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Cannibalization is the loss of sales of an existing brand when a new item in a product line or product family is introduced.
Example: Suppose ABC company, reputed for its quality wristwatches, decides to introduce a line of belt-fob pocket watches in an attempt to capture a larger market segment. ABC soon discovers that despite the successful rollout and high sales volume of its new pocket watches, its volume of wrist watches sales has taken a concurrent nosedive(drop). The crowding-out of ABC wristwatch sales by its sales in pocket watches constitutes market cannibalization.
In marketing strategy,cannibalization refers to a reduction in sales vole, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer.
Refers to reduction in sales volume or sale revenue as a result of introducing new product.
Cannibalization refers to reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of new product by the same producer.
Cannibalization is a situation where a new brand gains sales at the expense of another of the company’s brands.
A company introduces a new product into the market where the same company’s products are already well established. The main reason why a company does this (cannibalization) is:
- to increase its market share
- believing that by introducing the new product, competitors will be more affected than the company itself
- assuming the new product will see better than the first.
Eg: Motorola saw success in its Moto G 3rd Gen smartphone. Yet the company introduced Moto G 4th Gen in quick succession believing that the Fingerprint Sensor in the new model will increase the market share and will attract more consumers although the sales of Moto G 3rd Gen may fall.
This is Cannibalization
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