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In detail

The Halo effect in the business world

The Halo effect in the business world

Halo Effect Man

The Halo Effect is a cognitive bias in which the first general impression we generate on a given personIt influences how we are going to believe it is his character and personality.

Content

    • 0.1 How we generate the Halo Effect
    • 0.2 Origin of the Halo Effect
    • 0.3 The Halo Effect at school
  • 1 The Halo effect in the business world
    • 1.1 Example of brand with great Halo Effect
    • 1.2 The Halo Effect: an acceptable loss
    • 1.3 Efficiency and Use

How we generate the Halo Effect

Basically, we quickly perform a first rapid assessment of a person, such as: "How nice!". From this assessment, the rest of our evaluations on the specific features of that person are influenced in the same direction either positive or negative, in this case we might think: "It is also intelligent!".

A great example of the halo effect on the general impression that celebrities generate towards those who don't know them at all. Since we perceive it as attractive, successful, and often enjoyable, we also tend to see them as friendly, fun and even intelligent.

Origin of the Halo Effect

The psychologist Edward Thorndike He coined the term in a 1920 document entitled "The Constant Error in Psychological Scores." In the experiment described in the document, Thorndike asked commanding officers in the army to evaluate a variety of qualities in his subordinate soldiers.

These characteristics included things like leadership, physical appearance, intelligence, loyalty and reliability.

Thorndike's objective was to determine how the qualifications of a particular quality influenced the evaluations of other characteristics. He found that the high valuation indices of a particular quality correlated positively with high valuation indices of other distinct and unrelated characteristics, while negative valuations of that characteristic also led to lower grades in the other qualities.

"The correlations were too high and too similar," Thorndike wrote. "For example, the average results of the evaluation of a soldier with a physical appearance scoring 0.30, scored 0.31 in intelligence, 0.36 in leadership and 0.29 in loyalty and reliability."

So why do our general impressions of a person create that halo that influences the rest of our assessments of specific traits? Researchers have found that physical attractiveness is, above all, the factor that can play a greater role.

Several studies have shown that when we rate someone as attractive, we also tend to believe that person has positive personality traits and is more intelligent. One study even found that jurors were less likely to believe that attractive people were guilty of criminal behavior.

However, this attractive stereotype can also be a double-edged sword.

Other studies have found that while people are more likely to attribute a number of positive qualities to attractive people, they are also more likely to believe that good-looking individuals are vain, dishonest and likely to use their attractiveness to manipulate others.

The Halo Effect at school

In the classroom, teachers are also subject to the error of halo effect in the evaluation of their students. For example, a teacher who sees a student of good behavior might tend to assume that the student is also bright, diligent and committed before the teacher can objectively assess the student's ability in these areas. When these types of halo effects occur, they can affect approval rates in certain areas and may even negatively affect other students students.

It may interest you: The Pygmalion effect or self-fulfilling prophecy

The Halo effect in the business world

The Halo Effect is a term also widely used in commerce to explain the bias shown by customers towards certain products, due to a previous favorable experience with other products manufactured by the same manufacturer. The Halo Effect is a concept that drives brand value and as a consequence, your sales. The opposite of the Halo Effect is the Cannibalization of a product.

Example of brand with great Halo Effect

A Classic example of the Halo Effect is the one generated by the Apple brand and all its products. When the first iPod was put up for sale, there was huge speculation in the market and sales of Apple Mac laptops would increase dramatically due to the success of the iPod. This phenomenon is known as the Halo Effect.

The Halo Effect: an acceptable loss

The halo effect is often used to justify business segments that are a drag on profits. However, in the business sector there are several strategies to achieve greater customer traffic, which can translate into additional sales in other segments or business units available to the customer.

Managers recognize and accept a loss of profitability of a part or segment of their business, as long as the number of transactions made by customers in other parts of the store increases. For example, many gas stations sell cigarettes, although cigarettes offer them a low margin. The owner of the gas station has virtually no profit from the sale of cigarettes, but offers customers a reason to select their service station over another, they buy gasoline there and that when they enter for tobacco they generate other collateral purchases.

Efficiency and Use

The Halo Effect is effective for companies with high brand value and in industries that rely heavily on this brand value to grow demand.

It is also effective for very competitive monopoly companies in which there are many other companies that offer the same service with different prices. Companies use the Halo Effect here to establish themselves within a particular industry. If a product can become a leader in a particular industry, the brand value of the product can be extended as a halo to other products. This reasoning allows companies to accept a certain level of loss in the understanding that the loss is really an investment in brand value, as a payment for all future products and services marketed by that company. In this way, the Halo Effect has the potential not only to increase customer traffic, but also to be able to set prices at their interest, which are the two main axes of revenue growth.