Home > Update > June 2007

Jumping on the Brandwagon:
The Allure of Product Placement

By Bill Shepard

Back in 1982, Steven Spielberg’s “E.T. The Extra-Terrestrial” made sales executives at Hershey Foods Corp. jump for joy, while it probably made their counterparts at Mars, Inc. want to jump off a bridge.

Why? Spielberg initially approached Mars about placing its popular M&Ms in the film, but the company turned down the opportunity.

Hershey, on the other hand, agreed to place its lesser-known Reese’s Pieces in the heartwarming blockbuster, and it paid off.

Sales of the candy jumped by 65 percent, and Hershey Vice President Jack Dowd, who brokered the now-famous deal, was hailed as a visionary.

Hershey was not the first company to take advantage of “product placement”—the now widespread practice of using products as props in movies, television and other media to promote brands. One of the first cases involved Katherine Hepburn dumping Gordon’s gin overboard in the 1951 movie classic, “The African Queen.” Nowadays, it’s almost inescapable on TV and the silver screen, from routine appearances of Applebee’s on NBC’s “Friday Night Lights,” to James Bond using Sony cell phones, laptops and digital cameras in the movie “Casino Royale.”

Companies increasingly are embracing the idea that seamlessly integrating their products into entertainment vehicles is one of the more effective ways to connect with consumers.

“Product placement has become the wave of the future,” says Deborah Mitchell, senior lecturer and executive director of UW-Madison’s Enterprise MBA programs. “Companies increasingly are embracing the idea that seamlessly integrating their products into entertainment vehicles is one of the more effective ways to connect with consumers.”

Why companies do it

No doubt about it, product placement is a growth industry.

Case in point: in 2006, product placement mushroomed by 37 percent, with expenditures around $3.36 billion. In 2007, an estimated $4.38 billion will be spent on product placement.

Why are companies placing their bets on product placement?

One reason is that traditional advertising has become so omnipresent, which, ironically, has diluted its impact.

“The advertising industry has become a victim of its own success,” says Thomas O’Guinn, professor of marketing and executive director of the Center for Brand and Product Management at the UW-Madison School of Business. “Ads have become so pervasive—they’re almost like wallpaper. People tend to block them out.”

Technology also has diminished the impact of advertising. Armed with remote controls, videocassette recorders, digital video recorders (DVRs) and TiVo, ad-weary people can easily skip past the plethora of advertising bombarding them. Consequently, as many as eight out of 10 viewers may never see ads. Some estimates have TV networks losing as much as 10 percent of their advertising sales by 2008, thanks to TiVo and DVRs.

And then there’s the ever-increasing cost of broadcast advertising.

“Thirty-second TV spots are becoming too expensive, and it is hard to measure their true effectiveness,” notes O’Guinn.

In the 2006-2007 season, many prime-time TV ads cost around six figures, with “American Idol” raking in as much as $620,000 for half-minute spots.

Product placement offers companies an enticing alternative method of reaching the hearts, minds and pocketbooks of the viewing public.

“People are more accepting of product placement,” O’Guinn asserts. “When people watch ads, they automatically doubt their validity. But when people are following the story line of a movie or TV show employing product placement, they’re not ‘counter-arguing’ in the same way they would if they were watching an ad.”

Product placement proponents say that audiences with an affinity toward certain characters may be more apt to purchase products that these characters use in movies and on TV. Because products are integrated into movies and shows, viewers are unable to block them with TiVo and DVRs.
Companies using product placement are also lured by the relatively lower cost, compared to traditional advertising. This is especially true when companies donate their products to TV studios and movie production houses in exchange for guaranteed “screen time.”

In other cases, companies simply pay for product placement. Coca-Cola, AT&T and Ford shell out $30 million each for product integration and TV spots on “American Idol,” yielding tremendous exposure over the course of the broadcast season.

Product placement has even spawned a whole new niche industry: firms whose sole raison d’être is to broker product placement deals between companies and production companies.

“Some TV and movie studios rely on paid product placements to help finance their productions,” says Tom Bernthal, BA ’95, president and co-founder of Los Angeles-based Kelton Research. “In fact, scripts are written in a way to accommodate the various product placements which may offset growing production costs.”

Coming to a concert, video game or book near you

Having “matured” through the years, product placement has moved into new realms beyond TV shows and movies.

In the top 20 songs of 2005, Mercedes Benz was referenced 100 times, while Nike was mentioned 63 times. Some companies, like McDonald’s, even have paid rap artists to mention their products in the rappers’ songs.

“Our firm worked with a major beverage company to get rappers to appear with the company’s products in their videos, and to hold up the products onstage at concerts,” notes Bernthal. “This campaign was very successful in boosting the product’s awareness in that market segment.”

Video games have become a “natural” for product placement. The Dole Food Co.’s logo is peppered throughout Sega’s “Super Monkey Ball II,” while Atari’s “Test Drive Unlimited” features brands ranging from Lexus to Hawaiian Airlines. Spending on ads and product placement in video games is expected to jump from $56 million in 2005 to $730 million in 2010.

Even authors are benefiting from lucrative product placement deals. Bulgari compensated Fay Weldon for frequently mentioning its jewelry in her 2001 novel, “The Bulgari Connection.” In 2004, Ford paid Carole Matthews to mention its cars in her novels.

Is it effective?

Even though companies are eager to spend millions on product placement, the question remains: “Is it effective?”

The iconic example of Reese’s Pieces in “E.T.” suggests it can be highly effective. But Mitchell is cautious about declaring product placement a panacea for traditional advertising’s shortcomings.

“It hinges on what your goals are – whether it’s increasing brand awareness or simply driving Web site traffic,” says Mitchell. “You really need to demonstrate that it changes consumer behavior or the way consumers think about brands – which can be a real challenge.”

Bryan Hamilton, BBA, ’99, a brand manager at Procter & Gamble, says “product placement will only work if the target audience perceives it as authentic, and it is seamlessly integrated into the medium.”

In other words, James Bond wearing an expensive Omega Seamaster Professional Diver watch makes sense. But 007 wearing a $25 Timex? Probably not.

Hamilton also points to an emerging trend: combining product placement with multiple consumer touchpoints, including special product labeling, in-store events and user-generated media on the Internet.

“We partnered with ‘American Idol’ to create an expansive campaign for Pringles,” says Hamilton. “Besides 15-second Pringles spots embedded within ‘American Idol’ broadcasts, we’ve sold limited edition ‘American Idol’ canisters, and held special ‘Idol-themed’ in-store events. If you enter our ‘Jingles for Pringles’ contest, in which you submit online videos of jingles you have created yourself, you could win an all-expense paid trip to watch the ‘American Idol’ season finale.”

Will the public grow tired of product placement? “It’s conceivable that some day certain shows may be ‘placement free,’ if there is enough of a reaction against product placements,” says O’Guinn. “But brands are a part of our lives. So it’s likely that product placements are here to stay.”

Bill Shepard is a Madison-area freelance writer.