In Marketing Mix Modeling, I often come across explanations that conflate Halo effect and Interaction effect.
The two are not the same !!
📌 So what is Halo Effect?
Halo effect is the positive ‘rub-off’ effect of a larger brand on its sister brands or products.
This rub-off effect means that the customer buys the sister brand /product just because they have had positive experiences with the larger brand. These positive experiences in turn results in formation of trust and good will.
It is this trust & good will which is then extended to the sister brand/s (which may or may not be in the same category as the larger brand).
Now IMO there are some axioms for the Halo Effect.
1) The brand equity of the larger brand is always higher than the sister brands.
2) As a result of the point 1, Halo effect is always directed from the larger brand to the smaller sister brands.
📌 Conflation of Halo Effect and Interaction Effect?
If you google about Halo effect in MMM, you will come across many incorrect definitions like ‘It is an impact of one marketing channel on the other marketing channels’.
This is actually an interaction effect (For more on Interaction effect refer the linked article in comments).
In closing, Halo effect is actually a projection of the positive attributes of the larger brand on the smaller brands.
Where as in Interaction effect, there is no projection of any ‘positive attributes’ as such. It is simply an interference of one effect on the other.
