Monday Mornings with Madison

The Halo Effect in Business and Brands, Part 2

How the Halo Effect Impacts Business and Brands

The “Halo Effect,” a cognitive bias in which one person’s overall impression is influenced by assumptions based on unrelated, concrete information.   If a person likes one aspect of something, he tends to be predisposed to think positively about other aspects of it, even if they’re totally unrelated.   For example, Amazon offers a convenient way to order products online.  Therefore, Amazon is awesome and features the lowest prices.  It is the tendency to judge something (a person, place or thing) through the filter of a single, narrow perception.  And then, perception becomes reality.

However, we have all heard the admonitions.  Don’t jump to conclusions.  Don’t make hasty decisions.  Don’t judge a book by its cover.  Don’t be too quick to judge.   That is because some decisions can have big impact.  If certain decisions are influenced by the Halo Effect — rather than based on carefully weighed facts — it can have devastating repercussions.  In business, for example, the Halo Effect can negatively affect which stocks are chosen for investment, which deals are made and which employees are hired.  In those situations, the Halo Effect can lead to poor decisions with costly consequences.

Unfortunately, the Halo Effect is real.  It exists in ALL people.  Anyone who says they don’t succumb to the Halo Effect is kidding him or herself.  Every person makes decisions impacted by the Halo Effect.  Why?  It seems people have trouble with gray areas.  There is a propensity to want to see the world in black and white.  All or nothing.  Winner or loser.  All good or all bad.  When people rate someone on one trait, it is correlated with their ratings on other traits.

While this can be downright damaging to organizations in some situations, if channeled, the Halo Effect can also be used to benefit a brand.  In fact, the Halo Effect can be a brand’s best friend if it is understood and harnessed!

How to Harness the Halo Effect

1. The Halo Effect in Cross-Sales

Companies can capitalize on the Halo Effect by promoting a single product and then cross selling.  When one product from a family of products sells well, the rest of the product catalog can benefit.  If a company releases a product that either becomes popular with consumers or is intensely marketed to consumers and gains momentum, it not only increases sales for that product but customers associate those good feelings with the company’s other unrelated products.  And, not only do current and past products begin to sell, but it also can affect future product releases.  This can be seen in a multitude of industries and products.

Case in point.  The Halo Effect was evident in the beauty products industry with the rise of Tarte Cosmetics.  Maureen Kelly started Tarte Cosmetics out of her apartment in NYC.  Her first product was a cheek stain. While the cheek stain caught the attention of beauty writers a week after launching in Henri Bendel, Tarte did not immediately grow into the well-known company it is today.  After all, cosmetics was already a highly competitive industry in 1999.  So Kelly spent much of her first few years delivering sample sized Tarte products to the mailrooms of magazine publishers, hoping they would invite her back.  By 2003, Tarte products were in Sephora stores, and by 2010 in Ulta Beauty stores.  But, it was not until 2016 — when Tarte created its iconic, ”can’t live without” concealer — that the company became a global sensation.  Their Tape Contour Concealer became the most popular product in the company’s catalog.  In fact, it’s been said in the media that one Tarte Double Duty Beauty Shape Tape Contour Concealer is sold every 12 seconds.   By 2017, Tarte was shipping its products to over 190 countries worldwide.  One highly popular product helped increase the sales of all of its products thanks to the Halo Effect.

In the case of Tarte Cosmetics, that was purely accidental.  Fortuitous but unplanned.  However, the Halo Effect doesn’t have to be ‘accidental.’  Another case in point.  The Halo effect was channeled by Apple in 2005 to their benefit.  Apple chose to focus all of its marketing on its iPods, rather than its computers, which were struggling in a much more competitive space at that time.  Apple’s iPods were able to dominate the digital music space.  People who bought an iPod fell in love not only with that tiny digital music tool, but also with the Apple brand.  They started buying other Apple products and became “Apple converts.”  Thanks to the iPod push, Apple’s fiscal year sales in 2005 increased 38% and profits rose a whopping 384%.  This was not isolated to the sale of iPods.  As popular as they were, iPod and iTunes accounted for less than 40% of Apple’s sales that year. The iPod allowed people to see Apple as a technology leader and innovator.  Apple became a top brand in the technology space.

The Halo Effect can be harnessed even within less exciting industries than technology and beauty.  In fact, the Halo Effect can be leveraged to benefit any company in any industry.  And, capitalizing on cross-sales can happen even if the past, present or future products are very different from the popular one.   The key is for a company to focus all its efforts on promoting and marketing a single one of its products (or services).  Then, the goodwill it generates will then spill onto all of the company’s other products.

2.  The Halo Effect and Brand Reputation

Brand names can become powerful marketing tools in their own right, which then contributes to a halo effect for its products.  The classic example of brand power is Nike.  The quintessential example of a brand having a Halo Effect, Nike carefully cultivated a very strong reputation for making quality sneakers.  Only a very powerful brand can charge $150 for putting a Swoosh logo on what would otherwise be $30 sneakers. Then Nike used its success selling sports shoes to expand into other product lines including sportswear, backpacks, gym bags and sporting equipment. That is a good example of how a strong brand name can make any catalog of products instantly recognizable to consumers.

However, this is not unique to Nike.  There are other brands with the power to bestow the Midas touch on practically everything it does and sells.  Disney is one such brand.  Ranked #8 in Forbes 2018 List of The World’s Most Valuable Brands, There is scarcely anything Disney creates that is not hugely successful.  From parks, resorts and motion picture business to theme parks, merchandise and media networks, Disney products are bathed in the golden Halo Effect of the talking mouse that is beloved the world over.  Indeed, the Shanghai Disney Resort, which opened in June of 2016, was profitable in its first year, with over 13 million people visiting it in its firsts two years.  The Disney brand certainly experienced a halo effect in China, which created additional opportunities for other parts of the business and for more parks.  And the brands that Disney acquired in recent years — including Pixar, Marvel, and Star Wars – have also benefited from the Halo Effect.

3.  The Halo Effect and Influencers, Endorsements and Recommendations

Celebrities and influencers are used to endorse products in all forms of advertising.  Those endorsements and recommendations have a tremendous Halo Effect on the brand.   For example, Oprah Winfrey’s endorsement of Weight Watchers had a profound Halo Effect with women, the target demographic for WW.  And Nike, which has such brand strength now that it emanates its own Halo Effect, got part of its cache from early endorsements from such sports superstars as Michael Jordan.  Jordan’s name generated a Halo Effect of its own.  Based on their careers and personal stories, their endorsements aligned perfectly with those brands.

However, the connection between the person and the brand does not always need to be clear and apparent in order for it to be effective. For example, LeBron James’ endorsement of Sprite did not offer a direct correlation between the athlete’s profession and the product.  (Gatorade or Vitamin Water would have made more sense.)  The halo effect emanates from the value gained by associating a product or service with the celebrity’s fame.

4.  The Industry Halo Effect

When an exciting new product takes off in a given industry, it can create a halo effect that benefits all the companies in that space.  The Halo Effect sometimes is a byproduct of an industry that is up-and-coming.  The new pursuit of missions to Mars, the Space Station, and other parts of space has lent a certain cache for any companies entering that space.  For example, Spacex (Elon Must), Blue Origin (Jeff Bezos), StratoLaunch (Paul Allen), United Alliance (Boeing and Lockheed Martin partnership), ArianeSpace, and other companies in the space race are all benefiting from the Halo Effect that space exploration is generating.  The adventure, danger and mystery of space exploration generates a Halo Effect that is really benefiting the companies in that space.

The same is true of the hybrid vehicle market.   Marketed as offering significantly better fuel efficiency than standard vehicles, a number of automakers have used the popularity of hybrid vehicles as a way to improve sales.  They benefited from the Halo Effect of the popularity of the concept… the goodwill that is associated with any product that is viewed as “eco-friendly.”

Although the Halo Effect can be profoundly detrimental when affecting decision-making inside an organization, it can be equally beneficial when it endorses a brand.   Organizations with smart leadership and savvy marketing teams will seek to attach to and leverage any Halo Effect that can benefit the business.  Whether from an endorsement, related brand or product popularity, the Halo Effect can elevate a brand, increase sales and lift the entire company’s success.

Quote of the Week

“Don’t put people, or anything else, on pedestals, not even your children. Avoid global labels such as genius or weirdo. Realize those closest get the benefit of the doubt and so do the most beautiful and radiant among us.  Know the halo effect causes you to see a nice person as temporarily angry and an angry person as temporarily nice. Know that one good quality, or a memory of several, can keep in your life people who may be doing you more harm than good. Pay attention to the fact that when someone seems nice and upbeat, the words coming out of his or her mouth will change in meaning, and if that same person were depressive, arrogant, or foul in some other way, your perceptions of those same exact words would change along with the person’s other features.” David McRaney

 

© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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