Cannibalization in the context of TPM

Cannibalization is a very well-known phenomenon in the fast moving consumer goods industry. In the TPM context, it usually refers to an expected loss of sales caused by the introduction of a new or promotion of an existing product that partially displaces a similar item. The cannibalization of existing products leads to no increase in the company's market share despite sales growth for the new or promoted product.

An example for this effect would be the promotion of a cherry flavored soft drink that is advertised with a big display and a rebate in the stores. The increase in sales of that promoted product may be big, but there will be many customers that are not buying an additional bottle of soft drink, they are just trying out the promoted flavor instead of their usual one from the same brand. Therefore, similar non-promoted products and brands are cannibalized by the promotion and will show a negative incremental volume.

Cannibalization can be differentiated in three different types:

• Similar Product Cannibalization - Similar non-promoted products are bought less during the promotion
• Post Promotion Dip - What people buy more during the Promotion they will buy less in the week after
• Competitor Cannibalization - Competitors promote or introduce similar products

Many companies want to include one or multiple cannibalization factors into their TPM tools to calculate the promotion performance as accurately as possible and get a meaningful ROI and demand prediction.

How to configure in the TPM system:

We can easily configure the cannibalization factor manually in Salesforce CG cloud TPM. You can configure the KPIs smartly where an editable % rate can be manually entered on the same SKU in the Promotion and based on that rate, cannibalization can be calculated for each product.

There is always a possibility for KAMs to adjust the cannibalization factor. Below is a snapshot from a system where Cannibalization is configured without any customization and KAMs can include and exclude the products by using the Boolean factor of True and False at products of the same promotion themselves. Similarly in P&L sheet the cannibalization is calculated and aggregated.?

There are various ways to visualize Cannibalization in TPM:?Post Event on the same SKU’s in the promotion, during Promotion Event on relevant SKUs. This cannibalization factor is also considered while calculating the Promotion ROI.

Stay tuned for more TPM content following!

Also, if you are interested in talking to our TPM experts, drop us a message or reach out via [email protected].