Product Placement: Does It Really Work?

Blog post by: Steve Vanevenhoven, Baer Performance Marketing Intern
As consumers, we are bombarded with thousands of advertisements every day.  Whether you like it or not, you are constantly being targeted during your morning drive, while you’re browsing Facebook, or checking your email.  Although, a majority of advertising budgets still pay for this kind of exposure, many dollars are moving in the direction of product placement.
When a company pays to have its product shown or alluded to in television shows and movies, it is considered product placement.  This kind of promotion has been around for a long time and has been proven to be very successful.  In fact, some companies like Reese’s Pieces got their start because of product placement.  In 1982, the movie ET hit the box office.  The small candy was a featured element in the storyline, and soon after, sales for Reese’s rose a remarkable 65 percent at movie theaters.  Product placement can also be seen in television. American Idol  judges drink from very prominently displayed Coca-Cola cups.  Coca-Cola spends $60 million for product placement for the entire season but sees a return of around $12 million per episode.
There are many reasons why both Hollywood and big corporations find value in product placements.  For Hollywood, it makes their production more realistic.  Actors can grab a Coke instead of drinking soda from a no name can.  Also, a movie’s budget will obviously benefit from the money a company puts forward to integrate their brand into the production.
For business, product placement has a great return on investment.  After the movie is in the theater, it will come out on DVD and Blu-ray where customers can watch it over and over again.  Because of this lasting effect, the cost per view is significantly lower than other forms of advertising.  In addition, consumers can be skeptical of traditional advertisements.  When they see a product in a television show or movie, they don’t think of it as an advertisement, and product placement will have even more influence on a viewer if they see one of their favorite celebrities using a product.
In the United States, billions of dollars are spent every year on product placement, and this rate is only growing.  Do you think you’re more affected by this clever strategy than you are traditional advertising? Should there be some regulations for this form of advertising?