Launching a new product can be exciting, but also risky. You want to attract new customers, increase revenue, and grow your market share. But what if your new product ends up eating away at the sales of your existing products? This is called product cannibalization, and it can hurt your overall profitability and brand image.
Product cannibalization is when a new product reduces the demand for an existing product from the same company. This can happen when the new product is similar to the old one, but cheaper, better, or more convenient. For example, if you launch a new smartphone with more features and a lower price than your previous model, you might cannibalize your own sales. Product cannibalization can also occur when the new product appeals to a different segment of customers, but still competes with the old one. For example, if you launch a new energy drink that targets young adults, you might cannibalize your existing soft drink that targets families.
Think about a product or concept, which has or ads value. Now lets make it an apple. Now think about the product or concept, which can decrease its value. Think about rotting apple. Think about the cause. Now, think about the apple which has all the protection i the world, but still has its limitations to time. Cannibalisation of product is a concept, based on idea, that people are not accepting data, and decisions based on the product are not about value. The product will be/can be cannibalised in the terms of technical, marketing, development, market intelligence, price and trend. It is not about value and data. It is about timing and value. There is no point to have best firefighter equipment, if you arrive after house fire, isn.t it.
Take the forecast for each month of a new product, and the forecast for the actuals. If the differences between forecasts of old and new are an inverse trend. Then you could have a problem
Product cannibalization can be a problem for several reasons. First, it can reduce your total revenue and profit margin, especially if the new product has a lower price or higher cost than the old one. Second, it can confuse your customers and dilute your brand identity, especially if the new product is not clearly differentiated from the old one. Third, it can weaken your competitive advantage and market position, especially if the new product does not offer any significant value or innovation over the old one.
To measure product cannibalization, you need to track and compare the launch metrics of your new product and existing products. Launch metrics are KPIs that show how well your new product is performing in the market, such as sales volume, market share, customer acquisition, customer retention, and customer satisfaction. By analyzing these metrics, you can identify product cannibalization in two ways: a negative correlation, which means that as the sales volume or market share of your new product increases, the sales volume or market share of your existing products decreases; and a positive correlation, which means that as the customer acquisition or customer satisfaction of your new product increases, the customer retention or customer satisfaction of your existing products decreases. This indicates that your new product is either taking away customers from your old products or attracting customers who are not satisfied with your old products.
Social media analysis: Analyze user interactions on social media platforms to understand their demographics, interests, and pain points. Use social media listening tools to gather insights from mentions of your brand, competitors, and relevant industry keywords.
To prevent product cannibalization, you need to plan and execute your product launch strategy carefully. To start, conduct market research to understand the needs, preferences, and behaviors of your target customers, as well as analyze the strengths, weaknesses, opportunities, and threats of your competitors. This will help you identify gaps and niches in the market that your new product can fill. Additionally, differentiate your products by creating a clear value proposition and a unique selling point that distinguishes it from your existing products. You should communicate this difference to your customers through marketing and branding. Segmenting customers based on their demographics, psychographics, behaviors, and needs can also help you target the right customers with the right products without cannibalizing your own sales.
Product cannibalization is not always bad and can sometimes be a strategic move to leverage your product portfolio and gain a competitive edge. For example, launching a new product that appeals to a different or broader segment of customers can help you expand your market and increase your customer base. Innovating your product by launching a new one with significant improvements or breakthroughs over existing products can help you stay ahead of the curve and create a loyal fan base. Preempting competitors by launching a new product that matches or surpasses their features or prices while keeping existing products for niche customers can help you protect your market position and create a barrier to entry.