Synergy or Interference: The Effect of Product Placement on Commercial Break Audience Decline

AbstractRecent years have seen a considerable rise in the use of product placement in television shows. Taking advantage of second-by-second product placement, advertising, and audience tuning data, this research explores the impact of such product placement on the extent to which viewers tune away from downstream advertisements. Motivated by the behavioral priming literature, we examine how this impact relates to the brand-and category-match between product placement and subsequent advertising, as well as the temporal distance between them. Our analysis suggests that the coveted first position of a commercial break holds a greater audience when preceded by product placement from the same brand. This indicates a positive synergy between the two activities that can reduce audience decline by more than 10%. Product placements by other brands, however, can actually exacerbate audience loss, thus interfering with the reach of advertisements by competitors. Significantly, these changes in audience size are not temporary, but are retained across the remaining commercials in the same break. We discuss the managerial implications of these findings and directions for future research in the rapidly changing media landscape.