Exploring the Halo Effect in Modern Retail Strategies

The halo effect refers to the idea that a customer's perception of one product's price can influence their perception of the value of other products.??

Here's how it works:?

If a customer sees a high-quality product with a reasonable price, they might assume other products from the store/brand are also good value.??

Conversely, if a customer encounters a low-quality product with a high price, they might associate that negativity with the entire store/brand. A shopper might hesitate to buy other products there, even if they’re unrelated or a good price.?

Positive Halo Effect: Organic Produce: A grocery store might stock a higher-priced organic lettuce alongside conventionally grown lettuce. The positive perception of the organic option can create a halo effect, making the conventional lettuce seem fresher and of higher quality than it might be otherwise. Customers might be comfortable paying a slight premium for the non-organic option.?

Negative Halo Effect: Wilted & High-Priced Salads: A store displays wilted pre-made salads next to a fresh selection of vegetables. The negative perception of the pre-made salads creates a halo effect, making the vegetables seem less fresh in comparison. Customers might be discouraged from buying any produce altogether.

Positive Halo Effect: Online Grocery: Imagine your customer has a consistently good experience with delivery from your store thanks to your user-friendly app and product selection and availability. This customer develops a favorable impression and the halo effect influences her to try new products that are recommended in the app, increase basket size thanks to the convenience online shopping, and consider your store for non-grocery needs like pet food, household goods, and/or the pharmacy.

Optimizing Prices with the Halo Effect?

As a retailer, you can leverage the halo effect to improve your pricing strategy:?

• Set the best price on key value items that might make other or similar items seem like a better deal in comparison.?
• Consider how products within a category influence each other's perceived value.??

Executing the best pricing means....

• Increasing Profitability: You can maximize the profit margin on each SKU.
• Boosting Sales Volume: You can target specific demographics and price your products competitively to capture a larger market share.?
• Enhancing Perception: Pricing can be a powerful tool for communicating brand value. Premium pricing can position a retailer as offering high-quality goods, while value pricing can attract customers seeking affordability. A consistent pricing strategy builds trust and reinforces your message.?
• Gaining a Competitive Advantage: In a crowded marketplace, retailers need to stand out. You can use pricing to differentiate form your competitors.

While the halo effect isn't guaranteed, retail price optimization software can be a powerful tool to leverage it. By strategically setting prices, retailers can create a more positive perception of their entire store.

Retail Price Optimization

Retail price optimization software helps retailers understand the pricing landscape and execute their pricing strategy. Using this software, you can make data-driven pricing decisions based on a complete picture.

Continue learning about price optimization software here.?

If you're ready to get started... use your price optimization platform to identify key value items, analyze the market for gaps and opportunities, and determine the best price in line with your business goals. With Retailscape (Bungee Tech's retail price optimization solution), you can adjust prices in real-time and track the impact of changes on sales and perception. Fill out this form to schedule a demo.

In summary, the halo effect works by leveraging positive experiences and perceptions in specific areas, such as competitive pricing on key items, high-quality products, excellent customer service, and a user-friendly shopping platform, to create a favorable overall perception of the retailer. This positive perception can lead to increased customer loyalty, higher average order values, and a stronger competitive position in the market.?