Product Placement - The Next Frontier

Product placement is a fast-growing media option for buyers who are constantly confronted with the challenge of coming up with innovative media mixes. It helps advertisers cut through clutter, reach new audiences, and show the product in use. Downsides of product placement include legal issues, activist opposition, and the lack of a standard measurement and pricing system. Media professionals are discussing product placement frequently, debating its role in television, movies, and video games.

The main goal of product placement is to cut through the clutter of advertisements in the media by accessing the audience in original ways. Harrison Ford’s most recent movie “Firewall” became a marketing tool for Chrysler. Trailers for the movie were used as starting points for a Chrysler campaign that used the same style and promoted the placement in the movie. According to a Chrysler executive, "we're not trying to make a two-hour commercial, but rather cast our products in an entertaining environment” (2/10/2006). Product placement is also becoming more appealing because 78% of advertisers are losing confidence in traditional 30-second ads, as compared to how they felt two years ago (3/22/2006). Digital video recorders allow consumers to fast-forward through commercials, in fact, two-thirds of all digital video recorder owners skip most commercials (3/4/2006).

Product placement isn’t a replacement for the 30-second ad as much as it helps reinforce the message already in current advertising. While product placement occurrences have doubled since 2003 (3/4/2006), many of them have similar messages or themes to current advertising. An example of reinforcement is when Buick purchased a product placement in Desperate Housewives, where a character was shown modeling with the LaCrosse in a mall. This situation was also shown in similar Buick commercials throughout the night, but with a different model and slightly different set appearance. This slight difference prevented Buick from becoming overly repetitive (3/13/2006). Sears also uses this strategy with their placement in Extreme Makeover: Home Edition on ABC. Sears provides appliances and other items to ABC in exchange for goodwill-generating product placement and then ties in the placement with commercials during the show that display all the appliances donated (2/26/2006).

Product placement isn’t limited to television shows. Sports games and the Olympics feature many occurrences of placement, and even some product placement traditions. The Olympics feature champion athletes displaying their brands of choice during victory interviews, building a company’s reputation through positive association. Shaun White props his “Flow” snowboard up behind him in all of his interviews, getting his sponsor great placement on network TV (2/14/2006). Gatorade at football games has become a product placement tradition as players drink out of Gatorade bottles and dump the sports drink on the coach after winning games. Product placement also appears in video games, particularly games that are designed to be realistic. Gamers and designers believe that this makes the game more believable, and because “a quarter of US gamers have cut the time spent watching TV”, this is a good way to get to the demographic that is spending more time with video games than TV programs (3/19/2006). An extension of product placement in video games is the advergame, where advertisers have complete control over the design of the game and placement of the product. Jeep’s marketing executive believes, "gaming is a fun and creative way to increase brand awareness, build brand loyalty and educate consumers on vehicle attributes (3/20/2006).

There are legal issues surrounding the use of product placement. In Europe, product placement was banned until a proposal was accepted by the European Union. This proposal included a regulation that all shows that have product placement instances put a warning before each episode. This regulation allows an audience to remain passive, instead of consuming media in an active, analytical way. The proposal also allows networks that televise sports events to show advertisements during the game in a split-screen format, allowing advertising to have the same prominence as the game (3/16/2006). In the U.S., many organizations, such as Commercial Alert, have established organized campaigns against product placement, stating, "Television stations that cram their programs with product placements, yet fail to identify the sponsors in a conspicuous way, are brazenly violating the public’s right to know who is seeking to persuade them” (3/9/2006). This group believes they are trying to avoid a commercialized society, however, society is already at that point, and it is vital that media consumers become aware of the fact that product placement exists. Another controversy caused by product placement is the fight over whether or not it can be included in children’s programming. Products shown in these programs are often junk food and video games, and, because children don’t know that they’re being shown a paid placement, this should be avoided (2/20/2006).

The biggest controversy in the world of media is the difficulty in measuring and pricing product placement. The Q-Ratio has been developed, and it calculates effectiveness by determining “where the product appears in the frame and whether the brand name was spoken clearly". However, this ratio has not been accepted as an industry standard. VISA saw its sales rise after placement in the movie “National Treasure”, but the company believes other figures also contributed (3/24/2006). There are no rate cards for product placement, so pricing is decided in negotiations between advertisers and producers. Some instances are free because they are written into the script, but others pay for a movie’s production in its entirety (3/26/2006).

Product placement, as a new media option for buyers, is just beginning to take off. Eventually, evaluation and pricing will become standardized and legal issues will be ironed out. Because placement can access groups like college students, digital video recorder owners, and video game players, it gets to people that ordinary commercials can’t. Joseph Jaffe’s book “Life After the 30-Second Spot” discusses how advertisers are stuck in a rut of developing 30-second ads and believing “that by beating their prospects over the head with the same mundane message, consumers will eventually submit or succumb” (2/10/2006). Advertisers need to get innovative, a product placement allows them to do just that.

Pricing the Placement

Tonight I heard a speech that included the statistic that there are over 100,000 instances of product placement a year. 100,000 instances where advertisers are buying media without a rate card. That's right. Pricing for product placement is not standardized. "It's all done on a what-the-market-will-bear basis," says a producer who used to work with Mark Burnett Productions, which is responsible for Survivor and The Apprentice. "How badly do you want to be in the show, and what are you willing to pay?" (this article again)

According to the article, there are three categories of pricing for product placements: "some are free, including incidental cameos; others are barter deals in which there is a quid pro quo, such as a company agreeing to help promote the show or film; and in some, a fee is paid, or the integration comes as part of a big ad purchase—as a kind of bonus". Famous product placements (United Airlines in Terminal, FedEx in Castaway), were free - the writers wanted it, and it was just a special treat for the advertisers. The only cost to the company was personnel to advise the moviemakers about the details.

National Treasure was, well, a treasure-trove of product placement (sorry, I couldn't resist). The article cites a USA Today article which describes how "Visa, McDonald's, Verizon Wireless, America Online and others contributed to a $160 million marketing war chest, which exceeded the movie's $100 million production budget". You can fund your movie with product placement, you can produce a TV show - what better arguement is there for the growth of product placement as the 30-second ad continues to decline? One pricing is standardized (right now, it's all about getting in early and negotiating), product placement will surely play a larger role in funding media projects.

Measuring the Effectiveness of Product Placement

"Today it's the Wild West. But the marketers have the gold, and eventually, they'll make the rules. Right now, though, they're frightened that the competition will get a placement that they won't." - Frank Zazza, chief executive of iTVX, a research analysis organization

This article from CMO Magazine (a magazine for marketers) is a great summary of some important product placement instances, a history of the practice, and statistics for measuring its effectiveness. Ratings work to see how many people are viewing the TV show, but who is acknowledging your product placement attempts and actually allowing those attempts to influence their behavior? Product placement must work, why else would it be so popular? According to the article, "Eight seconds within a show may be worth as much as a 30-second ad, or more," says Mark Workman, founder of FirstFireworks, an entertainment marketing company. But determining what "the factor" should be is entirely subjective. Research companies are developing methods that combine factors like "where the product appears in the frame and whether the brand name was spoken clearly" to generate a number called the "Q-Ratio".

And the "Q-Ratio" does lead to a good return on investment. After product placement in and promotions with the movie National Treasure, VISA's holiday volume went up 19% (although not all attributed to the film). However, abuse of product placement could lead to problems. First, advertisers already think product placement is overpriced, because of the lack of an industry standard in measurement - the Q-Ratio is different between different research companies. Also, there is always the constant fear of alienating customers by placing a product too often or too promiently. TV shows and movies can easily become half-hour to two-hour long commercials. Workman says, "The moment you focus on the business over the entertainment value, people will recognize it, and they'll be turned off. I don't think there's any question that a lot of marketers and producers will make that mistake."

Product placement remains a good option for "entertaining" brands. The new and "revolutionary" (if you ask Pontiac) G6 struck a cord when all the members of Oprah's audience got a free one. VISA can be used to involve TV or movie characters in more experiences - because VISA is everywhere you (and the star) want to be.

Marketers Lose Confidence in TV Ads

“Prove to us they really are watching them and we’ll pay for it." - Kia Motors Chief Marketing Officer Ian Beavis

An article today in AdAge says that 78% of advertisers have less confidence in television advertising today than they did two years ago. The study was released today at the Association of National Advertisers TV Ad Forum and had asked 133 national advertisers their attitudes about the current state of TV advertising and potential threat posed by DVRs. The top alternative to TV advertising for these advertisers is branded entertainment within TV programs, with 61% of respondents saying it was their top choice, and product placement was fifth, with 44%.

With the advent of video on demand and digital video recorders, consumers are able to skip commercials. TV ratings are unable to report on commercial viewership or comprehension, and Nielsen's indifference is pushing advertisers away. However, these advertisers are apparently reluctant to break away from TV as their prime media choice (the other top alternatives were TV program sponsorships (55%), interactive advertising during TV programs (48%), and online video ads (45%)). Instead of thinking outside the box (literally), advertisers are stuck in a television rut.

Kia Motors Chief Marketing Officer Ian Beavis urged advertisers to not just talk the talk, but walk the walk. “Don’t get up and bitch and moan and then do the same thing you’ve always done,” he said. “Do the right thing to do for that brand at that particular time.” Until advertisers can look beyond TV as their favorite media choice, product placement will be a prime choice for those who are giving up on the 30-second ad.

Advergames

Product placement in video games can be as simple as having a billboard or a soda machine. However, taken to its extreme, product placement can include building actual video games to be distributed or played on the company's website. Other games can be played on free sites such as shockwave.com, and are themed around Lifesavers, Coca-Cola, or GMC Trucks. Lifesavers can be game pieces, bowling pins decorated with brand logos, or characters can interact with products. Regardless, company-produced advergames allow complete control for companies. They can demand how products are shown, how they are used, and, trust me, these games can be addictive and popular.

In this article, Julie Roehm of Chrysler/Dodge/Jeep marketing, states, "gaming is a fun and creative way to increase brand awareness, build brand loyalty and educate consumers on vehicle attributes." Gaming, as I stated in my last entry, is a way to reach an audience that is lowering their TV watching in order to dedicate more time to gameplay. Advergaming is a way to have complete control over a gamer's product interactions. Media buyers and advertisers today are always looking for the best way to control audience perception and interaction, and advergaming allows just that.

For more info, check out:
my classmate's blog
Livesaver's Candystand.com

Product Placement in Video Games

Billboards, drink machines, and clothing are all fair game for advertisers in video games. In Half-Life, these items are branded with generic names, presumably not to detract attention from the game itself. On the other hand, according to a USA Today article quoted on howstuffworks.com (I can't find the original), "Play Crazy Taxi and a lot of your passengers will ask you to take them to Pizza Hut or KFC (both owned by Tricon Global). Dive into Die Hard: Nakatomi Plaza...and you'll see Zippo lighters and Motorola cell phones. UbiSoft's Surf Riders has G-Shock watches and banners for Mr. Zog's Sex Wax, a surfboard wax." The article also notes how product placement in video games began in 1980, around the beginning of the video game craze.

A 2004 article in BBC News discusses how some gamers and programers say that advertisements make video games more realistic. That's the truth: driving along city streets in Crazy Taxi, it's much more realistic if you're as bombarded with outdoor advertising as you are in real life. The article also points out that "a quarter of US gamers have cut the time spent watching TV and a fifth more intended to, according to a recent survey."

There aren't any commercials in video games, so advertisers must find a new way of reaching this audience. Product placement in video games allows gamers to interact with the products while playing their favorite games. Some games don't allow for product placement because of their topics (World of Warcraft, for example, takes place on an alternate world, where Coca-Cola doesn't exist). However, earth-based games are great alternatives to the traditional 30-second ad for advertisers.

To be continued... next post: advergames - the ultimate product placement tool.

The Legality of Product Placement

On December 14th, 2005, the European Union proposed rules that would allow product placement during television shows in the U.K. for the first time. This article, originally published in the "Telegraph", discusses a directive called "Television without Frontiers", which would allow for product placement, micro-breaks (shorter than 30 seconds), and would eliminate a minimum for length between commercials. Children's and public programming would still be protected. Viviane Reding, the EU information society and media commissioner, said that these new regulations would allow for a "level playing field", and asked, "why should they not have the right to this additional source of income, which is absolutely necessary if we want to safeguard a strong audio-visual sector in Europe?"

One condition of this proposal is that television shows with product placement put a warning before each show in which product placement occurs. This warning would also be placed before American shows such as 24, which features a high amount of product placement. This warning is a good idea initially, but it degrades audiences and allows them to continue passive viewing. Advertisements today require a more active audience, and an audience that can discern between advertising and entertainment. Allowing audiences to remain passive by treating them like children is not the way to promote media literacy and a new, active, audience.

A contrasting part of this proposal would allow mini-breaks and split screens during athletic events, essentially allowing networks to show advertisements during the entire game. Mini-breaks allow networks to play short commercials when the ball goes out of bounds, and split screen rules let advertisements play while the game is shown on the other half of the screen. This is not product placement, but invasive advertising. Product placement is subtle; it is an art. Invasive advertising crowds in on a viewer's enjoyment instead of showing them the product or service in use.

The EU's new proposals are contradictatory. They limit audience participation by warning them about product placement exposure but slather on the advertisements. The EU proposal only targets a passive audience, while media should be trying to involve and create an active audience.

Getting at those hard-to-reach places

College students and the 18-24 age group in general are notoriously hard to reach. That's why there are events like the TKO (TechKnow Overload) Tour. This technology-savvy generation is one of the most skeptical audiences that advertisers want to reach. In 2002, the online spending rate for 18-24 year olds increased by 7%. As this age group gets older and enters the workforce, this spending power can only increase.

Product placement opens a back door to this age group's awareness. In Fox's new sitcom "The Loop" (which, by the way, is hysterical... check it out!), the 23-year-old lead character drives a Scion xB. Toyota's "younger" car, which resembles a tissue box, is targeted for this age group. When I was shopping for a car a few years back, Toyota salesmen refused to believe that I wanted to buy a Rav4, and instead kept pitching the Scion. It's customizable and reasonably priced, but it still hasn't taken off.

With jokes in the show sometimes revolving around the car (the lead changing in it to be more like his friends, him driving his controlling boss to an airfield), the product will become associated with laughter, fun, and a trendy new show. Advertisers now have another reason to look at the ratings of these new shows: to see if their products are being seen in use. It's a spokesperson, an extended commercial, and more.

Echoing Product Placement in Commercials

"Advertisers are becoming more skillful at using indirect sales pitches, such as product placement—a tactic that probably dates to the birth of cinema."

Last season, an episode of Desperate Housewives featured one of the characters modeling to promote a Buick LaCrosse at a local shopping mall. Commercials shown during the episode reflected this same pitch, reinforcing the image. Reinforcement (not to be mistaken for repetitiveness) is vital to the success of advertising. Consistency in a campaign between outdoor, television, and print advertising is one of the ingredients to a good return on investment. With the advent of product placement, the need for consistency has grown to a higher level.

The main problem with product placement is its subconscious nature. When the same product use is reflected in advertising, the consumer can connect the dots between the occurrence in the show and the brand. Buick separated themselves from being just another car company shown in the show to being a prominent sponsor through reinforcement.

Buick could have overdone the reinforcement, using the actual product placement instance in a commercial. This repetitiveness is one of the problems viewers have with advertising. The point is to reinforce, not to bash the consumer over the head with your brand and product. This could alienate consumers. Advertising is used to inform and persuade, not to convince via mindless repetition. Product placement is a great new tool for advertisers and should be reinforced with other media, but not to the point of annoyance.

For more info:
New Yorker article on product placement

Warning: product placement may be hazardous to your TV viewing

"It is inherently deceptive if people don't realize that ads are ads," said Gary Ruskin, executive director of Commercial Alert

In my last post I referenced this article, which discusses some of the problems with product placement that have led to an uproar from critics. The article calls product placement "stealth advertising" and critics say the subconscious nature of it is unethical.

Commercial Alert, an organization that is fighting the commercialization of society, has submitted a petition to the FCC. It alleges that network stations have not been forthright with identifying sponsorships and product placement occurrences. According to the petition, "Television stations that cram their programs with product placements, yet fail to identify the sponsors in a conspicuous way, are brazenly violating the public’s right to know who is seeking to persuade them." The FTC's response includes an item describing how some product placement is the result of paid sponsorship, while some is caused by decisions made by the writers. To outlaw one is to hinder the other.

The problem with trying to avoid a commercialized society is that it is already established. Our society was commercialized early in the 20th century, and the newest forms of advertising are just a part of that. Consumers today should be aware that they are being advertised to in almost every facet of their lives, and that is just a result of being part of this commercialized society. Product placement isn't the only type of advertising being targeted by Commercial Alert. Other "problems" include: buzz marketing, arenas, and advertising in public spaces. As much as these consumers want to be free of advertisments in their everyday life, it's impossible to do. Arenas need sponsors to be built and to stay open. Thousands are employed by agenceis designing outdoor advertisements and selecting media for product placement. Society is structured around immersion in advertising, and to ignore that aspect of society would be to move us back to the 19th century. It's time to move forward, not backward.

For more info:
Commercial Alert's Website

Product Placement and DVRs

"If you marry the right product to the right script, you won't turn off viewers." - Dave Harkness, Senior VP for strategy and development for VNU Media Measurement & Information Group

This article is a great summary of product placement's history and its current uses. Advertisers spend about $1 billion a year on product placement, everything from placing fixtures in ABC's "Desperate Housewives" to giving Hummers to CBS's "CSI: Miami" cast at a cost about $55,000 apiece. In the past, Campbell's Soup paid the producers of "Lassie" to make sure that Timmy finished every episode they sponsored with a bowl of Campbell's Soup. Product placement began when TV took hold, and it will last as long as TV shows are so popular.

The rise of the digital video recorder (DVR) has some advertisers cringing, and others rapidly picking up on the product placement trend. Viewers can fast-forward through commercials, but some have no idea that they are seeing thousands of products advertised in their favorite shows. According to the article, two-thirds of DVR owners fast-forward through some commercials, therefore, it makes sense to have a back up plan. Product placement provides just that. In fact, Volkswagon will pay $200 million in the next five years on product placement in movies and on TV shows. This reinforcement is one of the best things advertisers can do. It reinforces what audiences are seeing in commercials or shows and reaches new audiences that are skipping commercials.

Will product placement replace the legendary commercial? Doubtful. But they work well hand-in-hand. Product placement occurrences doubled in 2003, and are continuing to grow exponentially. Advertising on TV is making the same move towards an integrated marketing communications plan as many other advertising, PR, and marketing campaigns.

For more info:
Product Placement Turns TV Programs Into Commercials