Whether in traditional or digital marketing, considering product or market cannibalization is important for companies. This phenomenon makes it possible toidentify sales performance within a company in relation to its new products. It is therefore advisable to analyze it and carry out in-depth tests to assess whether sales are profitable or unprofitable. This article presents the key points to remember about cannibalization and explains how to calculate its rate for your company.

What is market cannibalization? 

The term cannibalization refers to a situation where sales of one product increase rapidly at the expense of another of the same company. This phenomenon is also known as corporate cannibalization. This event occurs when a new product is launched with key features that are more innovative and better performing. In this case, it should be noted that cannibalization can be intentional or unintentional. In the case of unintentional cannibalization, marketing or advertising campaigns for new products can turn away potential customers. This can damage the company's key revenues. 

In all cases, it's essential to take into account the state of the market in your sector. Cannibalization can destabilize your product inventory management.

Nevertheless, cannibalization can apply to different areas of the commercial sector. This can range from products of the same brand to a chain of stores if the company opens a similar establishment. It is therefore crucial to monitor this phenomenon closely to prevent any disruption in your market activities. 

What are the advantages and disadvantages of cannibalization? 

The advantages of cannibalization in marketing are numerous, especially when it is neutral. In this case, a company can deliberately use cannibalization to sell its products. at best an old key product. In addition, it can be used as an offensive strategy, exploiting the new product to win market share from competitors. But it can also be a defensive strategy. This strategy is used by stores selling technological products. They will launch new product brands at the same time as their competitors to compete effectively.

Cannibalization, on the other hand, is often the result of a positioning problem or great similarity between products. In fact, when several items cannibalize each other, the company may have difficulty selling them. This can lead to lower prices. This is known as cannibalization through discounts.

When faced with this kind of situation, it's essential to consider the loss of the cannibalized product. This is done at the time ofestimated demand and sales of the new product you're about to launch. In this case, it's important to carry out a thorough market analysis. You also need to study customer and competitor needs to minimize the negative effects of cannibalization.

Example of marketing cannibalization at Apple and Kodak

The Apple brand is a successful example of marketing cannibalization. By launching a new iPhone at the same time every year, it encourages consumers to go for the latest versions. This makes older versions obsolete despite their high price tag. In this way, Apple uses a well-thought-out, recurring cannibalization system. This enables it to maintain a high level of demand for its new products, while regularly renewing its offering on the market.

The Kodak brand, on the other hand, failed to adopt an effective cannibalization strategy. This had negative consequences for the company. Despite its reputation in the photography sector, Kodak relied on its popularity and did not launch new cameras. As a result, its competitors gained the upper hand by offering more innovative products and responding to changing consumer needs. The absence of cannibalization on its part has led to a decline in market share and sales.

How can I easily calculate the cannibalization rate? 

The cannibalization rate is easy to calculate. Simply take into account the lost sales of the old products and the total sales of the new key product. The formula is : (Sales of standard products at a loss/Total sales of new product) x 100.

Suppose a flat-screen TV company launches a new curved TV model on the market, even though it already has two older models on sale. Prior to the launch of the new model, monthly sales of the older models were as follows:

  • 140 cm flat-screen TV: 1000 units sold
  • 80 cm flat-screen TV: 800 units sold

After the launch of the new model, monthly sales are 1,500 units sold. The cannibalization rate of the new product on old products is therefore : 

Cannibalization rate = ([1000 + 800]/1500) x 100 = (1800/1500) x 100 = 120 %

How can we minimize market cannibalization in a given sector? 

To reduce cannibalization in a given market, several strategies can be implemented. First of all, it is essential to take into account the product positioning on the market. Products that are too similar in terms of price and placement, such as new flavors or added features, present a high risk of cannibalization. It is therefore important to diversify supply and to offer products with distinct characteristics to avoid direct competition between products.

Another approach is to use less expensive brands or ranges specific products to compete with low-cost competitors. And this without affecting high-end brands. By creating "battle brands" or products for address a specific market segmentIn this way, the company can prevent cannibalization. This makes it possible to offer customers alternatives without devaluing its key products.

In addition, careful planning of new product launches is essential. By avoiding launching new products that could compete directly with older ones, the company can reduce cannibalization. A thorough analysis of demand, customer preferences and market trends can help identify the right times to introduce new offers. And this, without having to disrupt sales of existing products.

Finally, it is important to monitor sales and performance of key products on the market. A attentive watch of the market will enable early detection of any signs of cannibalization. It also helps to take corrective action if necessary. Gathering customer feedback is also essential for understand their preferences. This will help adjust the offer presented on the market. 

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