Why do balloons work as decoration?

Because we see balloons at moments of celebration all our lives. The brain makes that link by itself. Balloons decorate birthdays, weddings, school parties and company parties.^{1Wikipedia, Balloon} A child who sees balloons at every birthday party learns early on: balloons mean that something fun is happening.

Psychology calls this evaluative conditioning. Something neutral, such as a coloured ball, becomes more positive when it keeps appearing together with something we like.^{2Wikipedia, Classical conditioning} Over time, the balloon alone is enough to bring back that good feeling. Advertising uses the same mechanism: a product keeps appearing next to something pleasant, until the product itself causes that reaction.^{2Wikipedia, Classical conditioning}

That makes balloons special as decoration. You do not have to explain anything. Everyone, young or old, understands the signal at once.

Because a party makes people curious: anyone who sees balloons expects something special inside. A shop front is an invitation. As early as 1973, marketing professor Philip Kotler described three things the atmosphere of a shop does: it attracts attention, it carries a message, and it creates a feeling.^{3Wikipedia, Atmospherics} Balloons do all three at once. They stand out, they say "there is something to celebrate here", and they give a good feeling.

Research supports the idea that a striking shop window really draws more people inside. In a field study, the Stockholm School of Economics followed 1,834 shoppers. More creative shop windows drew more visitors into the shop.^{4Journal of Business Research, Store-window creativity's impact on shopper behavior, 2016} The study also shows why: people find the window more attractive, get a better idea of the products, and see that the shop makes an effort.^{4Journal of Business Research, Store-window creativity's impact on shopper behavior, 2016}

That last point matters. Decoration is also a signal about the shop itself. A festive shop front says: we are thinking of you.

As long as the balloons look good. A limp or burst balloon says: the party is over. A shop opening, an anniversary or a promotion week often lasts several days. On the first day, everything looks bright. But a helium-filled latex balloon usually floats for only about a day.^{1Wikipedia, Balloon} In our experience, the decoration already looks less fresh after one or two days. Balloons hang limp, some have burst, and there are remains on the pavement.

Then the opposite of what you wanted happens. If the shop window shows that a shop makes an effort, a limp window shows that the attention has gone. It seems likely that passers-by read it that way too. You have to clear up while the party inside is still going on.

Reusable PVC balls work differently. They are filled with air, not helium, and stay firm for months. They keep their shape from -20 to +60 °C, in full sun on a terrace and in the cold during a winter promotion. Read more in From -20 to +60 degrees. The balls come with a 2-year warranty. So the decoration looks just as festive on the last day as on the first.

That is also good for your image. A company that shows it handles materials with care does not want a bag of burst balloons in the bin. A balloon column that you store empty and flat after the promotion and reuse up to 50 times or more fits that story better. Why burst balloons are a problem, you can read in Why green is not always green.