must consider the specific market segment sought,

whether it be the external or the internal audience or both. Many placements now occur whenever

the opportunity arises, or as a result of social connections, with little regard to the target audience. In

fact, movie ratings serve as a segmentation tool in themselves, and television audiences are usually

clearly defined demographically. In addition, specific programs/movies may appeal to a certain

lifestyle. For example, the movie Blue Crush was designed to appeal to teen females attracted to the

surfer lifestyle—regardless of geographic location. In addition, as noted, not all audiences are

external, nor are they always the ultimate consumer. Treated as internal public relations tools,

product placement deals may be evaluated differently.

Objectives should be specifically delineated. As noted, not all product placements are

designed to directly result in sales. Some have been used to develop awareness for a new product or

brand, build a brand image through association, enhance internal public relations, get “buzz”,

36

support the launch of a new product, etc. Currently, the only criterion that appears to matter is that

of generating impressions or “eyeballs”, with the outside chance that the placement may become the

next Reese’s Pieces. Many of those involved in placements claim to be satisfied just to see their

products appearing. The more exposures it generates and the more often it appears satisfies their

objectives, though no specific and quantified objectives are established. Without establishing such

specific, quantifiable and measurable objectives, the ability to gage a placement’s success is severely

limited, and planning and evaluation are inhibited. Product placements need to adhere to the criteria

defined for establishing communications objectives.

O2: “I remember sitting and watching the movie and in the middle of a scene, on a kitchen table, I see Crest

toothpaste and about six other products, just sitting on the table, that had nothing to do with the scene”

Like other media, the effectiveness of product placements needs to be assessed against the

objectives set. Standards other than exposures or impressions generated must be established, and

methods for establishing effectiveness implemented. Currently, there are no bona fide companies

offering valid and reliable measures, and most of those in the industry do not care, or, for that

matter, want to know if their placements work. Consider the following interview exchanges:

Q: “If I were your boss, and I asked how you knew the placements were working, what would you tell me?”

C4: Because I told you they were”

And

Q: “Why do companies not measure effectiveness?

O2: Companies are scared. What if it is not working?”

In fact, the product placement industry is in no immediate danger of losing participants, or

for that matter hitting the maturity stage of its life cycle. All indications are that it is still in the early

growth stages. However, as communications budgets level off or decrease, and/or as product

placements start to comprise a larger portion of these budgets and marketers demand more

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accountability, the use of this medium, like others, will require greater substantiation of their

contribution. Those involved in this industry should learn from those in the Internet advertising

industry, who at one time were in a similar high growth market. Eventually, they will be asked to

prove their worth, and will be forced to demonstrate their relative effectiveness to other media. Just

being in Los Angeles will not be enough.

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Table 1: List of Informants by Organization Type

Type # Informants

Code Organization Type

Agencies 1 A1 PP only 1 A2 PP only 2 A3 PP only 3 A4 Integrated 2 A5 Integrated 1 A6 PP only 1 A7 PP only 1 A8 Integrated 1 A9 PP only 1 A10 PP only 3 A11 Integrated 1 A12 Integrated 5 A13 Integrated 3 A14 Integrated TOTAL 26 Production houses/studios 2 S1 Large 1 S2 Independent 5 S3 Large 1 S4 Large TOTAL 9 Clients 2 C1 In-house

(Fortune 100) 1 C2 Outsourced

(Small) 2 C3 In-house

(Fortune 100) 1 C4 Outsourced

(Fortune 100) 1 C5 Outsourced

(Fortune 100) 4 C6 Outsourced

(Fortune 100) TOTAL 11 Others* 1 O1 Industry group 1 O2 Research 2 O3 Industry Analysts 2 O4 Industry group 1 O5 Research 1 O6 ITV 1 O7 ITV TOTAL 9 GRAND TOTAL 55

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Figure 1: Structure of the Industry

40

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