Halo Effect In Nutshell

The halo effect is a cognitive bias where the overall impression of a business, brand, or product influences how people feel and think about them. The halo effect was coined by psychologist Edward Thorndike in a 1920 study where military commanders were asked to rate subordinates based on several characteristics.

Understanding the halo effect

Thorndike wanted to know if the positive rating of one characteristic could result in the positive rating of another. In other words, could a subordinate judged as having great leadership skills also rate favorably for loyalty or independence?

Thorndike discovered a high correlation between certain attributes, with physical attractiveness one of the key drivers of the halo effect. For this reason, the effect is sometimes called the “what is beautiful is also good” principle.

While the study found a high correlation between certain characteristics, the halo effect says that any connection between them is unrelated and has no basis in logic.

The halo effect in business and marketing

In business, the halo effect can be seen in consumer favoritism toward a product range. If a consumer has a positive experience with one product, then it is likely to influence their experience with another product from the same organization

Business websites also suffer from the negative halo effect, where one negative characteristic causes broader negative sentiment. In a study analyzing poor-quality search results that didn’t follow a logical order, the consumer concluded that the company product range and customer service were similarly low quality.

At the product level

The visual design of a product is also a major determinant of a positive or negative halo effect – even when design features have no bearing on product effectiveness.

The effect is also seen in app design, with a study finding that the shade of yellow chosen for an app login screen had significant implications for the user experience. Those who found the shade to their liking tended to rate the app as more reliable, secure, and intuitive.

At the brand level

In the case of Apple, the halo effect creates the right conditions for successful product expansion. The success of the iPod paved the way for the iPhone and iPad and importantly, compensated for the teething problems that these products experienced.

At the corporate level, socially responsible program initiatives can soften the impact of negative consumer perception if the organization later receives bad press.

Astute businesses can also leverage the power of endorsements at the product and organizational level to influence external brand perception.

Key takeaways

  • The halo effect describes the tendency for a consumer to form an overall impression of a brand or product based on one unrelated trait.
  • The halo effect has both a positive and a negative component. A business can use the positive component to build brand equity but easily have that equity eroded by a low-quality website.
  • Apple has used the halo effect to their advantage to successfully manage product expansion and subsequent public brand perception.

Connected Business Concepts

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman since 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"