Cannibalization (marketing)

1. Definition

Cannibalization in marketing refers to the situation where a new product or service introduced by a company eats into the sales of its existing offerings. This often occurs when a company launches similar products or enters overlapping markets. While cannibalization can lead to internal competition between products, it is not always negative. It can be part of a strategic move to maintain market share or respond to consumer demand. However, if not managed properly, it may erode profitability or market share.


2. Applications of Cannibalization in Marketing

  1. Product Line Expansion: Companies often introduce new products to target a specific market segment. Cannibalization might occur when these new products attract existing customers rather than new ones.
  2. Market Penetration: It can be a calculated risk when companies aim to outcompete rivals by offering a similar product at a lower price, even if it impacts sales of their existing products.
  3. Digital Transformation: Transitioning from traditional to digital platforms can lead to cannibalization, as customers move from physical products to digital equivalents.
  4. Brand Evolution: A company rebranding or modernizing its portfolio may cause older products to lose relevance in favor of newer offerings.

3. Types of Cannibalization in Marketing

  1. Intra-Brand Cannibalization: This happens within the same brand when a company’s new product competes with its own existing products. For example, a new smartphone model may reduce sales of earlier models.
  2. Cross-Brand Cannibalization: Occurs when a company owns multiple brands in the same category, and products from one brand affect the sales of another.
  3. Channel Cannibalization: This arises when a company introduces a new sales or distribution channel (e.g., online stores), reducing sales in traditional channels like physical stores.
  4. Price Cannibalization: Happens when a lower-priced version of a product undercuts the sales of higher-priced offerings within the same portfolio.

Cannibalization is a double-edged sword in marketing—it can stimulate innovation and competitiveness but also requires careful management to avoid eroding overall business performance.

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