Academic journal article Asian Social Science

The Effect of Product Placement Advertisement Legalization on Firms' Sales Growth: Evidence in Korea

Academic journal article Asian Social Science

The Effect of Product Placement Advertisement Legalization on Firms' Sales Growth: Evidence in Korea

Article excerpt

Abstract

This study investigates the effect of PPL (Product Placement) advertisement in Korea on listed firms' sales growth in an empirical way. Most existing literatures argue that PPL advertisement brings negative impacts on sales of PPL products theoretically. It is difficult to find studies of examining the effect of PPL advertisment to sales growth empirically. Thus, from the listed firms' financial data, this study examines the change on sales pre and post PPL advertisement legalization periods in Korea. Korea is selected for the sample of this study, because Korea provides a good research setting for watching the PPL effectiveness; PPL advertisement has been legislated in Korea since 2010. In the past, the way to advertising through broadcasting was very limited so that some advertisements were illegally prevalent, but the PPL legalization allows that the advertisers more freely expose their products in various ways. For testing the effectiveness of PPL advertisement after the legalization, unique dataset of listed firms in Korea are collected. As a result, this study supports that there is a significantly negative association between PPL advertisement legalization and firms' sales growth rate. This negative association is still robusted when firms increases their advertsiment expenses. This implies customers are possible to receieve a negative impression from direct exposure of PPL advertisement. This result warns about the riskiness of exposing products indiscrimately through media content.

Keywords: advertisement strategy, advertising expense, product placement, PPL, sales growth

1. Introduction

In recent years, Korean media content including TV drama and TV shows has made a cultural boom in overseas countries under the name of "Korean Wave (Chua & Iwabuchi, 2008)." This movement led Korean government supportive interventions on entertainment industry aimed for producing "quality media content" (Kwon & Rhee, 2014). Korean broadcasting industry has likely to be high level of capital dependence on advertisement comparing with major G7 countries (Byun & Lee, 2013). Accordingly, Korean government gradually eases off the restrictions on advertisement, and one of the most representative case is to legalize PPL (Product Placement) in 2010. PPL is an advertising strategy which exposes specific products or brands within the public TV channels. Before the PPL legalization, it is prohibited to expose the products' logos or brands directly on TV screen in Korea. Although actors can wear a genericided brandnew shoes on TV but the logo of the product must be hidden; they usually cover the logo or brand name by carton sealing tape or paper stickers. Nevertheless, the those products have been affected on their sales growth; many of those "unintended PPL" products on TV shows has been usually listed in top ranks on search portal sites after the exposure. This implies that the PPL advetisement method is able to stimultate many TV show viewers' curiosity about the PPL products (Yu, 2003).

The legislation about PPL advertsiment in 2010 makes the brand names display more explicitly in broadcasting media content. Consumers do not need to make an extra effort to find about the product which they have seen on TV. However, according to the survey data from Trendmonitor (www.trendmonitor.com), as the frequency of PPL exposure increases, viewers' general advertising affinity about PPL products decreases (Acrofan Editorial Department, 2014). This could imply that deregulation of PPL advertisement makes the effectiveness of PPL less influential. This study tests whether PPL legalization makes an signifinace influence on the effectiveness of PPL advertsiment through the quantitative data analysis. Many of the existing literatures have argued that PPL advertisement legalization brings negative impacts on image of PPL products to viewers theoretically. However, the empirical studies examining the effect of PPL advertsiment to firms' performance are very few. …

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