Halo Effect

DEFINITION of 'Halo Effect'

The halo effect is a term used in marketing to explain the bias shown by customers towards certain products because of a favorable experience with other products made by the same manufacturer or maker. Basically, the halo effect is driven by brand equity.

The opposite of the halo effect is "cannibalization".

 

 

BREAKING DOWN 'Halo Effect'

For example, if a customer buys product C which is made by company X, not because of the attributes or benefits of the product, but because he or she had a favorable experience with product D - another product made by company X, the purchased item is said to be prospering because of the halo effect.

A classic example of the halo effect is the relationship between the Mac notebooks and iPod. When the iPod was released, there was speculation in the market place that the sales of Apple's Mac laptops would increase, because of the success of the iPod. The belief was based on the halo effect, as customers who had a great experience with the iPod would buy a Mac simply because it is made by Apple Inc.

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