The Eectiveness of

Product Placement
in Video Games
by

Jasper K. Juhl, BSc and MSc in Computer Science

Dissertation
Presented to the School of Management at University of Bath in Partial Fullment of the Requirements for the Degree of

MASTER OF SCIENCE IN MANAGEMENT

University of Bath
September 2006

The Eectiveness of Product Placement in Video Games

Jasper K. Juhl, MSc in Management University of Bath, 2006

Supervisor: Agnes Nairn

Abstract: This study investigates the eectiveness of product placements in video games. Through a review of relevant bodies of knowledge it was found that previous studies are limited in number and sometimes report contradictory ndings. Hence, signicant gaps exist and one of these has been selected for the current research, namely the fact that no previous studies have looked at the repetition eect of product placements in video games, although the habits of gamers who plays the same game repeatedly often are used as an argument for such placements attractiveness. Using related studies, three hypotheses were developed using recall, recognition and observed brand preference as measurements for eectiveness. By conducting an experiment with 96 Danish high school students, these hypotheses were challenged. Support was found for two of these hypotheses, namely that levels of recall and recognition increase the more the game is played, but a third hypothesis was not supported. This missing support and the many gaps identied underly the urgent need for future research, and such areas are covered at the end. ii

Acknowledgments
A number of people and organisations deserve to be acknowledged for their signicant contribution - without their help conducting this research would not have been possible. Without nancial income, keeping focus would be hopeless. Therefore, I would like to thank my nancial sponsors who made my study at the University of Bath possible. Particularly, I would like to acknowledge Aalborg University, the School of Management at the University of Bath, Oticon, Ingenirforening, Nordea, Henry and Mary Skovs fund and Director Ib Henriksens fund for their generous donations. Secondly, I would like to thank Martin Griths from the English Language Centre for his substantial contribution by proof reading my work. No matter how much you read your own work, some mistakes will last forever, which is why I would deeply recommend anyone who is facing a similar project to have it proof read by a third party, preferable one as talented and helpful as Martin. Thirdly, I would like to thank my volunteering workers at Future Week 2006, especially Olav Hellen, Christian Brdstrup, Anders E. N. Thomsen and Henrik Brandt, who all acted as my research assistants in various ways. Olav, Christian and Anders helped my to digitalise the results of my experiment, whereas Henrik worked nearly full time in a week helping me to introduce the participants to the study and teaching them how to use the control in the game. Without Henriks iii

help, I would probably still be in Denmark nishing up my research. Similarly, I would like to thank Lau B. Lauritzen for making the fake screen shots I needed to conduct a recognition test on my participants. Fourthly, I would like to thank Ph.d. Student Robert Heath for his excellent contribution through the Brand Communication course in Semester 2, and through our e-mail correspondence. In fact, at a challenging time of the dissertation period, Robert stepped in with a precise answer to my question, even though it was the day before the deadline of his Ph.D. thesis. Fifthly, my great supervisor Dr. Agnes Nairn deserves my deepest acknowledgement for providing much more supervision and guidelines than any student could imagine. Unfortunately for the University of Bath, Agnes has left so that she can focus on her research and on the guest professorship she holds at EM-Lyon, a top-rated French Business School. I wish her all the best in the future, and congratulate everyone who will be as fortunate as I was by getting her excellent supervision. Finally, I would like to thank my friends and family. Without their love and support, it would never had been possible to conduct this study.

Jasper K. Juhl

University of Bath September 2006

iv

Contents
Abstract Acknowledgments Chapter 1 Introduction 1.1 1.2 The Development of Product Placement in Video Games . . . . . . . Types of Product Placement in Video Games . . . . . . . . . . . . . 1.2.1 1.2.2 1.3 Adver-games . . . . . . . . . . . . . . . . . . . . . . . . . . . Brand Integrations in Mainstream Games . . . . . . . . . . . ii iii 1 2 3 3 4 5 5 6 8 9 11 12 13 15 17

Brand Owners Interest in Product Placement in Video Games . . . 1.3.1 1.3.2 1.3.3 The Declining Eect of TV Ads . . . . . . . . . . . . . . . .

The Growth of the Gaming Industry . . . . . . . . . . . . . . Demographics and Characteristics of Current Players . . . .

1.4

The Gaming Industry . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.1 1.4.2 1.4.3 The Largest Companies . . . . . . . . . . . . . . . . . . . . . Publishers Interest in Placing Brands . . . . . . . . . . . . . Adding Product Placement to the Business Model . . . . . .

1.5 1.6

Size of the Product Placement in the Video Games Market . . . . . Aims of this Project . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Chapter 2 Literature Review 2.1 Dening Product Placement . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 2.1.2 2.2 Product Placement or Brand Placement . . . . . . . . . . . . Brand Placement or Sponsorships? . . . . . . . . . . . . . . .

18 18 19 20 22 22 25 26 27 31 31 33 35 35 37 39 42 44 44 44 45 45 47 47 48

Consumers Attitudes toward Product Placement . . . . . . . . . . . 2.2.1 2.2.2 Product Placement in Movies . . . . . . . . . . . . . . . . . . Product Placement in Video Games . . . . . . . . . . . . . .

2.3

The Work on Eectiveness of Product Placement . . . . . . . . . . . 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.3.7 Memory System . . . . . . . . . . . . . . . . . . . . . . . . . Measuring Eectiveness . . . . . . . . . . . . . . . . . . . . . Eectiveness Studies using Recall . . . . . . . . . . . . . . . . Eectiveness Studies using Recognition . . . . . . . . . . . . Eectiveness Studies using Attitude Change . . . . . . . . . . Eectiveness Studies using Observed Brand Preference . . . . Eectiveness of Product Placement in Video Games . . . . .

2.4 2.5 2.6 2.7

Repeated Exposure of Product Placement . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hypotheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7.1 2.7.2 2.7.3 Recall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . Observed Brand Preference . . . . . . . . . . . . . . . . . . .

Chapter 3 Methodology 3.1 Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 Concepts and Notation in Experiments . . . . . . . . . . . .

vi

3.1.2 3.1.3 3.1.4 3.1.5 3.1.6

The Current Experiment

. . . . . . . . . . . . . . . . . . . .

49 52 53 55 57 58 58 63 64 67 69 71 72

Laboratory versus Field Experiments . . . . . . . . . . . . . . Designing the Current Experiment . . . . . . . . . . . . . . . Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . Ethical Aspects . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 Results 4.1 4.2 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 Conclusion Chapter 6 Future Work Appendix A Screen Shots Appendix B Experiment Environment Pictures Bibliography

vii

Chapter 1

Introduction
As the title page suggests, this project is about the eectiveness of product placement in video games. This subject is interesting for at least three reasons. First of all, product placement has received a great amount of interest from practitioners (Babin and Carder, 1996; Gupta and Lord, 1998; Law and Braun-LaTour, 2004; Reijmersdal, Neijens, and Smit, 2006), but little research has been done into how eective the technique is (Law and Braun-LaTour, 2004). Secondly, there is a current shift in customers behaviour from viewing a lot of television and being exposed to brands through this media toward watching less television and using equipment that automatically skips adverts, e.g. TiVO (Roehm, Roehm, and Boone, 2004). Hence, marketers are looking for other ways to communicate their brands, and the rising video games market is already seen as extremely important by big corporations such as Coca Cola, Lever Faberge and General Motors. Finally, as we will see through the literature review of Chapter 2, the right way to measure eectiveness of any brand communication has caused much debate among researchers for decades, and

the existing research on the eectiveness of product placement in video games has only used two of these techniques, namely brand recall and recognition. This chapter briey introduces the development of product placement and identies the dierent ways in which this can occur in video games. There follows a discussion as to why product placement in video games is interesting from a marketers perspective, and why game publishers are willing to include brands in their games. Finally, the chapter concludes by identifying the aims of this project.

1.1

The Development of Product Placement in Video Games

Product placement dates back to the 1930s when soap operas were produced to advertise washing powder (Economist, 2005c). However, the true potential of the method was not fully explored until the marketer of Gordons Gin paid to have the product placed in the movie The African Queen, which was shown for the rst time in 1951 (Duy, 2005). From there, product placement rapidly developed, partly to cover the increasing budgets of movies, and partly to make them appear more realistic by the placing of real consumer brands. During the 1980s the rst product placement occurred in games, when Sega placed a Marlboro banner in some of its arcade games (Neer, 2006). In the early period of product placement in games it was common practise for the game publisher to have to pay companies to get permission to place real brands in their games (Leeper, 2004). Nowadays, however, game publishers get paid to include a real brand in their productions and marketers are more than willing to pay the price. Before the launch of Electronic Arts Need for Speed: Under Ground 2, for instance, several advertisers were bidding against each other to be placed in the game (Delaney, 2

2004).

1.2

Types of Product Placement in Video Games

The methods by which marketers can get their brands into video games can be categorized into two distinct groups known as adver-games and brand integrations.

1.2.1

Adver-games

Adver-game is the name for a game that is produced directly for a marketer to communicate a brand message (Economist, 2005a). The US Army for instance, produced a game based on the popular war game Unreal in which the gamer is placed on realistic missions (Delaney, 2004; Economist, 2005a). The aim was to make people volunteer and the results were striking; a survey found that young adults were more likely to have heard about the game than any of the armys other communication eorts (Delaney, 2004). Jeep experienced a similar positive result. Their game, in which the player could drive a new version of its car, was downloaded 250,000 times within the rst six months (Delaney, 2004). Moreover, according to Delaney (2004), 40% of the players said that they were considering buying the car. Adver-games are usually distributed by letting players either download or play directly from the corporate website. Often the game includes some kind of prize to attract players, and a challenge system by which users can challenge their friends through a built-in e-mail system. The latter is, in many countries, violating the SPAM legislation, which generally forbids companies to send e-mails to people who have not actively agreed to receive them. Hence, the distribution of advergames can be seen as a disadvantage because it is expensive or dicult to attract

many players. The advantages of adver-games are that the marketer has full control over how the brand is communicated. Moreover, an adver-game can be developed for a limited cost, usually less than $250,000, which is at least half of the cost of a TV ad (Delaney, 2004).

1.2.2

Brand Integrations in Mainstream Games

Another way to communicate brand messages is by integrating the brand into mainstream games such as Electronic Arts Nascar 2005: Chase for the Cup, which generated more than $1m in ad revenue, or Tom Clancys Splinter Cell in which the player has to operate a Sony Ericsson mobile phone to get through a mission (Delaney, 2004). Such brand integrations are often initiated by the game publisher which approaches potential advertisers as a part of their game design process. In Electronic Arts, for instance, the ad sales team works with the producer from the very rst sketch, and 14 to 18 months before a new game is launched the team nally decides where brands can be integrated logically and eectively (Jana, 2006). The deals are usually made after a negotiation between the game publisher and the brand marketer. Agreements do not always include pay, since some publishers are equally happy to get promotion for their game. Ubisoft, for instance, made a deal with Sprite to promote its Street Hoops game on Sprite cans in return for including Sprite in the game (Leeper, 2004). In fact, the director of media and promotions at Ubisoft, Jill Steinbers, said at a panel discussion that she prefers such deals instead of taking cash (quoted in Leeper (2004)). The advantages for brand integration is that the marketer is targeting a

much broader audience than adver-games. Tom Clancys Splinter Cell, for instance, has been bought by more than 5 million customers (Sta, 2005). However, brand integration also introduces major pitfalls both to the marketer and to the game producer. The risk is that the game appears to be one big ad, something that customers are not to prepared to pay about $50 for, or that the placements destroy the articial world of some computer games (Twist, 2004). For example, Electronic Arts recently decided not to include product placements in The Sims 2 Open for Business, as they were concerned that such placements would damage the fantasy world built in The Sims (Jana, 2006). This case illustrates particularly well the dicult balance the publisher has to make, since Electronic Arts was the rst to close a seven-gure deal on product placement a few years earlier in, notably, The Sims Online (Jana, 2006).

1.3

Brand Owners Interest in Product Placement in Video Games

The potential of product placement in video games is argued by many to be of considerable size (Nelson, 2005), not least because of the declining eect of TV ads (Section 1.3.1), the fast growth of the gaming industry (Section 1.3.2) and the attractiveness of the demographics of current gamers (Section 1.3.3).

1.3.1

The Declining Eect of TV Ads

Generally, people are watching less and less TV, notably because of the rise of the internet and the gaming industry (VanBoskirk and Jackson, 2005). In fact, in a recent study by Forrester Research, the majority of boys aged 12 to 17 answered that they would rather play games than watch TV (Jackson, Schadler, Cohen, and 5

McHarg, 2005b). What is more, Massive Inc., a US-based company that sells ads in games, reaches more males aged 18 to 34 per week than cable TV (VanBoskirk and Jackson, 2005). Hence, the eectiveness of the TV media as a marketing tool is challenged by the decreasing number of viewers. Another factor that is forecast to aect the attractiveness of TV ads is equipment that makes it easier for consumers to skip ads. Most notable is the popularity of Personal Video Recorders (PVRs) which by 2012 are forecast to be in 8 million households in Britain alone (Duy, 2005). This fact, combined with the results from a study described by Duy (2005), which showed that consumers are skipping 80% of the ads when using such equipment, will obviously aect the power of TV ads as a brand communication tool. Marketers will therefore increasingly need to look for other ways to inuence their potential and existing customers.

1.3.2

The Growth of the Gaming Industry

According to Dawson (2006), the video game industry has grown exponentially in recent years, and recent research indicates that this trend will continue. In fact, ABI Research forecasts that the global video game market will double from the $32.6 billion it was in 2005 to $65.9 billion by 2011 (ABIResearch, 2006). The expansion has been driven by an increasing number of devices on which games can be played. As found by Forrester Research (Jackson, Favier, and Neurauter, 2005a) platforms now range from pure gaming platforms to general-purpose ones, and from fully portable to completely home-based (See Figure 1.1 on the following page). It is obvious that this development of providing entertainment to almost everyone and everywhere will make video games appeal to an increasing number of people. This in turn will make brand integration in games extremely

important to marketers.

Figure 1.1: A mapping of the variety in gaming devices (adapted from Jackson et al. (2005a)) ABIResearch (2006) emphasises that the future growth of the industry is mainly driven by online and mobile platforms. This is particularly good news for advertisers for three reasons. Firstly, such platforms have the ability to measure how many times each player is exposed to the brand and thereby optimise the eect of future placements. Secondly, it enables them to target their brands to specic demographics and change this target group over time. Finally, it makes it possible to update product placement after the game is launched, e.g. to place new variants of the product or to have real prices on in-game billboard adverts.

1.3.3

Demographics and Characteristics of Current Players

Obviously, the demographics of the players of video games vary widely from game to game and platform to platform. Generally though, games are played mostly by younger people who are particularly conditioned to being exposed to advertising (Herman, 2004).

Key Figures on Video Games Players Size. In 2004, game consoles were owned by 42 million households in the USA, according to research quoted in Delaney (2004). Time spent. On average, Americans spent 64 hours playing video games in 2002. This is more time spent than on other entertainment such as DVDs and VHS. (According to data from Veronis Suhler Strevenson, an investment bank quoted in Delaney (2004)). Age. The average game player is about 28 years old. More specically, 34% are under 18, 26% are between 18 and 35 and 40% are over 35 (D5Games, 2006). The age obviously varies from platform to platform. Sony Entertainment, for instance, says that 60% of Playstation 2 owners are 18 years old or over (Delaney, 2004)). Gender. Generally, the number of women who are playing video games is increasing, but the exact distribution varies from region to region. In South Korea for instance, 69% of all players are women, which is clearly more than the corresponding numbers from the US and UK, which are 39% and 25%, respectively (Delaney, 2004).

Characteristics of Game Players Regular players of video games spend 6-8 hours per week on playing games, according to research quoted in Herman (2004). Interestingly, this combined with the fact that it takes 40 hours play to complete some popular games (Delaney, 2004), means that game fans can play a game full time for up to 6 weeks and still meet new challenges. This characteristic of players makes them particularly interesting to marketers because they spend a more intense period of time with the product than they do on TV (Delaney, 2004) and because the players are more focused on what they are doing (Herman, 2004).

Key Market Segment Perhaps the most interesting segment from a brand owners perspective, is the group of young men aged 18 to 34. This is partly because they are a large group among all players (26% according to D5 Games (D5Games, 2006) and partly because this group is watching less and less TV (Delaney, 2004). They are also signicant because this segment spent more than $500 per month on clothes and entertainment, as found by Nielsen Research (quoted in Yi (2005)).

1.4

The Gaming Industry

To fully understand the gaming industry, consider the value chain of in Figure 1.2. The value starts at the game developers who develop the game, after making the initial contact to a publisher presenting its idea of a new game, such as was the case with the ancestor of one of the currently bestselling video games, Hitman Blood Money, which was made by the independent developer IO Interactive and published by Eidos (Interactive, 2006). 9

Figure 1.2: A mapping of the value chain of the gaming industry (adapted from GDAA (2006)) The game developer not only covers the costs of developing the game itself, but also the costs of getting a license for the platforms on which the game will be played. This license fee is increasingly covering the product development and production of new platforms such as the Xbox 360, on which Microsoft is currently estimated to make a $126 loss for each console it sells (on the production alone, i.e. excluding the cost of developing and designing the Xbox 360) (Hesseldahl, 2005). The game publisher then launches the game, which is normally sold through distributors and retailers. Besides negotiating with these parties, the publisher makes product placement deals and is responsible for the marketing of the game. In 2004, publishers spent $34.5 million on advertising, mainly on TV adverts (KeyNote, 2005). As with most value chains, some companies operate in multiple areas. Microsoft, for instance, both produces its console (the Xbox and XBox 360), but also develops and publishes various titles. Moreover, Microsoft recently entered the market of selling product placements in video games by taking over Massive Inc.

10

Although the nancial details have not been disclosed, it is estimated that Microsoft paid an amount in the range of $200-400 million for the company (WallStreetJournal, 2006).

1.4.1

The Largest Companies

According to a market research company, in 2004 there was ve companies in the market which had a revenue of more than $1 billion (DFCIntelligence, 2004). These are shown in Table 1.1. Interestingly, Electronic Arts was by far the largest independent publisher, whose revenue was nearly three times as big as the second largest, Take-Two Interactive. However, this table does not provide an accurate overview of the industry as the companies do not always publish the exact gures on game sales, and because the revenue uctuates depending on when they launch their bestselling titles.
e Ga me R even ue

uces Con soles

Dev elop s

Pro d

lishe s Ga mes Pub

G am es

Company Name Sony Nintendo Electronic Arts Microsoft Take-two Interactive

Yes Yes No Yes No

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

$7,093,000 $4,680,000 $2,957,000 $2,876,000 $1,145,000

Table 1.1: The ve largest companies in the gaming industry when measured by revenue (adapted from DFCIntelligence (2004)). Please note that the gure of Microsoft is not accurate as it also includes other Home & Entertainment activities. The information about the companies involvement in manufacturing consoles, developing and publishing games have been taken from Wikipedia (2006) 11

Hom

Another way to identify the main players in the market is by looking at how many titles each company has launched. Such a study has been made by Susquehanna Financial Group (quoted in Cole (2005)) and the result is summarized in Table 1.2. Interestingly, both Microsoft and Nintendo disappear from this top ve, which measures the number of titles launched from 1999 to 2004. This is not only because this research method lters out manufacturing activities, but also because Microsofts gaming activities are fairly new. Once again, Electronic Arts appears as being by far the largest independent publisher.
uces Con soles lishe s Ga mes Pub es

Pro d

Dev el

Company Name Electronic Arts Sony SEGA Activision Capcom Konami Take-two Interactive

No Yes No No No No No

Yes Yes Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes Yes Yes

Table 1.2: The ve largest companies in the gaming industry when measured by number of titles released in the period 1999 to 2004 (adapted from Cole (2005)). As before, the information about the companies involvement in manufacturing consoles, developing and publishing games have been taken from Wikipedia (2006).

1.4.2

Publishers Interest in Placing Brands

A signicant number of games try to build as realistic a world as possible, and such games will seem more realistic when real brands are included. In fact, this

12

Title

s Re lease d

ops

Gam

57 26 16 15 13 13 13

was the main reason that game publishers were willing to pay to use brands before they became powerful enough to demand money for including them (Rocha, 2006). Hence, in such games the publisher has a natural interest in placing as many brands as possible, as long as it does not have a negative eect on the game play. Moreover, as stated earlier, the gaming industry is now of a considerable size, with Electronic Arts being the largest player controlling about 20% of the video game market (Young, 2004). In 2005, Electronic Arts had a net revenue of just over $3bn (according to its annual statement, see ElectronicArts (2005)). However, the gaming industry is also under pressure from the continuing growth in the cost of developing a new game. For instance, the cost of producing a quality game nearly tripled from $2 million in 1997 to $5 million in 2002 (Economist, 2002). Moreover, as discussed in Section 1.3.2, game platforms get more and more diverse, and since game titles are usually launched on several platforms, the cost of developing a new title will increase dramatically in the near future. Not only are the platforms getting more dierent from each other, but each platform itself is becoming increasingly complex and expensive to develop for the manufacturer. This increased complexity not only has the consequence that more sophisticated, and expensive, game development is needed for each platform, but also that the manufacturers will increase their demand for pay in the licensing agreement between them and the game developers. These developers will then require more money from the publishers.

1.4.3

Adding Product Placement to the Business Model

According to Kevin Browne, Microsoft (quoted in Hyman (2006)), the wholesale price of a game that is sold for $50 is usually about $37. Since the cost of producing one game for one platform is now estimated to be in the region of $10 million (Young,

13

2004), the total cost of building such a game could easily be $15-20 million plus $710 million for marketing and advertising (Hyman, 2006). Hence, if the game sells one million units, which according to Browne a successful game does, the publisher makes around $6 million in prot. Thus, closing seven-gure product placement deals can easily be the key factor, determining whether the publisher makes a loss or a prot on a game, or at least represents a considerable boost in protability. The game publisher can either make deals directly with the advertisers or make a contract with an in-game ad network such as Massive Inc..

Making Deals Directly Such deals are usually made by negotiation between the brand owner and the publisher. Such negotiations make sense because the value of a product placement clearly varies from placement to placement, and also because the brand owner can often promote the game as part of the deal. Moreover, the promotion of the brand can be more complicated than just a placement. Castrol, for instance, not only paid to get its oil placed in Need for Speed, but also paid to distribute access codes to the highly esteemed Ford GT in the game a car that players normally would have to play many, many levels to access. By doing so, Castrol and the consumer were in a win-win situation, because the consumer got extra content in the game and Castrol established a clear link between the high-performance vehicle and its oil. The advantage of making the deals directly is that the publisher can strictly control its own interests and make deals based both on money and swapping promotion. The disadvantage is that the publisher needs to be fairly big to be interesting for major brand owners, and that the publisher needs to develop its own system for

14

targeting and updating in-game adverts.

Making Deals Through Networks Massive Inc. is the largest video game network, representing more than 40 titles. The in-game ads it sells are standardized billboard ads. These have been used by Coca Cola and other large corporations (Brown, 2006). According to Massives website, the publisher gets $1-2 per connected game unit in direct prot (MassiveInc, 2006). Potentially, such networks will be increasingly interesting both for smaller publishers and for large corporations. Publishers that focus on niche games, e.g. a cycle game for java-enabled mobile phones, will get access to revenue they would never have otherwise accessed without such a network. On the other hand, advertisers will be able to use a standardized format across games and, in real time, target a specied market segment. The main disadvantage both from the publishers and the brand owners point of view is the lack of exibility in making creative placements and deals.

1.5

Size of the Product Placement in the Video Games Market

Product placement is prohibited in most European countries (Economist, 2005d). However, the European Commissioner for Information Society and Media, Viviane Reding, recently stated that she is working to relax the legislation in the area (EuropeanCommision, 2005). Her reasoning is that consumers today are so powerful in the current media world that the industry will regulate itself (Economist, 2005c). For instance, as seen with several video games (e.g. The Sims Online), the cost of 15

overdoing product placement is simply too high and therefore not worthwhile. Interestingly, the European legislation in the area does not seem to have any inuence on the current and forecasted size of the product placement market, and the factor is not mentioned in a recent market forecast (Yankee, 2006). This might be because companies can simply publish their games from the US, where product placement is fully legal (Economist, 2005d). According to the research company Yankee Group (Yankee, 2006), advertisers invested about $60m in in-game advertisement in 2005, which was nearly double the previous years gure. Moreover, by 2010 the research company forecasts that this number will increase to over $700m. This estimate can be seen as pessimistic, since Massive Inc. forecasts the market to be in the region of $2bn (the forecast was made in a press release, see MassiveInc (2005)). Obviously, it is hard to predict the exact market size, but there are some clear trends which can already be indicated. For instance, Electronic Arts plans to sell space for brands in 13 games in 2006, which is two more than in 2005, and 11 more than in 2002 when they only had two games with product placement (Hyman, 2005). In 2004, their team of 8 in-game ad sellers were expected to generate a 60% increase in revenue (Delaney, 2004). Clearly, the number of games with product placement and the revenue generated by this are growing dramatically. It should be noted, however, that the market size of product placement in video games is still an insignicant fragment of the total market of advertising, which is estimated to be in the region of $428 billion (Economist, 2006). Delaney (2004) argues that game producers will be forced to remain small by much more powerful TV networks and magazine publishers. Further, many argue that there is a natural limit on how many brands can be included in the game without adversely

16

aecting the game itself (Delaney, 2004).

1.6

Aims of this Project

The main objective of this project is to explore the eectiveness of product placement in video games. In order to full this objective, the following aims have been identied: To explore the relevant body of knowledge in order to understand how a brand communication, such as product placement in video games, inuences the human brain. To analyze the relevant body of knowledge, in order to explore how the eectiveness of product placement has been measured in the eld related to video games, namely product placement in movies. To design, conduct and analyze an experiment to measure the eectiveness of product placement in a real mainstream video game. To identify areas in which it could be interesting to do further research.

17

Chapter 2

Literature Review
The aim of this chapter is to analyse the relevant bodies of knowledge, in order to gain an understanding of what product placement is from an academic point of view, and to analyse how this form of brand communication is thought to inuence the consumer. It will thereby be identied how eectiveness of product placement can be measured. Throughout the review, gaps in the current knowledge will be touched on, both to be able to design a useful experiment for this project and to recommend future areas of research.

2.1

Dening Product Placement

Before approaching the literature, one needs to understand what exactly is meant by the term product placement and be able to identify useful categories that classify dierent methods of product placement.

18

2.1.1

Product Placement or Brand Placement

In one of the rst reviews of brand placement, Karrh (1998) argues that although product placement is the most commonly used description, brand placement would be more correct. He argues that it is a brand (e.g. Bans) and not a product (e.g. sunglasses) that is placed. Obviously, an underlying assumption for this argument is the belief that sunglasses are products (and not a category of products) and that it is brands which are placed (and not a specic branded product). This assumptions has, to my knowledge, not received criticism in recent papers, but it seems to make just as much sense to argue that it is a product (e.g. Nokia 7110) and not a brand (e.g. Nokia) that is placed. Hence, it is dicult to argue which is the most correct description. However, it is a fact that it would be an extremely rare occurrence for someone wanted to pay to place what Karrh (1998) calls a product. No umbrella organisation has, to date, paid to get the product category placed anywhere. It is therefore arguable whether it is important to distinguish between the two descriptions, or whether they are, in principle, interchangeable. Product placement has been used throughout this report, and this will not change for following two reasons. Firstly, it does not make sense to argue that brand placement is a more correct description, since a branded product is what most people associate with the word product. Secondly, this paper aims to be as easily applicable in practise the use brand placement would introduce an unnecessary distance between this papers intended content and the readers interpretation of it. A search made on Google 1 July 2006 clearly showed that most people do use product placement as the description; only 29,000 pages were estimated to be

19

relevant to brand placement, which is two orders of magnitudes less than the corresponding number for product placement, namely about 7,670,000 pages. In this literature review, however, the two descriptions will be used interchangeably to reect what the original authors preferred to use in their papers.

2.1.2

Brand Placement or Sponsorships?

As with many other research areas within the eld of management, dierent words are used to describe similar things or concepts that somewhat overlap each other. Product placement contra sponsorships is one example. According to Schneider (2005), Balasubramanian (1994, pg 31) made one of the rst attempts to dene brand placement, as a paid product message aimed at inuencing movie (and television) audiences via the planned and unobtrusive entry of a branded product into a movie (or television program). Although this was a good attempt, there are a number of problems with this denition. Firstly, it is bounded to specic medias, movie or television programs (Schneider, 2005). Obviously, the fact that video games, novels, music videos etc. are left out makes its value fairly limited in todays media picture. Secondly, it is limited to cases in which payment is taking place (Schneider, 2005), leaving out the cases we saw in the introduction, where companies make non-nancial deals by, for instance, promoting each others products. The problem of limiting brand placement to specic media was also addressed by Karrh (1998) who also questioned whether brand placements could always be considered unobtrusive. For those reasons he argued that brand placement is better dened as the paid inclusion of branded product or brand identiers, through audio and/or visual means, within mass media programming (Karrh, 1998, p33).

20

Again, this denition assumes that payment is always made for the brand placement, which is only true if payment can also take place without the exchange of money, e.g. by agreeing mutually advantageous marketing campaigns (Gupta and Gould, 1997; Schneider, 2005). Sponsorships, on the other hand, have been dened as the provision of assistance, either nancial or in kind, to an activity by a commercial organisation for the purpose of achieving commercial objectives (Meenaghan, 1983, p9). As Schneider (2005) points out, this denition fails to include those additional rights and advantages that the organisation gains in return for its sponsorship. Budweiser for instance, was the only beer allowed to be sold within a 500 meter radius of the pitches in Germany during the World Cup 2006 and this advantage was part of the sponsorship deal between Budweiser and Fifa (Boyes, 2006). An example of a wider-ranging denition for sponsorship is that provided by The International Events Group (IEG), which, according to Roy and Cornwell (2003), is a leading source of sponsorship information. IEG denes sponsorship as being the relationship between a sponsor and a property, in which the sponsor pays a cash or in-kind fee in return for access to the exploitable commercial potential associated with the property (Andrews, 2006, p1). Clearly, this denition includes both aspects of a sponsorship, namely the outcome for the sponsored organisation (cash or in-kind fee) and the benet for the sponsor (the access to exploitable commercial potential). The comparison of the denitions of brand placement to that of sponsorship seems to reveal that the product placement in video games is brand placement rather than sponsorship. However, as noted by Schneider (2005), some elements in video games could be considered to be sponsorship, e.g. the Mastercard billboards in NHL

21

Championship 2000.

2.2

Consumers Attitudes toward Product Placement

Despite the increasing interest in product placement, little is known about how product placement is viewed by, and inuences the customers. This fact has been noted in various studies; Mau, Kehres, and Silberer (2006, p1), for instance, note in their recent paper on video games that a review of the state-of-the-art [research] shows that little is known about how players respond to these persuasion attempts.

2.2.1

Product Placement in Movies

One of the rst studies made on the consumers view of product placement was by Nebenzahl and Secunda (1993). This study, which was carried out in the US, found that the participants, aged 18-34, were fairly positive toward placements, and preferred such placements to other types of on-the-screen advertisement because these were seen as more annoying. Moreover, Nebenzahl and Secunda (1993) found that those who were against product placement were so for ethical reasons, an observation that Gupta and Gould (1997) studied in more detail. Gupta and Gould (1997) applied the ethical aspects to product groups, and found that controversial products such as alcohol, cigarettes and guns were considered to be less acceptable to place in movies. Gupta and Gould (1997) also found that women were more negative toward placements of such controversial products than men. The rst result is very interesting from a gaming perspective, because one of the most popular types of video games are those known as rst-person-shooters (Mau et al., 2006), in which the gamers ght each other using a variety of weapons. It could be tempting for the game publisher to place

22

particular brands of weapons in these games, but consumers negative attitudes towards such placement indicates that this might not be a good idea. The two studies reviewed above only included American respondents. However, as found by several studies (e.g. McKechnie and Zhou (2003) and Gould, Gupta, and Grabner-Kruter (2000)), the attitudes change from region to region according to culture dierences. Gould et al. (2000) noted the lack of focus there had been on product placement as a global marketing tool, since most studies had been carried out in the US. To explore whether dierences exist between countries, Gould et al. (2000) took the questionnaire of Gupta and Gould (1997) and distributed it to respondents in France and Austria. Interestingly, they found that French and Austrians were not as positive toward product placement as the Americans, but they also found that the ethical and gender trends found in the U.S. were also present in Europe. That is, controversial products were relatively less popular than non-controversial products, and women were generally less positive than men. The rst study that compared consumers attitudes in the West to those in Asia was the one carried out by Karrh, Frith, and Callison (2001). This study approached college students in Singapore and America in order to compare the attitudes of the two populations. They found that Singaporean consumers were more concerned about the ethical aspects of product placement than their American counterparts. However, both groups of participants admitted equally that their buying behaviour was inuenced by the products they had seen in movies and television. Similarly, McKechnie and Zhou (2003) compared the attitudes of American consumers to those of Chinese buyers. This study focused on 108 Chinese participants aged between 18 and 34 and included equal number of males and females.

23

The participants saw movies on a regular basis and the study was therefore comparable to the similar American studies by Gupta and Gould (1997). This comparison revealed an interesting dierence, namely that the consumers in China were less positive toward product placement than the customers in the US. These ndings are particularly interesting from a video game publishers perspective, since each game title often targets multiple markets. Moreover, some of the markets in which consumers are more negative toward product placement are particularly interesting for the gaming industry. China, for instance, currently has 27 million gamers, and the video game market is estimated to be in the range of $500 million (Niko, 2006). Moreover, the market is expected to develop dramatically with an increase of 24% per year and thereby reach a value of $2.1 billion by 2010 (Niko, 2006). In comparison, the computer and video game market in the US was about $7 billion in 2004 (Economist, 2005b) and is thus much bigger. However, the market size in the US is fairly stable (e.g. it took ve years to grow 16% from $6 to $7 billion (Economist, 2005b)) and the Chinese market therefore holds much more growth potential for the gaming industry than the U.S market. The question is, of course, whether it matters what the customers claim they the think about product placement. For instance, it could be that some customers say that they are generally against all forms of product placement, while they in reality buy those products that are commonly placed in movies.

The Potential Link Between Beliefs and Reality Morton and Friedman (2002) published a paper which directly compares consumers belief to reported buying behavior, thereby exploring how important consumers attitude toward product placement actually is. They found that such a link actually

24

exists. Their ndings support the view that a positive attitude toward a particular placement can contribute to a selection of that product, whereas a negative attitude can work against the brand in the decision (Morton and Friedman, 2002). This result is of signicant importance, if it can be generalised to product placement in video games, since the current view in the industry seems to be to avoid product placement if it hurts games sales. However, these results suggest that the company which markets the product should also proceed with caution. It is arguable whether all these ndings, which have focused on movie viewers, can be applied to product placement in video games. To address this question, the studies on product placement in video games will now be reviewed.

2.2.2

Product Placement in Video Games

Probably the rst published paper on consumers attitudes toward product placement in digital games is by Nelson (2002) in which 36 American students were approached with a questionnaire. In their responses, consumers were generally positive toward placements in games as real brands make the games appear more realistic, but open-ended questions revealed that the level of acceptance depends on the game genre, and how and where the brand is placed. In particular, the respondents found that brand placement potentially could destroy the fantasy world (e.g. if Pepsi was placed in the Mario Brothers, as one of the participants explained). A more recent study by Nelson, Keum, and Yaros (2004) supported these ndings and also concluded that those who were negative about product placement were also negative about other types of advertisement. Similar results to those of Nelson (2002) were found in a very current, but as yet unpublished paper by Molesworth (2005). This study was based on ve focus

25

groups. In each, four experienced video game players were interviewed. Molesworth (2005) found that most of his participants were positive about brand placement, partly because it added realism, and partly because it helps to nance the game developers. However, the interviews also revealed that some participants were concerned that game publishers might only develop games with a high potential for product placement revenue, which was considered to be a negative side-eect of product placement. Although no published studies have compared attitudes toward product placement in computer games to those towards product placement in movies and television, it seems that gamers are more positive to placement in video games than people generally are to placement in movies and television shows. This more positive attitude could be caused by the fact that video games are still not as realistic as movies, and the quality of a game is therefore dependent on its level of realism (Ho, 2006). It is likely that controversial products will be less acceptable in video games just as they are in movies, but no studies have so far conrmed this.

2.3

The Work on Eectiveness of Product Placement

Since product placement is supposed to work unobtrusively, some may challenge how important consumers attitude toward product placement is when talking about eectiveness. For instance, although Gould et al. (2000) found that people claimed they would buy the brands shown in movies, this does not prove that they will actually do so. On the other hand, Heath and Hyder (2006) found that consumers were aected by adverts to which they claimed they had not been exposed. As we also noted with consumers attitude toward product placement, very

26

little work has been done in measuring its eectiveness. Some studies have measured the eectiveness through the audiences memory of brands (Section 2.3.1-2.3.4), whereas only a few papers have tested the attitude changed by product placements (Section 2.3.5) or observed whether participants behavior changed (Section 2.3.6).

2.3.1

Memory System

The memory system is key to the understanding of the inuence that product placements have on the audience or game players, because research has shown that the memory system strongly inuences buying decisions (Vakratsas and Ambler, 1999). Before the 1970s, memory was viewed by most researchers as a single system in which information is rst stored in a short-term area, and later copied to a longterm storage (Daniel L. Schacter and Ochsner, 1993). However, several observations began to indicate the existence of more than one memory system. The rst of these was done by observing patients who had dierent kinds of brain damage. Schacter (1996) observed patients who scored normally high values in intelligence (the IQ test), but a decit in showing feelings and emotions, and had diculties in making normal everyday decisions outside the research lab. Similarly, researchers observed amnesic patients who clearly had diculties at recalling things, such as peoples name (Schacter, 1996). If these patients were giving a list of words (e.g. Product and Placement), and after delay presented a new list and asked to identify the words they had seen before, the would not be able to do so. However, if they were given a list with unnished words (e.g. Pr-t), after the delay, they would, without being aware of it, be more likely to guess the word Product because of the previous exposure, just as a control group of non-amnesic people was (Schacter, 1996).

27

Other experiments were based on normal subjects, and these supported the view that more memory systems exist (e.g. Graf, Mandler, and Haden (1982) and Jacoby and Dallas (1981)). As researchers found more and more evidence of the existence of two dierent memory systems, Graf and Schacter (1985) introduced the distinction between implicit and explicit memory. When people store information in their explicit memory, they do so consciously, in the sense that they are aware that they are using it. They do so intentionally, that is, they choose to pay attention to the information (Law and Braun-LaTour, 2004). However, peoples implicit memory is accessed without their knowledge, so they, by denition, do not know from whence this particular knowledge comes (Schacter, 1996).

Making Decisions Early models on decision making saw the inuence caused by aect (feelings and emotions) as something that happened postcognitive (Zajonc, 1980, p151), i.e. after the cognitive process had taken place (See Figure 2.1). However, Zajonc (1980) published some of the rst experimental results that suggested that this was not the case, since aect-driven decisions were made faster than cognitive-driven decisions.

Figure 2.1: An early model for how decisions inuenced by feelings and emotions were believed to be done (Adapted from the Typical information-processing model of aect.-gure of Zajonc (1980, p153) 28

This observation has also been made in the marketing literature. Shiv and Fedorikhin (1999), for instance, conducted an experiment in which the participants individually could choose between a chocolate cake (an aect-driven choice) and a fruit salad (a more cognitive-driven choice). The chocolate cake was selected much more often, when the participants had limited time to make up their mind, compared with a group who had more time to make up their mind (Shiv and Fedorikhin, 1999). These observations indicate that decisions can be made in dierent ways, which perhaps is best shown in the model by Damasio (2003), illustrated in Figure 2.2. Decisions can either be made using route A, a cognitive-driven decision, which can be said to be cognitive-driven in the way that pure facts are compared using a reasoning strategy, before the decision is made. Alternatively, decisions can be made using route B, an aect-driven decision, in which aect plays a central role, since the decision is either made purely based on emotions or is at least, inuenced by them (Damasio, 2003). Cognitive-driven decisions mainly use explicit memory, whereas aect-driven decisions can be inuenced by both memory systems (Schacter, 1996). Explicit memory is often tested through recall, in which the participants are asked whether they remember having seen a particular marketing stimulus (Heath and Nairn, 2005). Implicit memory, on the other hand, is tested without making use of the participants conscious recollection of stimulus, e.g. by directly testing participants brand preference, observed behaviour or attitude change toward the communicated brand (Law and Braun-LaTour, 2004). An alternative test method that uses both explicit and implicit memory is recognition (Law and Braun-LaTour, 2004), in which people are asked whether they recognise the marketing stimulus. These answers are then used to isolate those who have seen the brand communication from those who have

29

Figure 2.2: The current model for how decisions are believed to be done, namely by either following a cognitive-drive route A or an aective-driven route B. This illustration is adapted from the Normal decision-making uses two complementary paths.-gure of Damasio (2003, p149) not, and the eect of the marketing stimulus can be then measured by comparing these two groups average attitude toward the brand (Heath and Hyder, 2005). The key, and as yet unanswered question, is which of the methods of measurement (recall, recognition, attitude change or observed brand preference) best evaluates the communication of a brand. After all, marketers make the decision as to where to invest their money, and they obviously want to do use the most eective method.

30

2.3.2

Measuring Eectiveness

Eectiveness can be dened in a number of dierent ways, depending on the overall goal of the placement. This fact was noted by Law and Braun (2000, p1059), who state, little is known about its [product placements] eectiveness nor even how to dene and measure such eectiveness. Some researchers (e.g. Nelson (2002)) claim that increasing awareness of a brand can be an important goal of a marketing campaign and thereby justify their study using memory-based measures (recall and recognition). Others assert that dierent types of products can be placed effectively in dierent ways. For instance, Law and Braun-LaTour (2004) claim that recall is a good measurement when the customer is highly involved in the buying decision, whereas implicit memory tests are more meaningful when the decision is spontaneous. Hence, there is no current standard agreement of the right measurement of eectiveness, since it depends on the overall goal. Thus, selecting one view at this point would exclude important research results, and we will therefore review the work done using each method separately, namely Recall, Recognition, Attitude Change and Observed Brand Preference. As for consumer attitudes towards product placement, most research on effectiveness has focused on movies rather than on video games. These studies on movie and TV viewers will be covered in Section 2.3.3-2.3.6, after which the studies focusing on video games will be reviewed in Section 2.3.7.

2.3.3

Eectiveness Studies using Recall

The rst research papers on eectiveness of product placement used recall as the measurement, but they did not provide a consistent answer on how eective prod-

31

uct placement is. Stacy Vollmers (1994) (cited in Gupta and Lord (1998)), for instance, found high recall of brands placed in the two movies investigated. Similar results were found by dAstous and Chartier (2000). In contrast, Sabherwal, Pokrywczyncki, and Grin (1994) (quoted in Gupta and Lord (1998)) found only marginally higher levels of recall in their study, in which some participants saw a movie where a restaurants name was mentioned, whereas other saw the exact same movie, but where the sentence which included the name had been replaced with silence. This could indicate that auditory placements are not as eective in terms of recall as visual placements. However, a broader review of the literature reveals that this is probably not the case. Generally, cognitive psychology research has shown that modality has little inuence on explicit memory tests (Roediger and Blaxton, 1987). The fact that Sabherwal et al. (1994) found that a minor eect of the auditory memory is more likely to be an eect of the product centrality since, as Law and Braun-LaTour (2004) argue, a brand which is both shown and mentioned is usually more central to the plot compared to one which is only mentioned. In fact, research has shown that if the marketers aim is to gain high recall, then it is key how central the placement is to the plot (Law and Braun-LaTour, 2004). Gupta and Lord (1998), for example, used two movies, Big and Project X, to show that a prominent placement of Pepsi in Big led to a higher recall than a subtle placement of Pepsi in Project X and Pizza Hut in Big. The results were quite clear; signicantly more recalled Pepsi after its central position in Big, compared to the more subtle placement in Project X, and people did not mention Pizza Hut nearly as much as Pepsi after watching Big. These results are interesting from a gaming perspective, although it is dicult

32

to predict exactly how these can be adapted. For instance, the concept of centrality is much more complex in the video game environment, because one billboard can be more central than another. Moreover, the player can also interact with products in some games and one could therefore claim that such placements are overall more central to the game than billboards. Additionally, product placements can also be a part of the winning and losing concept of many computer games. It is not unlikely that a product you have to win (e.g. the player has to win many games to be able to drive certain cars in Need for Speed ), are more eectively branded than those that just appear from the beginning. As we will see later, current research in video game placements have only looked at centrality in terms of the size or placement of billboards, but it is questionable whether such a grouping is the most appropriate for this media. Firstly though, we will look at another way to measure eectiveness, namely recognition.

2.3.4

Eectiveness Studies using Recognition

One of the rst published academic studies that evaluated the eectiveness of product placement in movies was that by Babin and Carder (1996). This study explored whether viewers were able to recognise the brands placed within two dierent movies, Rocky III and Rocky V. They found that people were generally able to recognise the placed brands and correctly identify those which were not present in the movies. Interestingly, brands which were placed later in movies were more likely to be recognised than those placed earlier, which indicates that it is not only important whether the placement is central or subtle. Although no studies have conrmed that this is the case for video games, these ndings are particularly interesting because there is a trend for some place-

33

ments only to occur late in the game. As mentioned before, the placement of the Ford GT car in Need for Speed only occurs after the player advances through several levels. Hence, if the study by Babin and Carder (1996) can be generalized from movies to games, this would mean that the placement of the Ford GT, which only becomes available after hours of play, is more eective than placements of cars that are available right from the beginning. Moreover, the fact that the player aims to advance to this level, to drive the car, could perhaps increase the eectiveness even further. However, as already mentioned, no studies have conrmed this to date. Russell (2002) found that the more meaningfully brands were placed, the more likely they were to be recognised. Furthermore, it was found that the names of brands were more likely to be recognised when these were placed using audio only. This is interesting because it directly contradicts the research of eectiveness using recall. As addressed in Section 2.3.3, Gupta and Lord (1998) only found a marginally higher recall of a brand placed auditorily, whereas Stacy Vollmers (1994) found a signicantly higher recall of brands placed visually. Hence, it seems that modality is highly important for eectiveness, regardless of whether it is recall or recognition which is used. However, it does depend on which of these two measurements is used, to be able to decide whether an auditory placement is better than a purely visual placement. Law and Braun-LaTour (2004) argue that it depends on the organisational goal whether recall or recognition should be used, but argue that visual modality should be preferred if the goal is to exert a more subtle inuence.

34

2.3.5

Eectiveness Studies using Attitude Change

Although several studies have shown that brands communicated using TV ads can change consumers attitudes (e.g. OGuinn and Shrum (1997)), very few studies have tested whether product placements inuence the consumers to any extend. In fact, Russells (2002) was the rst study to explore this area, and no similar study has since been published. Russell (2002) found that maximising memory scores did not lead to an optimal level of attitude change. That is, the level of recognition peaked when products where placed using audio, whereas the attitude toward the brand was changed signicantly more when products were placed visually. This clearly challenges how useful measurements based on implicit memory tests are when talking about product placement in video games, at least if the overall aim is to change the attitude toward the branded product.

2.3.6

Eectiveness Studies using Observed Brand Preference

Several authors have noted that measuring eectiveness through a direct tapping of memory is not necessarily the best approach (Law and Braun, 2000). This is mainly because it has been shown that the level of recall and/or recognition does not always predict the amount of inuence the marketing stimulus has on the consumer. A classic study which shows exactly this is that by Shapiro, MacInnis, and Heckler (1997), in which the authors placed ads next to an electronic article. They designed their study such that a minimum amount of attention was given to the ads and measured the level of recognition of the ads between the group which was exposed to them and a control group which was not. The level of recognition did not vary between the two groups. However, in another part of their study, Shapiro et al.

35

(1997) made a buying setup for the participants and made them produce a list of eight products, which they would include in their buying decision. In this part, signicantly more participants mentioned the products which they had been exposed to, compared to the control group. Hence, the study of Shapiro et al. (1997) clearly indicates that measuring memory directly is not always the most accurate method. Further, as argued by Law and Braun-LaTour (2004), recall and recognition are not able to measuring the more subtle eects of product placements. The rst published study of an experiment to identify the eectiveness of product placement in television was by (Law and Braun, 2000). They compared the results of their experiment on brand choice with the outcome of a recall and recognition test using two dierent clips of the television show, Seinfeld. Interestingly, Law and Braun (2000) found that centrality had a direct eect on the memory tests, but did not inuence their participants choice of brand. Similarly, modality had a dierent eect on memory and brand choice, since visual-only placement were least recalled but the most eective placement method in terms of brand choice. Finally, Law and Braun (2000) argue that their nding is in line with memory theories which generally forecast that the outcome of such memory tests can be unrelated to the one of implicit choice or performance. This result could have major implications for video games, since (as we will see) all published studies on product placements in games have, to date, been based on such memory tests and not on observed brand preference. Nevertheless, many public media praise the eectiveness of such placement built on the reference to high reported levels of recall (e.g. Twist (2004)). A later study using experiments is that of Auty and Lewis (2004). They showed a part of the Home Alone movie to about 100 British children. One group

36

was shown a clip in which a Pepsi was spilled and another group (a control group) was shown a similar clip, but in which a non-branded product was eaten. After being exposed to the clip, the participants were individually invited to a fake interview setup, in which they were oered a free drink, either a Pepsi or a Coke, and their brand choice was observed. In their analysis, they made a distinction between those children who had seen the movie before and those who had not. As predicted by their hypothesis, signicantly more children who were exposed to the Pepsi and had seen the movie before chose the Pepsi instead of a Coke. This is a valuable observation since it not only shows that product placement works, but also that the eect increases when the audience is exposed to the scene more than once. This could be important for the video game industry because, on average, much more time is spent on a new game than on a new movie. Hence, this could be used to argue that product placements in games are more eective than those in movies. However, such a comparative study has not yet been carried out, and the question is whether such a study can be designed meaningfully, since products can be placed in many dierent ways, not least across dierent media.

2.3.7

Eectiveness of Product Placement in Video Games

As described above, quite a few studies have, to date, been evaluated the eectiveness of product placement in movies, whereas very few studies have focused on video games. This is surprising because placements in games are much more complex to evaluate than those in movies (as the consumer can interact with the brand). To date, only approximately four papers have been published in journals on this topic, of which three papers (Chaney, Lin, and Chaney, 2004; Nelson, 2002; Schneider, 2005) have only looked at billboards and measured their eectiveness

37

using recall and/or recognition. Probably the rst published study on eectiveness of product placement in games is that by Nelson (2002). Using a racer game, questionnaires and 16 players (13 men and 3 women), this study found that players, on average, were able to recall 25%-30% of the brands when questioned shortly after the game, and 10%-15% when approached 5 months after playing. Although the study used very few participants (only 12 responded after the 5 months delay) no similar studies have been published using such a time delay. However, a similar study has been made on short-term memory. Chaney et al. (2004) used a modied rst-person-shooter-game to nd that only 5% of their participants recalled the least memorised brand name, whereas 20% recalled the most memorised brand. Noteworthy is the fact that these numbers were found without a time gap between playing and questioning the participants, so these numbers are signicantly lower than those identied by Nelson (2002). Moreover, Nelson (2002) found that the size of the placement did not eect the level of recall. However, Grigorovici and Constantin (2004) recently challenged this result, when they observed that the size of the billboard did inuence the levels of recall and recognition. Only one paper, namely the one of Grigorovici and Constantin (2004), has addressed the eectiveness of other types of 3D placements. In this study, their participants were shown three 3D worlds in which various products and billboards were placed. Each participant was exposed to each 3D world for three minutes and were automatically shown a questionnaire after each world, which contained measures for presence, memory and brand evaluation. Perhaps the most interesting nding of Grigorovici and Constantin (2004) is

38

that billboards appeared to be more eective than direct placement of a product, in terms of recall, whereas billboards and direct product placement performed equally well in terms of recognition and the intention to buy the product. That is, the study indicates that placing bill boards is just as ecient as integrating the product into the game. However, it should be noted that these ndings of Grigorovici and Constantin (2004) may not directly apply to game players, as their participants were not involved in nding their way around the 3D world and therefore might not have had the same level of attention as gamers generally have. Moreover, the products which were placed in the world were neutral, in the sense that the player could not interact with the product, and the product was not a part of the winning-and-losing characteristics that most computer games have.

2.4

Repeated Exposure of Product Placement

As mentioned in the introduction, one of the main characteristics that makes product placement in video games interesting for marketers, is that each game is played several times by the same person usually up to 40 hours per popular game (Delaney, 2004). Notwithstanding this, no published studies have to date looked at how the eectiveness of product placement increases as the player is repeatedly exposed to the product placed. Generally however, several studies have focused on mere exposure, and explore the inuence of brief repeated exposures to non-semantic stimulus (e.g. nonsense words) (Bornstein (1989) provides an excellent overview of these studies). A signicant proportion of these studies found that the inuence followed an inverted u-curve, i.e. that the eect increases until some point at which the eect leveled

39

out and eventually decreased. The most widely recognised explanation of this is the two-factor theory, which states that two factors, namely boredom and habituation, strongly inuence the relationship between repetition and aective response (Berlyne, 1970). However, such an inverted u-curve is only observed when the stimuli are shown for longer periods or when they are simpler an observation that the two-factor theory fails to explain (Nordhielm, 2002). The two-factor theory has also been applied to repetition of advertising in a model known as the modied two-factor theory by Anand and Sternthal (1990). This model argues that the positive or negative thoughts that the viewer of the advert has are transferred to the brand communicated. For instance, if the viewer is bored during an advert, the model argues that these negative thoughts will lead to a decrease in the eect, e.g. in terms of liking the brand. In contrast, if the viewer is entertained, this enjoyment will lead to positive thoughts about the brand and thereby an increase in this eect. Obviously, this is only the case when eectiveness is measured using related variables such as attitudes toward the communicated brand, and not when measured using recall or recognition alone (Nordhielm, 2002). As for Berlynes original two-factor theory, the modied version fails to explain why the inverted u-curved is not observed in common elements that are used in dierent adverts for the same product, e.g. the music theme and/or logo (Nordhielm, 2002). Another well-recognised model that can be applied is the Perceptional Fluency / Misattribution (PF/M) model by Bornstein and DAgostino (1994). Perceptional uency can be dened as the ease with which people can perceive, encode and process the stimulus (Nordhielm, 2002). According to the PF/M model, perceptional uency can be increased by prior exposures, although people generally do not know that this is the reason. In particular, this has been observed when

40

the duration of exposure is so short that the people do not even remember being shown the stimulus beforehand. In these cases, the respondents often think that the true cause of their perceptional uency is any variable that they perceive as being a likely explanation at that particular time. For instance, Mandler, Nakamura, and Zandt (1987) found that dierent respondents, who were inuenced by previous exposures, came up with contradictory explanations for their favorite, namely lightness and darkness of the stimulus. Hence, people not only discredit perceptional uency as liking, they also come up with a non-aective, descriptive variable that they believe is the true source. On the surface, the modied two-factor theory and the PF/M model appear contradictory, but a recent study by Nordhielm (2002) shows how the two bodies of knowledge can be integrated. When people have the ability (e.g. time and attention) to make a deep cognitive process of the stimulus, the relationship between exposure and aective response follows an inverted u-curve as predicted by the modied twofactor theory. On the other hand, when people process the stimulus in a shallower manner, the aective response increases monotonically with the exposure. Hence, according to Nordhielm (2002), it is the level of processing that dictates whether the modied two-factor theory or the PF/M model should be applied. Of note is the fact that neither the two-factor theory nor the PF/M model can be applied when eectiveness is measured using a variable that is related to liking, such as recognition or recall Nordhielm (2002). That is, the models can only be applied to measurements such as attitude change and observed brand preference. Results of memory tests such as recognition or recall will monotonically increase as the person is exposed to the stimulus more and more (Schacter, 1996).

41

2.5

Summary

Several researchers have explored consumers attitudes toward product placement in movies. Firstly, they have found that consumers were generally positive toward product placements. Further, it has been shown that dierent cultures have dierent views on placements. For instance, for movies, a more positive attitude toward placements has been observed in China than in Europe and the US. Similar studies on video games found a generally positive attitude toward product placements, as players claim that it makes the games appear more realistic. However, no studies have explored whether the attitudes vary between cultures and genders, and no studies have investigated the potential link between the attitude toward product placement in video games and the buying habits of those players. Hence, it could be the case that controversial placements in games inuence consumers equally regardless of whether they like such placements or not. If this is the case, it could be questioned how important consumers views on placements are, at least from a marketers point of view. Before the studies on eectiveness of product placement were reviewed, the human brains memory function and decision processes were addressed. Through this, it became clear that no single method of testing eectiveness could be claimed to be the best, since it would depend on the overall goal of the marketers organisation and the type of decisions that organisations customers typically made. For this reason, studies that have used recall, recognition, attitude change or observed brand preference to test eectiveness were reviewed. Interestingly, it was found that the type of product placement that appeared to be most eective was highly dependent on the method used to measure eectiveness. For instance, in movies, visual placement was shown to be most eective

42

when recall measures were used, but audio placement was more eective in terms of recognition. Moreover, studies using attitude change reported that the highest attitude change was made when products were placed visually. Unfortunately, no studies have explored whether visual and audio placements are most eective in terms of observed brand preference. Research on eectiveness of placements in video games is limited and occasionally reports contradictory results. For instance, one study found that the size of billboards in video games did not inuence the eectiveness in terms of recall, but another study reported the exact opposite nding. Similarly, study most often quoted by the press, measured eectiveness only in terms of recall and had a very limited number of participants. In fact, only 12 respondents were recorded after a six month delay, which is challenging for the external validity due to a statistical error rate of considerable size. The fact that popular games are, on average, played for 40 hours, makes the repetition eect of product placement of substantial interest for marketers. Surprisingly, no studies have to date explored how the eectiveness develops as a function of the time played. Hence, it could be the case that the eect increases as players are exposed to the brand again and again, but it could also be the case that popular games lead to a limited eect of the product placement, since the eect could be dropping each time the player is exposed to the brand. Generally two dierent models were described for predicting the repetition eect, namely the modied two-factor theory and the PF/M model. According to the modied two-factor theory, the eectiveness of the stimulus follows an inverted u-curve and thus declines after several exposures. In contrast, according to the PF/M model, the eectiveness increases monotonically as the stimulus is exposed

43

more. However, these theories are not really contradictory, since they should be applied in two dierent cases. Whilst the modied two-factor can be applied when the stimulus is believed to be processed in a deeper manner, the PF/M model should be applied when the stimulus is processed in a shallower manner.

2.6

Research Question

Although several gaps were identied in the literature review, it would be beyond our scope to address them all in this dissertation. The perhaps most surprising gap is that no studies have explored how the eectiveness develops as the game is played more and more, notwithstanding the fact that the continued game play is one of the main arguments used in the press when companies are praising product placement in video games. This fact was the reasoning for developing the following research question of this study: What is the relationship between the eectiveness of product placement in video games and the period of time the game is played?

2.7

Hypotheses

Three hypotheses are built using the relevant bodies of knowledge covered in the literature review.

2.7.1

Recall

As shown in Section 2.4 on page 39, the recall method tests peoples explicit memory (Heath and Nairn, 2005). Hence, this method should be independent of whether the gamer likes the exposure or not.

44

Thus, it is suggested that (Hypothesis H1) the level of recall of a product placed in a video game increases monotonically the more the game is played.

2.7.2

Recognition

As argued in Section 2.4, the recognition method tests both peoples implicit and explicit memory (Law and Braun-LaTour, 2004). However, whether people can recognise a product placed in a game, should be independent of whether they like the exposure or not (Nordhielm, 2002; Schacter, 1996). That is, it is not believed that people will claim that they do not recognise the placement as a result of disliking the exposure. Hence, it is suggested that (Hypothesis H2) the level of recognition of a product placed in a video game increases monotonically the more the game is played.

2.7.3

Observed Brand Preference

As found in Section 2.4, when the eectiveness variable tested is related to whether the participants likes the brand communicated, it can either follow an inverted ucurve or increase monotonically, depending on whether the stimulus is processed in a deeper or a shallower manner (Anand and Sternthal, 1990; Bornstein and DAgostino, 1994; Nordhielm, 2002). Generally, whether something is processed in a deeper or a shallower manner is directly associated to the level of attention that is giving (Law and Braun-LaTour, 2004). That is, someone who processes a stimulus in a deeper manner will have to pay attention to the stimulus for some period of time.

45

A key question is whether a product placed in a game will attract enough attention to allow the stimulus to be processed in a deeper manner. Unfortunately, no research has focused on this area, and it would be beyond the scope of this dissertation to conduct such a study. Instead, it will be assumed that placements not central to the story in the game (i.e. billboards, non-interactive soft-drink machines etc.) will be processed in a shallower manner. These will be referred to as products placed in a subtle manner. As players do not pay much attention to subtle placements, it is believed that its eectiveness in terms of observed brand preference will fall when the game is played more, as predicted by the Perceptional Fluency / Misattribution (PF/M) model (Bornstein and DAgostino, 1994; Nordhielm, 2002). Hence, it is suggested that (Hypothesis H3) the ratio of observed brand preference toward a product placed in a subtle manner in a video game will decrease monotonically as the game is played more.

46

Chapter 3

Methodology
This chapter discusses the method of the research which was made in order to test the hypotheses developed in Section 2.7 on page 44.

3.1

Research Design

Several dierent methods could have been applied to test the hypotheses developed, but many of these would not suit to the focus of this dissertation. For instance, a qualitative approach, such as interviews or focus groups, could have identied whether players thought they more easily could recall products played in a game they play a lot compared to a game they only have played a little. However, a big drawback of such an approach would be that this does not show whether people actually recall the products, but only if they think the would. Thus, such a study would never be able to support any of the hypotheses of Section 2.7. Instead, it was clear that the hypotheses describe the relationship between an independent variable, time of playing, and a number of dependent variables, namely level of recall (in H1), recognition (in H2) and observed brand preference (in H1).

47

For instance, it was (in H1) hypothesised that when a game is played more, the level of recall would either remain the same or increase, but not decrease. Although causality can never be proven, marketing experiments can be a helpful way to either nd support or reject a hypothesis of causality (Malhotra and Birks, 2003). That is, it will not be possible to prove that playing a game for a long period of time causes higher recall of a brand among players (e.g. because it is possible to eliminate every other factor that might inuence level of recall). What can be done, however, is to design the experiment such that the inuence of these unwanted factors is minimized.

3.1.1

Concepts and Notation in Experiments

Before the actual design of the experiment can be discussed, the following concepts need to be described (adapted from Malhotra and Birks (2003)): Test Units are the units which the experimenter tries to inuence and observes through the experiment. Independent Variables are variables that the researcher controls and sets in order to inuence the test units. Dependent Variables are the variables that the researcher measures or observes in order to see whether the independent variables had an impact on the test units. Extraneous Variables are variables which are dierent from dependent and independent variables, but inuence the test units. At worst, these variables have a big enough impact on the result of the experiment to make it invalid and thus misleading. 48

Obviously, when designing experiments, an overall goal is to make it as valid as possible. Malhotra and Birks (2003), identify two types of validity, namely internal and external validity. Internal Validity is the extent to which the measured eect on the independent variables is caused by dependent variables (and thus not by some extraneous variables). On the other hand, External Validity is the extend to which the result can be generalised from the experiment setting to real-world settings. For describing the experiment, the following notation (adapted from Malhotra and Birks (2003)) will be used: X is the independent variable that will be exposed to the test units in order to inuence them. O denotes an observation of the dependent variable on the test units. R is a random allocation of test units to dierent treatment (e.g. dierent exposures). For instance, consider Experiment 3.1. Here, the test units are randomly assigned to dierent values of the independent variable (e.g. dierent number of exposures), whereafter they are observed in three dierent ways (e.g. recall, recognition and brand preference).

R1 X1 O1 O2 O3

(3.1)

3.1.2

The Current Experiment

Figure 3.1 shows the dierent variables that are needed to be controlled and measured in order to nd support for or reject the proposed hypotheses. 49

Figure 3.1: It was in Chapter 2 hypothesised that the number of times a player is exposed to the placement inuences his ability to recall, recognise, as well as his preference toward the brand, in a particular way. In order to test these hypotheses, an experiment is needed in which other (extraneous) variables must be carefully handled. Test Units The test units in this experiment will be participants who are playing a video game in which a product placement occurs. As the researcher was chairing a large Danish summer school, students of Future Week 2006 were asked to volunteer for the study during the introduction talk given by the author. To attract participants, the students were promised a gift card worth 250 kr. (about 22), but they were not told where this gift card could be spent. The participants were told that the study was on quality in computer games. Without such a cover-story, the external validity of the experiment could be chal-

50

lenged, as they would be likely to pay more attention to the product placements than they normally would. All 96 high school students, aged 16-20, signed up to participate in the study during their stay at Future Week 2006. Of these, 93 were Danish, and the remaining three were from Sweden. Of all participants, 31% were females and 69% were males, which lies very close to the gender demographics for gamers within the UK and US, as discussed in the Introduction.

Independent Variables The independent variable controlled by the researcher was the number of games each test unit played. As the brand was exposed at equal intervals, three exposures per game, the researcher was thereby also controlling the number of exposures each participant had. Based on previous studies, three dierent values were selected to be the number of games that should be played, namely 1, 7 and 14 games. These values correspond to 3, 21 and 42 exposures of the Burger King logo, and were selected because the inverted u-curve (which H3 predicts the observed brand preference should not follow), usually peaks at approximately 21 exposures (Nordhielm, 2002). Further, 1, 7 and 14 games seem like a reasonable length of playing for a gamer (these correspond to periods from about ve minutes to about one hour).

Dependent Variables The dependent variables that are believed to be inuenced by these exposures are recall of the brand, recognition of the placement and an observed brand preference for the product placed.

51

Extraneous Variables A number of extraneous variables were identied, but it should be noted that there can potentially exist many more of these than the researcher can identify (Banks, 1965). However, it is believed that these variables are the most important ones and hence those that we will aim to control in the experiment. The extraneous variables identied were: Demographics of the test units Buying habits of the test units Level of attention the test units pay to placement Other stimulus exposed to the test units during the period of the experiment

3.1.3

Laboratory versus Field Experiments

One of the rst design decisions which had to be made was whether the experiment should be conducted in a controlled laboratory or in the eld. Generally, experiments conducted in laboratories have potentially higher levels of internal validity, because extraneous variables are controlled more easily, but they tend to lack external validity as the setting is often quite unrealistic (Malhotra and Birks, 2003). On the other hand, eld experiments have the opposite characteristic with potentially low internal validity, but high external validity (Malhotra and Birks, 2003). It was decided to conduct the current experiment in a articial environment which could easily control the extent to which the test units were exposed to the stimulus. In order to increase the external validity, it was decided to use a realworld game (Need for Speed: Underground 2 ), with a real product placed (a Burger

52

King billboard), and to design the playing environment as a living room. These settings were chosen to make the experiment as realistic as possible, while maintaining control of the independent variable and avoid test units exposed to other stimuli.

3.1.4

Designing the Current Experiment

Generally, a researcher can choose among fundamentally dierent experimental designs, as argued by Malhotra and Birks (2003). One approach is known as in pre-experimental test units are observed both before and after the independent variable is applied:

O1 R1 X1 O2

(3.2)

The problem with this approach is that test units chosen might be inuenced by the fact that they are measured before the experiment. For example, if participants have a brand preference toward fast food restaurants before the exposure to the Burger Kings logo, it could be that participants would be biased toward their original preference after the study and thereby weaken the validity of the study. In contrast, in true experimental designs, test units are only observed after the independent variable is applied. It is then possible to measure the inuence by comparing the observations of those observed in a control group:

R X1 O1 R O2

(3.3) (3.4)

In this setup, the measured inuence of X1 would be O1 O2 .

53

Grouping versus Randomisation Hence, a possible design of this study could be the one suggested by the experiment shown below:

T E1 = R X1 O1 T E2 = R X2 O2 T E3 = R X3 O3 CG = R O2

In this setup, test units are randomly assigned into four dierent groups, corresponding to the three dierent numbers of games needed to be tested, and a control group. However, such an approach could potentially threaten the internal validity as some participants would have to play for an hour, even if they only wanted to play for a short time. This would lead to a low level of attention, and the groups would have dierent values of this extraneous variable. Therefore, participants were asked when they signed up whether they would like to play for about 5 minutes, 35 minutes or 70 minutes. Based on these requests, three clusters of 32 participants were made in a non-random manner. These groups were named G1 , G2 and G3 , and each group was randomly divided into two subgroups of equal size, one acting as a test group (T G1 T G3 ) and one as a control group (CG1 CG3 ). The dierent groups and their characteristics are summarised in Table 4.1. The reason for creating three dierent control groups, instead of just one,

54

was that it could be questioned whether participants with one preference for playing time (e.g. ve minutes) had the same buying habits and/or demographics as those with another preference (e.g. 70 minutes). If such dierences existed and only one control group was used, the experiment could lack internal validity. Since the test units are only observed after the exposure, we would never be able to reject this possible error source. However, this choice is a trade o between external and internal validity. This is because three control groups leads to smaller groups, which aects the chance of having sucient data to generalise the result and thereby threaten the external validity of the study. Notwithstanding this, it was considered as acceptable, as this form of external validity can easily be tested using a statistical test known as the t-test (Malhotra and Birks, 2003).

3.1.5

Observations

The environment designed to conduct the experiment is shown in Appendix B. The hypotheses developed required three dierent observations, namely recall, recognition and brand preference. It was decided to observe the test units brand preference through an interview on the quality of the video game played. At the end of the interview, the participants were told that they would enter a draw for a 250 DKR
T G1 16 5 min. 1 3 3 CG1 16 5 min. 1 3 0 T G2 16 35 min. 7 21 21 CG2 16 35 min. 7 21 0 T G3 16 70 min. 14 42 42 CG3 16 70 min. 14 42 0

Nr. Nr. Nr. Nr. Nr.

of of of of of

Participants in Group gaming the participants chose games each participant played labs each participant completed exposures to the product placement

Table 3.1: An overview of characteristics of the test and control groups. The test groups played a track with a Burger King billboard, whereas the control groups played one without this or similar placements.

55

(about 25) gift card to be used at either McDonalds or Burger King. The participants were then asked for which restaurants they wanted the gift card. This choice was noted as the Observed Brand Preference and denoted as OBP . Although the researcher had not received formal training on how to avoid inuencing participants during such a brand observation, special care was taken on this issue. For instance, the researcher always used the same sentence when asking the brand choice question, and looked down at his paper until the answer was given. Moreover, no reference was made to product placements or billboards in the game during the interview by the researcher. After all the participants had been through the rst part of the study, they received an e-mail with a link to an online questionnaire, in which they were asked to name any brands or products they recalled from the game (Observed Unaided Recall, denoted by OU R ). When the participant clicked next in the questionnaire, the rst question was locked such that they could not go back and change their answers. The second page of the questionnaire showed a number of screen shots of billboards that appeared to be in the game (only Burger King actually appeared in the game, see Appendix A) and the participants were asked to select those they recognised from the game. Here it was observed whether the participants recognised the exposure (denoted by ORE ). In all, the following experiment was conducted for each cluster (i) of test units:

T Gi = R Xi OBP,i,1 OU R,i,1 ORE,i,1 CGi = R OBP,i,2 OU R,i,2 ORE,i,2

(3.5) (3.6)

56

The treatment eect (T Ei ), for each group i, is then found by subtracting the two corresponding observations of the test and control groups. For instance, the eect in observed brand preference of group one (those who played one game and thus were exposed three times) would be T E1 = OBP,1,1 OBP,1,2 .

3.1.6

Ethical Aspects

One major ethical issue needed to be considered before carrying out the study, namely the fact that the researcher had to tell participants that they were participating in a study on quality in video games, instead of telling them that the study was on product placement. It would have had a major impact on the validity of the study, if participants had known what the real purpose of the study was. This issue was resolved by informing the participants immediately after collecting the nal data, which was less than two weeks after the rst person participated. Only positive feedback was received from this orientation and none of the participants requested removal from the study.

57

Chapter 4

Results
The overall results of the experiment is shown in Table 4.1. Moreover, the results of the recall and recognition tests are illustrated in Figure 4.1, and the result of the observed brand preference is pictured in Figure 4.2 on page 60.
Nr. Interviewed Nr. Preferred BK % Preferred BK Nr. Respondents of Questionnaire Nr. Recalled BK % Recalled BK Nr. Recognised BK % Recognised BK T G1 16 5 31.25% 14 1 7.14% 1 7.14% CG1 16 6 37.5 % 11 0 0% 0 0% T E1 6.25% 7.14% 7.14% T G2 16 2 12.5% 13 1 7.69% 2 15.38% CG2 16 5 31.25% 14 0 0% 0 0% T E2 -18.75% 7.69% 15.38% T G3 16 8 50.00% 14 3 21.43% 5 35.71% CG3 16 7 43.75% 12 0 0% 0 0% T E3 6.25% 21.43% 35.71%

Table 4.1: The result of the experiments. The recall and recognition gures are based on those who responded to the questionnaire (the overall respond rate was 82.13%).

4.1

Discussion

Hypothesis H1 (see Section 2.7 on page 44) suggested that the level of recall would increase continuously and thus not follow an inverted u-curve. As shown in Figure 58

Figure 4.1: Levels of recall and recognition, calculated from the participants who were exposed to the Burger King billboard (n = 48). The percentage is shown as a function the number of exposures (i.e. number of rounds each participant completed), which was either 3, 21 or 42, each of which had n = 16. 4.1, although the curve only increases insignicantly from 3 to 21 exposures, the development from 21 to 42 is signicant (t = 4.52, p < 0.001). Hence, Hypothesis H1 is supported by the ndings. Moreover, Figure 4.1 shows, as predicted by Hypothesis H2, that it becomes more and more likely that the players can recognise the stimulus the more they are exposed to the product placement. Using this method of measurement, the eectiveness increases signicantly both from 3 to 21 and from 21 to 42 exposures, with t = 3.0(p < 0.01) and t = 5.4(p < 0.001), respectively. Thus, the data supports the trend Hypothesis H2 suggested. For both H1 and H2, one could correctly claim that the experiment did not show what would happen beyond the 42 exposures, and that it might be the case that it could follow an inverted u-curve. Notwithstanding this, a previous studies have shown that the inverted u-curve usually peaks at 21 exposures (e.g. Nordhielm (2002)), and it is therefore believed to be highly unlikely. However, as shown by Figure 4.2, the observed brand preference does not follow an inverted u-curve as Hypothesis H3 suggested. In fact, the observed brand 59

Figure 4.2: Percentage of participants who had were exposed to and had Burger King as their observed brand preference. This percentage is shown as a function of the number of exposures. These values are compared to the average Burger King preference observed in the control group (n = 48) . preference seems to follow a u-curve, with the least eect observed at 21 exposures, where only 12.5% chose Burger King, which is very signicantly less than the 31% (t = 5.2, p < 0.001) and 50% (t = 10.0, p < 0.001) observed at 3 and 42 exposures, respectively. Hence, Hypothesis H3 cannot be supported. The data collected in the observed brand preference experiment was very unexpected, not only because Hypothesis H3 was rejected, but also because it suggests that the product placement sometimes had a negative inuence on the participants observed brand preference. That is, when participants were only exposed to the logo 3 or 21 times each, signicantly fewer of them chose Burger King compared to the average of all 48 members of the control group. This unexpected observation led the researcher to consider whether the validity of the experiment and/or analysis could be questioned. One issue in particular emerged as a potential error source that could have had an inuence on the result, namely the way in which the groups were made. That is, the participants were 60

asked how much they would like to play before the groups of 1 game, 7 games and 14 games were constructed. It could be that those who only wanted to play a little were generally less likely to buy Burger King (although, they were at this point not aware of which game they were to play). Fortunately, as this possible error source was predicted when designing the experiment, the control group was selected so that it consisted of equal numbers (16) of the corresponding type of participant.
Games Played 1 7 14 % of the subgroup exposed to BK that chose this brand 31.25% (5 of 16) 12.5% (2 of 16) 50.0% (8 of 16) Number of exposures 3 21 42 % of control subgroup that chose BK 37.5% (6 of 16) 31.25% (5 of 16) 43.75% (7 of 16) Degree of dierence

Not signicant (t = 1.49) Very highly signicant (t = 5.27) Not signicant (t = 1.42)

Table 4.2: A comparison of the results for the two dierent groups of participants, those exposed to the Burger King (BK) placement and those in the control group. In order to approach this issue, refer to Table 4.2. Firstly, it is noted that even within the control group there a signicant dierence between those who chose to play a medium number of games (7 games) and those who chose to play a lot (14 games), namely that 31.25% against 43.75% chose Burger King (t = 2.83, p < 0.01). This could be because the larger group of participants that chose to play for longer had tried the game before, and thereby were more inuenced by previous exposures than those in the other groups. Notwithstanding this, there is still no evidence that could support Hypothesis H3, nor the belief that product placement should positively inuence peoples brand preference. In fact, the only inuence observed is negative, namely the group of people who played 7 games where there is observed a signicant dierence (t = 5.2, p < 0.001). That is, in this group, only 12.5% of the participants who were exposed to the product chose Burger King, whereas 31.0% of those in the control group chose the brand. According to statistical convention such 61

a dierence is called very highly signicant, because the probability of this result being wrong due to too few participants is less than 0.1%. Hence, it could seem that the experiment indicates that product placement in video games negatively inuences customers, when measured by observed brand preference. However, ndings of a similar experiment by Auty and Lewis (2004) indicated that only participants that had seen a movie beforehand were inuenced by a placement of Pepsi. They explained this observation to be because placements have a reminder eect, in which the prior and current exposures work together and inuence the audience. This could also be the case for players and video games, a fact that led the researcher to look closer at those who, during the interview, claimed that they had tried the game before. This ltered data is shown in Table 4.3. As before, negative inuence is observed for participants playing 7 games. However, unlike previously, a signicant positive inuence is now observed, namely among those who were exposed to the brand 21 times and had tried the game before. That is, about 45% of those who were exposed to Burger King chose the brand, whereas only 33% from the control group chose this brand. Since the probability of this result being wrong is less than 1% the dierence can be said to be highly signicant (t = 2.92, p < 0.01), a calculation which is particularly important, because the ltered data set is of fairly limited size.
Games Played 1 7 14 % of the subgroup exposed to BK that chose this brand 40% (2 of 5) 0% (0 of 6) 45.45% (5 of 11) Number of exposures 3 21 42 % of control subgroup that chose BK 33.33% (2 of 6) 37.5% (3 of 8) 33.33% (3 of 9) Degree of dierence

Not signicant (t = 0.00) Very highly signicant (t = 6.20) Highly signicant (t = 2.92)

Table 4.3: After removing those who had not tried the game before, this table compares the results of the two dierent groups of participants, those exposed to the Burger King (BK) placement and those in the control group. 62

4.2

Summary

Although the design of the experiment led to fairly small test and control groups, it was, with statistical signicance, possible to nd support for an increase in the levels of recall and recognition as the game was played more and more. This fact supports the view that video games should be of substantial interest for marketers, since popular games are repeatedly played over a considerable period of time. However, it was not possible to nd support for the claim that the eectiveness in terms of observed brand preference would decrease the more the game is played. Surprisingly, the data suggested that this eectiveness measure follows a u-curve that reaches its minimum at 21 exposures, whereafter it increases again. Given the literature review and the results of the experiment, it is now possible to conclude the work that has been done throughout this project.

63

Chapter 5

Conclusion
The aim of this project was to explore the eectiveness of product placement in video games. It was argued that this aim was interesting for several reasons. Firstly, the traditional marketing medium (e.g. TV) has become weakened compared to new forms of entertainment, forcing marketers to look for new ways to promote their products. Secondly, the cost of developing video games has grown signicantly, a fact that is leading publishers to look for new approaches to secure a return on their investment. This is perfectly illustrated by the current trend in product placement market, which is experiencing rapid growth. Notwithstanding this, very little is known about how eective this marketing approach is, making it dicult for marketers to evaluate whether product placements pay o, and making it impossible for publishers to price placements in their games. In order to explore how much is known about placements eectiveness, relevant bodies of knowledge were reviewed. It was noted that more research was done on product placement in movies and television, than on those in video games. Al-

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though the two media are argued to be quite dierent, especially in terms of level of attention paid, it was found that something could be learnt from the results found in studies on movies and television. Studies on the human brain, decision making and general marketing literature suggested that there is no single optimal way to measure eectiveness, since it depends on the type of buying decision there is to be made and on the overall goal of the marketing campaign. Therefore, studies using four dierent types of measurements were reviewed, namely recall, recognition, attitude change and observed brand preference. Among other things, it was found that products were more eectively placed in movies using audio only, when eectiveness was measured by recognition, but less eective than purely visual ones when measured by recall or attitude change. This was a particular interesting nding as it seems that most placements in video games are currently placed visually, suggesting that these are highly eective in terms of recall or attitude change. Studies on the eectiveness of placements in video games were limited and reported sometimes contradictory results. For instance, one study observed that the size of a billboard in a video games did not inuence the eectiveness in terms of recall, whereas a later study reported the exact opposite nding. Similarly, the most frequently quoted study in the press only measured eectiveness in terms of recall and had very limited test units. In fact, only 12 respondents were recorded after a six months delay, which is challenging for the external validity due to a statistical error rate of considerable size. Using this review, several gaps in the current body of knowledge was identied, but it was clearly beyond the scope of this project to investigate them all. Instead, it was chosen to focus on a sticking point, namely that a main argument

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for the attractiveness of product placement in video games is that gamers typically spend considerable time in front of the game. However, no study had before looked at whether such a repetition of the placement actually is advantageous for the eectiveness of the placement. Using relevant bodies of knowledge, it was hypothesised that this repetition leads to an increase of recall and recognition measures, but a decline in the eect observed in brand preference. To test these hypotheses an experiment with 92 participants was conducted. The results supported the two rst claims, since rising levels of recall and recognition were observed when the number of exposures was increased from 3, to 21, and to 42 exposures. However, the belief in eectiveness in terms of observed brand preference was not supported by the ndings. Most surprisingly, it was found that this this form of eectiveness followed a u-curve, dropping from 3 to 21 exposures, but increasing from 21 to 42 exposures. Although the experiment design led to fairly small test and control groups (16 participants in each), it is still argued that the results are to be considered reliable. This is done because the widely-recognised t-test shows the likelihood of the results being misleading due to too few participants. This is because trends such as those suggested by the hypotheses are more easily tested with high levels of condence than exact values for, e.g. recall or recognition.

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Chapter 6

Future Work
One thing that has become perfectly clear through this project is the fact that much is still unknown on the subject of eectiveness of product placement in video games. In fact, the area is so big and yet unexplored that it would be beyond the scope of this project to describe every study that needs to be conducted. Instead, some areas within the subject will be briey described in the hope that future study will elaborate on them further, and conduct studies that can add to the limited body of knowledge. The areas identied through this study include: Replication of this Study. The fact that an unexpected u-curve was observed revealed the need to study this area further. It could be interesting to replicate the experiment to clarify whether the observed brand preference generally follows a u-curve, and to identify what happens to peoples preference beyond 42 exposures. Interactive Products. An as yet untouched area is measurement of the eectiveness of placement where the gamer can interact with the product, e.g. driving a car or operating a mobile phone. Such placements are generally 67

much more expensive to make for the game developer, but it seems reasonable to assume that such placements are more eective since the player is likely to pay more attention to such products. The Winnings/Losings Eect. Another area that to date has not received researchers focus is the consequence of the winning and losing characteristic of video games. For instance, it could be interesting to explore whether the eectiveness of a placement on a football players shirt is aected by whether the gamer wins or loses with that particular team. Similarly, in racing games it could be interesting to see whether players attitudes toward a placed car changes depending on whether he wins. Dierent gaming media. As pointed out in the introduction, a main driver of the rapid growth of the gaming industry is the diversity in media, from consoles to mobile phones. However, no studies have compared how eectiveness characteristics change from media to media. For instance, it could be that visual placements are more eective on consoles, but audio placements are preferable on mobile phones. Thus, although new informed has been added to the body of knowledge, it is perfectly clear that substantial research has to be conducted to fully understand the eectiveness. It is my hope that such research will be conducted such that marketers can make more informative decisions on how to distribute their marketing budgets.

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Appendix A

Screen Shots

Figure A.1: The only screen shots used in the recognition part of the online questionnaire, which actually was taking from the game. Although the billboard was in the game, it only appeared in the track played by the test groups and not in the one played by the control groups.

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Figure A.2: The four fake screen shots used in the recognition part of the online questionnaire. Neither of these appeared in the game, but were made by manipulating the real screen shot in Adobe Photoshop CS.

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Appendix B

Experiment Environment Pictures

Figure B.1: Six oces were lent from Aalborg University. Five of them were equipped with a TV, an arm chair and a Playstation 2 console. Such a room is shown on the left picture. The nal oce was used as an interview room, which is shown on the right picture.

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