MMI PRODUCT PLACEMENT, INC

MMI PRODUCT PLACEMENT, INC

Read the Case, and then follow instructions below: The format for the case is as:  1) Executive Summary – overview of case 2) Analysis of problem 3) Options 4) Recommendations 5) Conclusions 6) Charts, tables and graphs are welcome as addendum. It is expected that all cases be double-spaced with 12-point font. Each case should NOT exceed 7 pages (excluding exhibits). Remember a case is not a repeat of what is written but an analysis of the problem and your suggestions. DEFEND YOUR DECISION. please write two cases separately. THIS PAPER is for MARKETING Class. If you used any sources other than readings, please provide references. For each case, do not use more than three sources other than the readings. Thank you

 

MMI PRODUCT PLACEMENT, INC.
In August 2005, Philip Hart, president of Toronto-based MMI Product Placement Inc. (MMI), was close to signing Greyhound Canada (Greyhound) as a client. Greyhound, the country’s largest provider of intercity bus transportation, had been searching for cost-effective ways to communicate its marketing message to consumers, and was considering placing Greyhound buses in Canadian TV serials. Hart was preparing to make a final pitch that would convince Greyhound to sign up with MMI. Said Hart:
Greyhound has the same doubts about product placement that all new clients have. They worry that their message might not be seen by the right viewers, that their product might be shown in an unfavorable light, and so on. But the biggest sticking point for them is that the benefits of placement are hard to measure. There are no generally accepted performance metrics in our industry, so they worry they won’t know whether product placement is making a difference to their business.
MMI PRODUCT PLACEMENT
Established in 1985, MMI was a pioneer of product placement in Canada. The company had over 2,000 product placements to its credit in feature films and TV episodes. Its self-proclaimed mandate was threefold: to select the best placement opportunities for its clients, to negotiate placement contracts for client brands, and to offer value by providing exposure at an extremely attractive cost per thousand viewers (CPM). MMI leveraged its relationships with the Canadian entertainment industry, built over many years, to encourage the makers of films and TV shows to incorporate its clients’ brands into their productions.
Securing product placement for a client was a sequential process. MMI regularly received scripts from established film and TV companies and would analyze each one for placement opportunities. When it found a potential fit, MMI would inform the client and provide details regarding storyline, distribution and casting to help the client make an informed choice. It would then negotiate with the production team for placement of the client’s product and offer executional support. After the production was complete, MMI would screen the film or TV episode and notify the client about the release or air date.
A second part of MMI’s service was to monitor and track these product placements. Scenes featuring the product would be inventoried and sent to the client so that they could be shared with marketing managers and used at seminars and sales meetings. MMI had editing software that enabled it to distribute these scenes via e-mail, CD-ROM, DVD or VHS. The company also had proprietary software to assess the impact of its placements for each client. Said Hart:
The payoff from a placement does not end with a particular episode. After a production is released, it appears before millions of additional viewers via pay TV, cable TV, network TV and DVD. Product placement can also trigger coverage in other outlets like company newsletters, newspaper articles, and websites. A product’s appearance, verbal reference, or use by a star raises consumer awareness of the brand to an extent that cannot be compared with any other media vehicle.
Since Canada produced a relatively modest level of home-grown feature films and television shows, MMI faced only a handful of direct rivals. However, the company was seeing growing competition from full- service ad agencies, many of which had set up product placement arms as a means of providing clients with a “one-stop shop.” Hart was unfazed by the threat:
Ours is a business based on relationships. If you knock on the front door and ask for product placement, production companies will simply ask you for money and give little thought to whether the opportunity helps your brand. Our clients benefit from our years in the business, our understanding of what works, and our relationships with the producers, directors, and art departments.
The companies we represent have millions of dollars invested in their trademarks, so a poor placement poses a serious risk. We read thousands of scripts on behalf of our clients and choose the ones that make sense for their brand. We also make certain that their products are always seen in a good light – that they don’t end up in the hands of the villain, for instance. Brand managers and conventional ad agencies simply don’t have the time to do that.
PRODUCT PLACEMENT
Product placement was a cooperative effort between advertisers and entertainment production companies, in which trademarked goods were embedded into popular entertainment products in order to encourage their consumption. The Center for Media and Democracy called it a “form of advertisement, without disclosing it to the receiving party.” Product placements “allow you to get to where consumers live, to where they play, to where they work in a way that is not invasive and doesn’t look necessarily like a sales pitch.”
Financial arrangements usually took one of three forms. In many cases, placement simply happened, with no compensation paid or received by the producers for use of the product. At other times, it would be arranged with a certain amount of the product serving as compensation. In still other instances, some level of monetary compensation was involved.
Most sources agreed that the first instance of formal product placement had occurred in 1951, in the feature film The African Queen, when Gordon’s Gin paid producers to have Katharine Hepburn’s character toss loads of their product overboard. Since then, there had been countless placements in thousands of movies.
Product placement had experienced a surge in the mid-1980s and strong growth ever since. It had also evolved into a specialized form of advertising, with specific corporate positions and dedicated agencies built around it.
Product placement was growing in television, too, but averaged fewer placements per programming hour than in movies. The main reason was that product placement (referred to as “product integration” in the language of TV) had to share space with traditional advertising. The latter consisted primarily of 30- or 15-second advertising spots. Interestingly, the cost advantage of product placement could best be understood in relation to the cost of such television commercials. A 30-second spot in a popular Canadian TV serial, such as Corner Gas, cost Cdn$14,000, while the cost (in cash or in-kind goods and services) of a quality placement in a scene of the same program cost about Cdn$2,500.
Estimates of total spending on television product placement varied. PQ Media, a Connecticut-based research firm, had predicted spending of US$2.21 billion globally on paid product placements in 2005, with an additional US$3.78 billion of cash-equivalent on in-kind deals. In the United States, paid placement was estimated at US$1.42 billion, of which US$941 million was spent on television and US$499 million on feature films. Other forecasts suggested that, by 2010, product placements would be present in 75 per cent of all prime time scripted shows. In spite of this impressive growth, product placement still constituted a relatively small portion of TV ad spending, estimated at US$50 billion in North America alone.
Agency Structure and Compensation
Most placement agencies were small, “mom and pop” outfits owned and operated by their founders, who typically had experience in the entertainment industry. A few large advertising agencies had their own in- house placement divisions, often the result of acquisition of a smaller specialty firm. Recent growth in the number of independent producers, both in films and TV, had led to a growth in demand for what was known in the industry as ‘independent pickups’ originating from product placement agencies like MMI. Labor cost was the single largest expense, since the business thrived on personal relationships, hard work, and referrals.
Because of the unpredictable nature of the business, most product placement agencies operated on a retainer basis. Clients would hire the company to seek out appropriate product placement opportunities for a fixed annual fee that ranged from Cdn$15,000 to Cdn$50,000, depending on the client. An additional source of income was the leveraged licensing fee, whereby the placement agency would receive payment if a character from the film or TV show in which the product appeared was later hired to serve as a product spokesperson in other media.
Measurement
The size of the audience that watched a particular program was an important input in gauging the increase in consumer awareness that arose from product placement. Measuring this audience was time consuming and costly, and involved elaborate procedures, techniques and documentation that small, independent firms like MMI could not afford. Instead, the company used data from two firms, AC Nielsen and the Bureau of Broadcast Measurement (BBM), whose estimates of audience size were generally regarded as the industry norm. These agencies used a variety of tools, the most common being the People Meter, to produce daily estimates of audience size and demographic characteristics for various TV episodes.
The People Meter was an electronic device, placed on or near the TV in 5,000 randomly selected Canadian households. It measured three things: the tuning time of the TV set (i.e. the on and off time), the channel being tuned and the people watching the channel. Each member of the household was assigned a personal viewing button that they turned on whenever they watched television, allowing the agency to determine who was watching which program. One of the main areas of concern for MMI, while making a pitch for a prospective client, was the reliability of these data. Said Hart:
Both AC Nielsen and BBM try hard to make their results as scientific as possible. But, clearly, if a client were to dig deeper and ask questions about the methodology, they would conclude that the data provide no definitive answers. On top of that, extrapolating findings from a small pool to an infinitely larger TV audience creates a risk of faulty conclusions. So it’s difficult, based on all the assumptions being made, to assure a new client that they are getting value for money from product placement.
For its part, MMI had developed a proprietary Placement Quantifying Scale (PQS) for measuring the value of each placement (see Exhibit 1). It considered three variables to arrive at a number: cost of an equivalent 30-second commercial; the “value” or expected impact of the on-screen placement compared to a 30- second spot; and the possibility of multiple airings of the TV episode (also known as the ‘evergreen factor’). This number was subjective because two of the three inputs were based solely on human judgment.
The cost of buying airtime for a 30-second commercial was based on the current market rate and was, therefore, a wholly reliable figure. The value of on-screen placement, expressed as a percentage, was based on the prominence of the placement and the audience’s likely engagement level at that point in the show. An outstanding placement was assigned 100 per cent value, an average placement 50 per cent value, and poor placement 25 per cent value. This was then multiplied by the evergreen factor, which was normally estimated at 1.5.
The equation used to arrive at the value of product placement was thus as follows:
Value of = Cost of × Placement × Multiple airings placement 30 s spot ($) value (%) factor (#)
Said Hart:
The PQS model is only as accurate as the inputs you use. It is based on the quality of placement as perceived by a professional viewer. But perceptions vary; there is nothing conclusive about them. These are limitations you simply have to live with.
Trends
The nature of product placement was also changing with the times. According to Leo Kivijarv, vice president and research director for PQ Media, three major trends were affecting the business in 2005:
First, brand marketers are becoming savvy regarding the value of product placement. They are willing to pay a premium for a brand to be used in the right context in the visual medium. Second, there is a shift occurring in product placement from a barter and gratis model to a payment model. In Canada, for example, paid placement was on the order of Cdn$19.5 million out of a total market of Cdn$57.2 million in 2005. Third, TV networks are becoming proactive in combining product placement with their ad buying. Placement is no longer the domain of TV producers.
The blending of in-show placement and 30-second spots for the same product in a single TV episode had arisen largely from the rise of reality-based television shows, which were tailor-made for product integration. The best known example was the popular talent show American Idol, which not only featured standard advertising for Coca-Cola, AT&T Wireless, Old Navy and Ford, but also integrated the products themselves into each episode. Another well-known example was the Donald Trump vehicle, The Apprentice, which pitted young entrepreneurs against each other in challenges that were frequently sponsored by well-known brands.
Automation and standardization were also beginning to impact the business. Movie studios and TV networks had started to explore systems whereby excerpts from scripts, or even specific placement requests, would be uploaded to a central website for advertisers, who could search the requests to evaluate and bid on the available placement opportunities. A related website would then allow the director or other creative professional to approve and sign off on each placement. It was envisioned that the system would eventually enable advertisers to track the exposure resulting from each placement by determining how many people saw it and illustrating how this compared to competitors.
Finally, there were also the beginnings of what was called “digital brand integration” through which different products could be inserted, digitally, into the same television show depending upon whether it was first run, rerun, syndication or cable TV. Although this was currently a labor-intensive process, technology was being developed that would make it possible to insert products into programming in real time. In anticipation of these new systems, scenes would be filmed with generic product elements that would be digitally tagged with instructions on the spatial orientation and size of the product. Advertisers would then have only to supply a 3D image of their packaging, and the software would automatically insert their product into each scene.
The principal advantage of this new technology was the opportunity it offered the owners of movie and TV programming to realize maximum value from product placement. For example, studios might charge separately for placement in specific regional markets or for particular time periods. And since only a handful of films had contractual restrictions on content modification, it would even be possible to alter and customize products that appeared in existing films and television shows.
Even with the current state of technology, precedents had already been set for region-specific product placement. When the 1993 Sylvester Stallone film Demolition Man was released in international markets, for instance, all references to Taco Bell — a restaurant with a negligible presence outside North America — were changed to Pizza Hut. Similarly, in the 2004 release Spider-Man 2, a prominent advertisement for Dr. Pepper appeared in the shop where the principal character worked. In international versions, that image was replaced with an ad for PepsiCo’s Mirinda soft drink.
PASSENGER TRANSPORTATION IN CANADA
Because of Canada’s vast size, most long-distance travel in the country took place by air on one of the country’s two scheduled carriers, Air Canada and WestJet. For medium- and short-distance travel, travel by automobile was the most popular choice. The train remained an option for medium- and short-haul trips, but was only practical in southern Ontario, southern Quebec, New Brunswick, and Nova Scotia — regions where passenger rail service was frequent and passed through the majority of population centers. Compared to air or rail, travel by bus was generally less expensive and offered service to more locations.
Passenger bus transportation in Canada could be divided into three categories: intercity bus services, school bus services and urban transit services. Intercity bus service, offered in all provinces and territories with the exception of Nunavut, connected large and small cities to each other and to communities in remote parts of the country. The largest network was operated by the Laidlaw group of companies, and included Greyhound, Grey Goose, Voyageur Colonial and others. These companies offered service that extended from Montreal and Ontario to the Pacific Coast, and included Manitoba, Saskatchewan, Alberta and British Columbia. They also offered connections to various locations in the United States.
GREYHOUND CANADA
Greyhound was Canada’s largest provider of intercity bus transportation, serving nearly 1,100 locations across the country. It was an icon of bus travel, providing safe, enjoyable and affordable travel to 6.5 million passengers each year — a market share that approached 40 per cent. In addition, the Greyhound running dog was one of the most-recognized brands in the world.
According to company research, the profile of Greyhound’s passenger base was as follows: 32 per cent earned over Cdn$35,000 per year, and 48 per cent had a college degree. Almost half had used an airline in the last year. Most owned automobiles that were sufficiently reliable for a trip of a similar distance, but traveled by bus because it was safe and more economical. Half of all Greyhound passengers used the service more than five times a year. In addition, analysis of company sales data indicated that the average price paid for a Greyhound ticket was Cdn$45.
Although Greyhound was primarily known for its transportation services over medium and long distances, many of its passengers actually used the service to commute to and from work. As a result, the company’s primary target group for generating new business consisted of young professionals aged 18 to 44, especially those in the 18 to 24 age group. The idea was to win over these individuals at a young age so that they would be interested in using Greyhound for their commuting needs once they became working professionals.
Greyhound was also in the middle of organizational change, stemming from the belief that the 75-year-old brand had become staid and required repositioning. A new marketing team had been brought in with a mandate to build awareness among consumers that Greyhound not only provided affordable, convenient and safe travel, but was also “alive and well” as a transportation option. The team was developing a 360- degree marketing plan that encompassed the traditional approaches of online, outdoor and event marketing. It was also planning product upgrades in order to enhance the travel experience. One of its priorities was to wire all Greyhound buses for Internet access, in order to better meet the needs of its customers.
Paul Dillon, marketing director for Greyhound, stated:
Although our brand recognition is very high among Canadians, we are not top of mind in their travel consideration set. This has to change. We need to get front and centre with them. We know our customer segments, and we know where they are, but we haven’t done a good enough job letting them know that we are a viable option for travel. Awareness is our primary expectation from product placement. We need measures that will let us know whether or not that awareness is getting generated. That’s important. We also need to ensure alignment. Our brand should be presented unobtrusively and incorporated seamlessly into the storyline. It should not look like a plug.
MAKING THE CUT
In July 2005, MMI had received a script for the reality-based TV serial Making the Cut: Last Man Standing. The concept was to offer a group of amateur ice hockey players a second chance to realize their dreams by giving them an opportunity to compete for a shot at making an NHL team. The need to transport these players to and from various venues provided an opportunity to integrate a Greyhound bus into each episode. The all-Canadian show was scheduled to premiere nationally during week-end prime time on the Global television network between September 2006 and February 2007, and was scheduled to comprise 21 episodes (see Exhibit 2 for sample promotional material).
Within the show, the Greyhound bus was expected to feature prominently an average of three times per episode, for approximately 45 seconds each time. Of this footage, perhaps a third would involve exterior shots of the bus, either driving or being loaded or unloaded. For the most part, these would be the only times that the Greyhound logo would be clearly visible.
Viewership data for Making the Cut would not be available until after the show aired, making it impossible for Hart to prove conclusively that the audience would match Greyhound’s target market. It was, however, widely known that the 18 to 24 demographic were heavy viewers of entertainment channels, and that hockey was popular with the 18 to 44 age group.
ISSUES BEFORE HART
Phil Hart knew he would need to work hard to close the deal with Greyhound. Despite MMI’s many assurances, Paul Dillon continued to be concerned by the difficulty of measuring the effectiveness of product placement. Moreover, Greyhound had a long-standing relationship with its advertising agency, and they would almost certainly encourage Dillon to stick with traditional advertising and its tangible metrics. He wondered what arguments he could make to convince Greyhound that product placement was worthwhile.
A second issue was to decide whether Making the Cut was the right promotional vehicle for Greyhound’s needs. The absence of a track record for the show meant that Hart could neither guarantee viewership nor provide detailed audience demographics. Since Hart was working simultaneously on 20 other product placement opportunities, in both film and TV, he wondered whether it might make sense to focus on a different opportunity, with a built-in audience — perhaps a hit show like Corner Gas.
As he prepared his final pitch to Dillon and the Greyhound marketing team, Hart knew he would need to make a strong case to win the business. Greyhound was hardly his first client, but Dillon had made it clear that he had not yet been sold on product placement. And none of these presentations were ever easy.

Is this the question you were looking for? If so, place your order here to get started!