Wednesday, October 5, 2011
The HALO EFFECT
In a market where products and commodities seem to have lost acceptability, branding plays a key role in marketing to the consumer. People are more emotionally connected to a brand than ever and they want a brand that offers them a connecting experience or a Halo Effect.
The connections between marketing and psychology are particularly interesting for a company like ours with a branding mission.
If psychology is the systematic study of human behaviour, then marketing is the systematic study of human behaviour in the marketplace.
Good-looking people, for example, tend to be perceived as more intelligent, more successful and more popular. That is the halo effect.
Apple Computer sales were up 68 percent over the previous year in 2005. Profits were up 384%. And the stock was up 177%. And Apple’s net profit margin increased from 3.3% to 9.6%, a remarkable jump.
The good news from Apple Computer wasn’t just the success of the iPod. As a matter of fact in 2005, the iPod and iTunes together accounted for only 39% of Apple’s sales. The other 61% of Apple (computers, software and services) also did well.
Apple’s computer and related businesses were up 27% in 2005 over the previous year. And, according to industry reports, Apple increased its share of the personal computer market from 3 to 4%. That’s the halo effect in marketing.
Apple concentrated their advertisement more on one of their products – The iPod. Many times, it is good to aggregate more efforts in advertising the best product or service in a company, this in turn help endear the brand of that company emotionally to the people, which in turn help in promoting other products and services of that company.
Motorola also employed a similar advertisement concept by putting its emphasis on its RAZR line of cell phones. In the third quarter of 2005, for example, Motorola shipped 38.7 million cell phones. Revenues for the quarter were up 26%.
But only 6.5 million, or 17% of those cell phones, were RAZR lines. So, the RAZR was a halo for the rest of the Motorola line.
Focusing your marketing message on a single word or concept has been my tune for years. But taking this idea a step further can also produce dramatic results. Focusing your marketing budget on a single product or service - This is surely very hard to be accepted in the boardroom, it sounds like an idea of putting one’s egg in one basket.
Business as it is, is many times based on careful risky prediction towards an unprecedented action in marketing. In other words, no business idea is perfect based on so many constraints. As it is, the halo effect has been successfully implemented by many leading business brands.
Virtually every principle of psychology can be applied in marketing. Take imprinting, for instance.
The first brand in a new category will imprint itself in human minds as the original, the authentic, the real thing. Kleenex in tissue. Google as a search Engine. Heinz in ketchup. Starbucks in coffee shops.
The study of marketing begins with the study of psychology.