27 February 2019

Research pick: Saturday night at the movies, tell a friend… "The complementary role of advertising and electronic word-of-mouth for blockbusters and low-budget motion pictures"

There is a complementary role between conventional marketing and advertising and electronic word-of-mouth (e-WOM) for motion pictures with high and low production costs, according to an analysis by researchers in Chile and Spain. They suggest that understanding the roles of advertising and e-WOM in the era of social media and social networking can have a big impact on low-budget movies compared to the blockbuster, perhaps even allowing low-budget movies to become surprise blockbusters and leading even the biggest budget movie to fail as a “rotten tomato”.

Guillermo Armelini of the Universidad de Los Andes, in Santiago, Chile, and Jorge González and Julian Villanueva of the University of Navarra, in Madrid Spain, detail their findings in the International Journal of Internet Marketing and Advertising.

The team tested the two forms of promotion using a novel methodology in experience goods modelling, that endogenise the effect of e-WOM, advertising, revenues per screens and screens – the main constructs of our study. They applied the approach to a random sample of 202 movies.
The team found that “The advertising impact on revenues and e-WOM is more critical for high than for low-production budget movies. However, a higher positive effect of advertising on-screen allocation is found for movies with lower budgets.”

They suggest that their findings have implications for managers: from the demand side, advertising affects the attention of moviegoers beyond a certain threshold and it has a ripple effect on e-WOM. In other words, e-WOM is unlikely to succeed as an exclusive approach to marketing. By contrast, they also showed that cinema owners consider advertising investment as a signal of quality for movies with a limited production budget.

Armelini, G., González, J. and Villanueva, J. (2019) ‘The complementary role of advertising and electronic word-of-mouth for blockbusters and low-budget motion pictures‘, Int. J. Internet Marketing and Advertising, Vol. 13, No. 1, pp.1-21.

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