Study shows: record-breaking advertising expenses on films pay off
Films, video games, music releases – the entertainment industry is well known for its high spending on advertising. A new meta-analysis by KLU Professor Alexa Burmester demonstrates that the high expenses pay off. The marketing budget of the blockbuster film Barbie was greater than the film’s total production costs. A new meta-analysis shows this approach is worthwhile. Increasing spending on film ads by one percent increases revenue by 0.33 percent – nearly three times as much as in other industries. This was established in a study by researchers at the University of Cologne, Kühne Logistics University (KLU), KU Leuven, and the universities of Hamburg and Leipzig. These results can aid marketing managers in planning expenses more accurately and in better forecasting their efficacy.
“Our results show that spending on advertising in this industry in particular pays off,” said Alexa Burmester, Assistant Professor of Applied Quantitative Methods at KLU. She cited film advertising as an example, “In addition to movie-goers, the ads also reach cinema operators. More cinemas show the film and more people see it, which increases revenue as well.” The effect here is very robust. “Advertising works – no matter the country and also in economically tough times,” said Prof. André Marchand of the University of Leipzig. Generally, the influence of advertising has decreased since the mid-2000s due to the emergence of social networking services such as Twitter.
Role model for other industries
“For consumers, compared to other industries it is particularly difficult to estimate the quality of entertainment products before purchase. Viewers only know if they like the film after seeing it. Advertising can help decrease this uncertainty, for example, by showing clips of the film in trailers and testing the product,” explained Dr. Andrea Schöndeling of the University of Cologne.
“What’s more, advertising in the entertainment industry banks heavily on storytelling. It tells thrilling stories and arouses emotions, animating discussion and sharing on social networks. Even prior to a film’s release, hype can be generated that can motivate cinema operators and distributors to place the product more prominently,” Prof. Alexander Edeling of KU Leven added.
The principles of product testing and storytelling presumably make advertising more effective. Other industries could integrate these effects into their ad campaigns.
The analysis synthesizes the results of 59 studies on marketing in the entertainment industry from 1994 to 2021.
Publication: Schöndeling, A., Burmester, A.B., Edeling, A., Marchand, A. & Clement, M., Marvelous advertising returns? A meta-analysis of advertising elasticities in the entertainment industry. J. of the Acad. Mark. Sci., Vol. 51(5), 1019-1045, (2023). doi.org/10.1007/s11747-022-00916-0