What is a 'Halo Effect'

The halo effect is a term for a consumer's favoritism toward a line of products due to positive experiences with other products by this maker. The halo effect is correlated to brand strength and brand loyalty and contributes to brand equity. 

BREAKING DOWN 'Halo Effect'

The halo effect applies to a broad range of categories, including people, organizations, ideas, and brands.  For example, Apple Inc. benefits significantly from the halo effect. With the release of the iPod, there was market speculation the sales of Apple's Mac laptops would also increase due to the success of the iPod. This phenomenon of one product favorably impacting another is known as the halo effect.

Companies create the halo effect by capitalizing on their existing strengths. With the concentration of marketing efforts on high-performing, successful products and services, the firm's visibility increases and reputation and brand equity strengthens.  

The Halo Effect Process

When consumers have positive experiences with products of highly visible brands, they cognitively form a brand loyalty bias in favor of the brand and its offerings. This belief is despite having no positive experiences with the other offerings. The reasoning is that if a company is exceptionally good at one thing, they will undoubtedly be good at something else.  

Figuratively, a halo forms and extends over the brand. It effectively allows for the expansion of product offerings. For example, Apple's iPod success allowed for the development of other consumer products such as the Apple Watch, iPhone, and iPad.  If the following product pales in comparison to the leading product, the success of the leading product will help to compensate for the failure.

The opposite of the halo effect is the horn effect, named for the horns of the devil. When consumers have an unfavorable experience, they correlate that negative experience with everything associated with a brand.

The halo effect increases brand loyalty, strengthens the brand image and reputation, and translates into high brand equity.  Companies use the halo effect to establish themselves as leaders in their industries. When one product positively imprints in the minds of consumers, the success of that product infectiously affects other products. Ultimately, businesses can gain market share and increase profits.

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