Cannibalization- A unique marketing strategy

Have you ever thought about how and why products of the same company #compete with each other in same market?

The Answer is #Cannibalization.

🐟Cannibalization is a sales phenomenon that occurs when a company launches a new product in the #market and let it compete with its own product. These two products are in fact similar to each other.  👆This new product launch may eat the sale of their other products previously present in the market.

🔥 Product Cannibalization can be either: –

∆ Thought out #strategy of the company where they want to increase their total #sales and eliminate their rivals and #competitions.

Or

∆ Unintentional consequence of not able to #differentiate the products or analysing #customerbehaviour.

Examples :-💯

• When Apple releases a new product into the market, they don’t shy away from making their newer versions available in all their stores. The sales of the old #Iphones do go down.

 Other examples can be: –

• Say a company is selling flavoured lemon juice. Now it decides to sell the same product with less sugar and price reduction.
• The Coca-Cola Company introduces Diet Coke, Coca-Cola zero etc to compete with classic coke.
• Clothing companies like GLOBUS, Pantaloons ZARA SA often display new products at the entrance to their store while putting older ones on sales racks farther in the back.

🤔How market Cannibalization works: –

A company killing the sale of its own product for its other product may seem very weird and #risky but it can be a very #successfulstrategy if well planned and executed smartly keeping in mind few factors such as the Inventory of old product and market research on the need of new product demand.

Impact of cannibalization can be measured using the formula:-

🔁Cannibalization Rate = 100 x (Lost sales on old product) / (Sales of new product)

👍Advantages to the Company:- 

• Revenue sources of new product
• New Category Customer.
• Increased demand from current customers.
• Switching from competitors product.

👎Disadvantage of Cannibalization:-

• Losing out on the market share of its product.
• Decline in the demand for the original product.
• May loose loyal customers.

Thus to have advantage of Cannibalization, one will need to evaluate the production costs incurred versus the benefits.