What is the ‘Halo Effect’

The halo impact is a term used in marketing to explain the predisposition revealed by clients toward certain products since of a favorable experience with other products made by the same producer or maker. The halo impact is an idea driven by brand equity. The opposite of the halo result is cannibalization.

BREAKING DOWN ‘Halo Effect’

A traditional example of the halo impact is the relationship in between Mac notebooks and iPods. When the iPod was released, there was speculation in the market that the sales of Apple’s Mac laptop computers would increase because of the success of the iPod. This phenomenon is described as the halo effect.

The Halo Effect: An Appropriate Loss

The halo result is frequently utilized to validate service sections that are a drag on incomes. If the company section provides a lift in customer traffic, it may translate into additional sales for other sectors or company systems available to the client. Managers are alright with taking a loss on business segment profitability as long as it increases consumer deals in other parts of the store. For example, many convenience shops and gas stations offer cigarettes although cigarettes are understood to have a low margin. The gas station owner makes no profit from the cigarette sale, however it gives customers a reason to choose his gasoline station over another. Another example is a free service offered by business, such as a grocery store that offers a free carry-out service for senior citizens or a retail shop that uses free shipping on sales over $50. These items and services are not complimentary for the business, however they are used to the customer as reward to buy an item over the competitor. The halo impact of complimentary delivery equates into the purchase of additional items.

Effectiveness and Usage

The halo result works for business with high brand equity and in industries that rely heavily on brand equity to grow demand. It is also reliable for companies in competitive monopolies where there are lots of companies providing the same service with minimal differences. Companies likewise use the halo impact to establish themselves in a specific industry. If one item can become a leader in a provided industry, the brand equity from that item may spread, like a halo, to other items. This reasoning permits companies to accept a particular level of loss with the understanding the loss is really an investment in brand name equity with a payoff throughout all future services and products sold by the company. In this way, the halo effect has the possible to not only increase client traffic but also pricing, which are the 2 main levers of profits growth.

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