CANNIBALIZATIONS ON PRODUCT PROTFOLIO, INNOVATION AND

PROMOTIONS

Abstract:

Brand owners use existing brand names to reduce barriers to entry for the new line with the

implicit assumption that additional profit will be earned as a result. But haunting the parent brand

is the spectra of cannibalization. What if the line extension is successful but only at the expense

of the parent? Then additional costs will be incurred without the benefit of incremental revenue.

Cannibalization is a very real threat for the vast majority of new product launches. To evaluate

the success of a new product, managers need to determine how much of its new demand is due to

cannibalizing the company's other products, rather than drawing from competition or generating

primary demand. When two or more brands in the identical product line, presented by same

producer targeting similar market and compete among themselves by eating away the market

share with no value addition to the marketer is called brand cannibalization. This can happen to

any manufacturer if the branding and the market segment are not clearly defined. In few

occasions brand cannibalization is necessary for survival as people want change and in today’s

environment with innovations happening overnight, there is a lot more need to launch new and

improved products for different segment of the market.

Purpose:

The need for studying the effects of cannibalization and its importance has been established in

the literature, especially, since an assessment of the expected cannibalization effect of a new

product can help in deciding on suitable times for new product portfolio, introduction and

promotions.

Keywords:

Product mix, Product management, Product development, absolute volume ,Market share,

product cannibalization, intertemporal price discrimination, brand extension,

Introduction:

Innovation, the process of bringing new products and services to market, is one of the most

important issues for firms and researchers. To evaluate the success of a new product, managers

need a method to gauge not only how much new demand it generates, but also to what extent this

demand comes at the expense of (cannibalizes) their other products. When ignored, the success

of the new product will be over-estimated. It is difficult for any manager to determine this -

managers tend to take a more aggregate approach and look at sales volumes and shares, not at an

individual's buying patterns. It also over-simplifies the construct which can be viewed on a

number of levels. While managers are aware of the cannibalization phenomenon, they typically

are less clear on to how to quantify the size of the cannibalization risk..

Unilever’s portfolio, for example, includes many food products, as well as several household and

personal-care items. Hewlett-Packard is active in the notebook, desktop, printer and scanner

markets, and many car manufacturers sell cars in both the SUV and the Luxury Sedan category.

Even when managers are aware that the new product may cannibalize their other products in the

same category, they may overlook a similar cannibalization potential in other categories. This is

especially an issue in case of radical, pioneering innovations. These products add a new

dimension to the consumers’ decision process (Cooper 2000), making it less obvious which

categories will be affected (Moreau et al. 2001). For example, Apple’s iPhone crossed the

boundaries of two categories (portable media players and mobile phones), with a clear

cannibalization potential for the pioneering firm (LeClaire 2007). Similarly, Procter and

Gamble’s Febreze may draw from the air-refresher category, as it eliminates odors, but also from

the laundry-detergent category, as it works directly on fabric (Gielens and Steenkamp 2007).

Given P&G’s presence in both categories, there are again two potential sources of

cannibalization effects. Both cannibalization sources are unattractive to the firm, as neither

implies that the net number of products sold increases (although profit may increase, depending

on the respective margins). Within- and between-category brand switching, in contrast, come at

the expense of other brands, and is therefore much more attractive from the introducing firm’s

perspective. Finally, part of a new product’s demand can be really new, i.e., representing a

primary demand effect, and come at the expense of the outside good (Albuquerque and

Bronnenberg 2009).

Estimating the impact of a new product on other products in a company's product portfolio is a

critical management function as any new product entering a market will take market share from

all the existing players and predicting these cannibalization effects is a critical and difficult task.

However, ignoring the effects may have adverse consequences on the financial performance of a

company.

Product innovation can help the manufacturer gain market share by giving customer many

options in its product line to choose from but sometimes it can be a dual edged sword as it can

also reduce sales of the old brand existing in the same segment of the market. The manufacturer

should place the innovative products in such a way that it caters to different segments of the

market. In few occasions if company purposely wants to obsolete its own product, then it can

launch the new product in the same segment.

For example as the old television got obsolete Samsung launched flat television but as market

innovated further LED were launched, the company had to launch LED to remain in the market

however it cannibalized the old brands which also exists in the market. The above example is to

state that sometimes it is not a manufacturer’s choice to innovate or launch product which does

not cannibalize the existing product segment. It is the market or the competitors which might

force a manufacturer to cannibalize the existing products for its own benefits. And manufacturers

who are not innovative or don’t have the latest technology might lose their market share to the

competitors. Thus brand cannibalization is a dual edged sword which needs to be used

strategically by manufacturers and marketers.

Evaluation of the anticipated cannibalization effect of a new product is thus necessary for timing

its introduction and promotion (Cravens et al. 2000) suggested the importance of studying the

relationship between market share and product attributes before introducing a new product. . It is

evident that one of the critical issues associated with new product development is the ability to

identify its impact on the existing product portfolio.

Cannibalization

The concept of product cannibalization was documented almost thirty years ago by Heskett

(1976), who defined it as "the process by which a new product gains sales by diverting sales

from an existing product". Copulsky (1976) defined product cannibalization as "the extent to

which one product's sales are at the expense of other products offered by the same firm". More

recently, Meredith and Maki (2001) have defined upward cannibalization as the cannibalization

of a premium brand in the portfolio by a sub-premium brand and downward cannibalization as

the cannibalization of a sub-premium brand by the premium brand. Subsequent researchers have

focused on identifying the factors affecting cannibalization and how to measure its impact on an

existing portfolio. (Wikipedia) In marketing strategy, cannibalization refers to a reduction in

sales volume, sales revenue, or market share of one product as a result of the introduction of a

new product by the same producer. While this may seem inherently negative, in the context of a

carefully planned strategy, it can be effective, by ultimately growing the market, or better

meeting consumer demands. Cannibalization is a key consideration in product portfolio analysis.

Mason and Milne (1994) and Lomax et al. (1997) provided a detailed background on the

problem domain, and Lomax (1996) stated that: "the risk of product cannibalization is a real

threat for many new product launches and the risk becomes more significant if the new product

is launched under the same brand name as an existing product". Buday (1989) stressed the

importance of addressing issues regarding product

For example, when Hewlett-Packard puts out a new printer, they realize that older printers will

suffer some erosion of sales or market share; that erosion is referred to as cannibalization.

Samsung undergoes improvement occasionally which means killing its existing product in the

market. With a launch of 10.1-inch Galaxy Note (Samsung's latest tablet) it would most likely to

cannibalize sales of the existing 10.1-inch Tablet. That is fine for the corporation as somebody

has said it rightly that the finest thing to continue to exist in the competitive market is to

eradicate your own goods.

Similar approach is followed by Apple. While launching i-Pad it didn’t thought of cannibalizing

Mac sales instead they went for its launch and did well. It happens that if the corporations or

producers lack innovation, the category might become stagnant and obsolete as competitor might

grab the entire market share.

Another example of cannibalization occurs when a retailer discounts a particular product. The

tendency of consumers is to buy the discounted product rather than competing products with

higher prices. When the promotion event is over and prices return to normal, however, the effect

will tend to disappear. This temporary change in consumer behavior can be described as

cannibalization, though scholars do not normally use the phrase "cannibalization" to denote such

a phenomenon.

Another common case of cannibalization is when companies, particularly retail companies, open

sites too close to each other, in effect, competing for the same customers, such as Starbucks or

McDonald's.

When a firm introduces a new product, there are three strategic options to take into

consideration: developing a new individual brand for the new product, applying one of the firm’s

existent brands (which will be termed as parent brand) to the new product, or combining an

existent brand (the parent brand) with a new one for the new product (sub brand).

Kevin Lane Keller considers that brand extension is when “a firm uses an established brand

name to introduce a new product”3. It’s the case of the last two approaches of launching a new

product presented above. Thus, the parent brand associated with multiple products through brand

extensions will generate a family brand. Therefore, a set of attributes to help characterize each

product, including brand, family, package size, package type, and package volume.

(1) Brand - identifies the manufacturer of the product;

(2) Family - each brand has one or more families; all products belong to only one family;

(3) Product group - classification within a family based on any set of defining characteristics;

and

(4) Product - defines an individual "atomic" product within a product group.

Cannibalization is an important issue in marketing strategy when an organization aims to carry

out brand extension. Normally, when a brand extension is carried out from one sub-category (e.g.

Marlboro) to another sub-category (e.g. Marlboro Light), there is an eventuality of a part of the

former's sales being taken away by the latter

Peter Farquhar considers that brand extension can be classified into two general categories4: line

extensions (when the parent brand is used to brand a new product that targets a new market

segment within a product category currently served by the parent brand), and category extensions

(when the parent brand enters a different product category from that currently served by the

parent brand).

However, if the strategic intent of such an extension is to capture a larger market of a different

market segment notwithstanding the potential loss of sales in an existing segment, the move to

launch the new product can be termed as "cannibalization strategy". In India, where the

passenger-car segment is going up dramatically since the turn of this century, Maruti-Suzuki's

launch of Suzuki Alto in the same sub-category as Maruti 800, which was the leader of the

small-car segment to counter the competition from Hyundai is seen to be a classic case of

cannibalization strategy.

A company engaging in corporate cannibalism is effectively competing against itself. There are

two main reasons companies do this.

The company wants to increase its market share and is taking a gamble that introducing

the new product will harm other competitors more than the company itself.

The company may believe that the new product will sell better than the first, or will sell

to a different sort of buyer. For example, a company may manufacture cars, and later

begin manufacturing trucks. While both products appeal to the same general market

(drivers) one may fit an individual's needs better than the other.

However, corporate cannibalism often has negative effects: the car manufacturer's customer base

may begin buying trucks instead of cars, resulting in good truck sales, but not increasing the

company's market share. There may even be a decrease. This is also called market

cannibalization.

Product categories are generally complex. Each brand competes with a product line composed of

product formats that differ in size, taste, quality, characteristics, and so on. Therefore,

promotional effects not only show up competition among brands, but also competition within

brands. This competitive effect within a brand is called cannibalization, and consists of the

substitution of the product that is often bought by another format of the same brand, but in a

different size, color, taste or any other characteristic, that is, the switching of different product

formats within one brand. 16, 18 Specifically, the cannibalization effects empirically examined

in this study focus on size-based formats of the same kind of product; some brands

commercialize different size-based product lines within the same product category.

Price promotions are often not profitable. Fewer true incremental sales accrue to the brand when

one of its pack sizes is promoted, because an appreciable proportion come from other pack sizes

of the same brand. The managerial implication is that price promotions must be assessed across

the entire brand; it is not enough to inspect a sales spike for a promoted pack size. The extent of

cannibalization from other brand-pack sizes must be factored into calculations of the profitability

of a price promotion.

In an effort to avoid the cannibalization problem, sellers often attempt to segment the market by

employing intertemporal price discrimination by offering high-end goods early and low-end

goods at a later time .Rather than lowering the actual quality of the low good, the seller degrades

the product by using delay to force low type consumers to wait for the introduction of products

suitable to their needs. However, certain unique features of the online channel may provide the

seller with additional ways to combat the cannibalization problem. For example, because

personalization technology allows the seller to better identify a prospective customer’s

preferences, the seller may be able to use personalization to mitigate the cannibalization problem

and move toward first-degree price discrimination in the online channel. In addition, the seller

may be able to provide an additional incentive to entice customers to reveal their preferences by

bundling the purchase of the physical good with access to a value-added online community. If

the seller is able to restrict community access based on specific consumer purchasing behavior,

the seller may be able to entice consumers to reveal their true purchase preferences.

It is important to be able to identify the new product to be analyzed and to distinguish between a

new product introduction and a new product group introduction. Therefore, available data must

be analyzed to verify if multiple new products were introduced during the same time period.

Once the new product has been isolated, model formulation can begin.

The first step is to identify the attributes of the possible victims in the portfolio using both

qualitative and quantitative analysis.

Qualitative analysis may involve discussions with the executive management of the

company and are often based on experience with the previous products.

Quantitative analysis is performed based on product attributes; if the existing products in

the portfolio have one or more of the product attributes of the new product, then they are

potential cannibalization victims. Sales data trends (volume of sales vs time) are

compared to help identify potential attributes. Performance measures such as absolute

volume*, market share* and market volume* for the possible victims are utilized to

identify the victims in the entire portfolio:

* absolute volume - percent volume of victim product group(s) to the total volume of family was

studied for the entire sales data period;

* market share - percent volume of a family of the total volume sales of the brand was studied

for the entire sales data period; and

* market size - percent volume of company's total sales of the total market share was studied for

the entire sales data period.

Lomax et al. (1997) used the ratio of loss of sales of the existing product to the sales of new

product to measure cannibalization, but do not account for losses across product families.

Analysis of the performance measures identifies which products have been cannibalized and

their levels of cannibalization. The parametric measures help identify the sources of

cannibalization, i.e. from within the portfolio or the competition. Thus it could help identify the

level of cannibalization among the boundary conditions established earlier. Once attributes of the

cannibalized product are identified, including identification of the percentage contribution of

each of those attributes towards cannibalization, existing forecasting models are used to predict

sales of the victims and loss in sales of the victims resulting from the introduction of the new

product. Based on the results from the cannibalization model, management will be able to assess

the impact of the introduction of the new product, resulting in better new product introduction

decisions including changes in marketing, e.g. pricing of the new product, pricing of other

products in the portfolio, and promotions.

Types of cannibalization

Four different scenarios resulting in product cannibalization (in consumer industry) are discussed

in this section. (Sundara, R. S., Ramakrishnan, S., & Grasman, S. E. (2005). Incorporating

cannibalization models into demand forecasting. Marketing Intelligence & Planning, 23(4), 470-

485.)

(1) Intra-product cannibalization. Different products in the market could compete for the

same market share. Intra-product cannibalization is observed between two that are

different but offer similar functionalities. Although these products are different, their

functional commonality is higher than the differences and hence results in

cannibalization; hence they compete with each other for a common market share.

Depending on their functionalities and the needs, one product might be cannibalized in

preference to the other. An example of intra product cannibalization is the competition

between microwave and ovens. Although these products are different in the fact that they

offer minor functional differences from the other, they compete for a common market

share.

(2) Inter-product cannibalization. This occurs when products within the same product group from

a company compete with each other for market share. It could affect, for example, mint-flavored

and cinnamon-flavored toothpastes. Both these products have very similar features and are

competing for the same market share.

Depending on factors such as price, consumer preference and marketing strategies, one product

might be cannibalized in preference to the other.

(3) Multi-product pack cannibalization : This type of cannibalization occurs when companies

market multiple products as one product. For example, a combination of closely related products

(such as a tube of toothpaste, toothbrush, dental floss, and mouthwash as one product) or a set

related by their use rather than their nature

(such as a camping kit that includes insect repellent, torch light, knife, and sleeping bag).

Typically, the price of this multi-product pack would be less than if the products in the pack are

purchased individually, and if a consumer finds the cost of the multi-product pack to be only

minimally higher than the sum of the individual

items they intended to purchase, the multi-product pack will be purchased and cannibalization of

the individual items will occur. In such cases, it may be difficult to determine which product is

being cannibalized.

(4) Combo-product cannibalization. An example of a combo product is a television monitor, plus

VCR, plus a DVD player. The main difference between multi-product pack products and the

combo products is the fact that the products in the multi-product pack can be separated into

individual products, while the combo product cannot be separated. The difficulty of identifying

which product is being cannibalized still exists.

Sources of cannibalization

Introduction of new products refers to the introduction of a new package, line-extension, or

brand new product.

Price elasticity is concerned with price changes due to introduction of a new product or price

changes for an existing product due to changes in the process/logistics or a change in the

marketing strategy.

The marketing field relates to changes in the marketing policies, such as introduction of a

product into a completely new market, or a market in which another product of the company is

already well established. Competition straight forwardly describes the introduction of new

products or price changes by the competition. Market trend sums up changes in the economic

conditions or consumer preferences. Market share boundary conditions for product

cannibalization

It is important to firstly identify the realms of product cannibalization in order to make decisions

on the introduction of the new product and quantify the impact of cannibalization.

Consider an example with two products, A and B, offered by companies X and Y, respectively.

If company X wants to introduce a new product C, which has functionalities very similar to

product A, product A will be cannibalized. But studies should also be performed to check if the

new product C increases the overall market share of the company. Considerations should also be

made related to the cost of manufacturing the product and other expenses in order to find out if

the new product would increase the total profit, since increase in market share may not

necessarily lead to more profit.

Four different scenarios are observed when a new product is introduced in a product portfolio.

Traylor (1986) reported similar scenarios of cannibalization, but does not explain the reasons.

Scenario 1. The new product draws all of its sales from products in the company portfolio and

does not increase the overall market share.

Reasons for the new product drawing all of its sales from the existing products in the portfolio

include:

* functional similarity with the already established products;

* marketing in the same areas as the existing products; or

* customer preference of the new product over the existing product.

Scenario 2. The new product increases the overall market share, while cannibalizing the

company portfolio, but not the competition. Possible reasons that the new product has increased

the market share are that functionalities distinguishing it from the established product result in

increased market share, and that functionalities similar to the existing product result in

cannibalization of some market share of the existing product.

Scenario 3. The new product increases the overall market share and cannibalizes both the

product portfolio and the competition. In this scenario, the new product has functionalities that

can be used to distinguish it and create its own niche, and are common to the products in the

market, thus cannibalizing market share.

Scenario 4a. The new product increases the overall market share and cannibalizes only the

competitor products . The new product has attributes to distinguish it and create its own niche,

which are common to the competition's products, hence cannibalizing their market share

Scenario 4b. The new product increases the market share by the same quantity as in the previous

scenario, but does not cannibalize either the product portfolio or the competition. It may be

deduced that the new product has been introduced in the new market with no competitors, or that

the new product has unique

features.

Scenario 1 could be termed the "worst case" situation, because all the resources spent in

developing the new product did not generate any additional market share. Since the new product

has drawn all of its sales from product A, the new product will not generate an increase in the

profitability of the company unless it has a

higher profit margin.

Scenario 2, although the new product has cannibalized some market share of product A, it has

increased the overall market share of the company. The new product is likely to increase the

profitability of the company as a function of profit margin.

Scenario 3 is a similar, but generally more favorable outcome.

Scenario 4 could be termed as the "best case" scenario since the new product increased the

market share without cannibalizing the product portfolio. The new product has increased the

overall market share of the company by either cannibalizing only competitor products or by

creating a new market niche.

Why does cannibalization occur?

There can be several arguments that can be put forward on why a business adopts the strategy of

cannibalization. We often observe that there are two stores owned by same owner operates is

close locations. Here, the psychology of the owner can be that the size of market is large enough

to support two stores and they can afford drop in sales as long as their total sales are in upward

trend. Sometimes it may happen that any company in order to push out a competitor off market

launches a revised version of its own product.

Introducing a revised version of own product definitely leads to reduction of sales of the old

version but it also lowers the market share of the competitive product .Cannibalization may also

happen as a result of a company’s efforts to satisfy or meet customers’ needs through extending

its product line thus having a new product eating up the sales of the existing product of the same

company.

Therefore, Cannibalization in the marketing context is defined as the negative impact a

company's new product has on the sales performance (volume and revenue) or the market share

of the existing products of the very same company.

Effects of Cannibalization:

1. New product introductions impose resource costs on existing products : Such cost

can be incurred during research and development stages of the new product, during the

introduction stage with all the pre-launch and launch periods characterized with intense

promotions, advertisements and new product placement. For example to develop, launch

and market the new Mirinda variations such as Mirinda Pineapple, a significant amount

of funding was to be done. Such funds originated from the same limited financial sources.

It also meant that the existing brands such as Mirinda Orange had their fund allocated to

successfully introduce, market and distribute Mirinda Pineapple or Fruity. As a result, the

brand strength that Mirinda Orange had before as a single fruit flavoured product is

reduced greatly. This weakens the brands immunity to competition, both in the short and

the long run terms. As a result, brand market share drops.

2. Decline of Core brand’s market share: Anther effect of cannibalization by sister

products from the same maker is the decline of firstly, the individual fateful brand being

cannibalized , above example being continued of Mirinda Orange and secondly the

overall generic brand such as Mirinda. On the other side, the outward market share of

Mirinda in respect to the soft drink industry remained stable in the first six months but

gradually declined as some of the newly introduced Mirinda Variations were not

constantly available in the market thus creating a gap that was easily seized by

competitors. Some peripheral markets would go months without a particular brand,

especially the Mirinda Fruity which was highly loved by the younger market (children in

particular). This weakened the overall brand image.

3. More focus and resources are directed to the newly introduced product hence an

elevated priority (importance and attention) to a newly introduced brand at the expense of

the existing one (Mirinda Orange). This is brand wise unhealthy for the existing product

as it weakens the brand which can easily give way to the competition. With every new

introduction, it was found that majority of its efforts were directed into these new brands.

Being too curious about new brands, other existing brands suffered. Sales people had to

spend more time on new products, promotional campaigns focusing on new brands but on

the external battle field the competition was waged against the core brands and not much

on their variants. As a result, the overall corporate brand market share also slid back a bit.

4. Loss of Profit across all marketing offerings: With profit as a central most objective of

any business venture, cannibalization tends to reduce the profitability index of the total

set of the company’s offerings. Given that profit is a function of Unit Volume and Unit

Margin, the declined volume of units as a result of cannibalization (market share loss)

directly result into low profits. To control the effects of cannibalization of this nature, the

volume of new product and the margin of the new product must be higher or equal to the

function of volume and margin of the old/existing product.

5. Regular Out of Stock Situations create a less friendly relationship between the

company, its distributors, wholesalers, sales points and finally the already

committed consumers of the newly introduced brands. In case of out of stock or

deliberate production stoppage, customers get angry and may react negatively. The effect

of cannibalization here is the resultant poor relations as a result of unsatisfied customer

demands.

6. During times of deliberately created scarcity as a response to cannibalization, some

amount of sales of a core brand is lost to close substitutes from competition or other

substitute products that are not available to the already existing customers.

7. Low brand growth especially to the cannibalized brand and those newly introduced

brands with limited or very low marketing activities like advertisements. This leads to

unhealthy brands which can easily be defeated by competition.

8. General economic losses to the company in case of failed brand or discontinued

production of a particular brand. All costs incurred during R&D, production, initial

launch and the funds spent to procure initial raw materials are wasted when decisions are

made to stop production or withdrawal of a particular product. For example, Mirinda

Lemon is hardly available in the market. Some market have not seen it at all since its

launch in 2002.

So how do you combat cannibalization concerns?

Find ways to turn the threat into an opportunity. One of the easiest ways to do this is to find

customers who aren't consuming because existing solutions are too expensive or complicated.

There probably isn't a clearer recent example of this than Apple's iPad. When the product came

out that that analysts might complain about how it ate away at Apple's higher priced computer

offering. As Chief Operating Officer Tim Cook noted in Apple's recent analyst call, there did

appear to be some of that going on. But that effect was more than offset by Apple using the iPad

to introduce people to its products. And of course, selling 15 million iPads and producing $10

billion in revenue didn't hurt. "If this is cannibalization," Cook quipped, "it feels pretty good."

Make sure you are doing something legitimately different. If all you are doing to win in a more

price-sensitive market tier is chopping price, you deserve the fate you receive. One mantra that

Procter & Gamble follows is "delight, don't dilute." P&G's VP for R&D in Asia Maurizio

Marchesini described how the company successfully introduced a custom laundry brand in India

called Tide Naturals. It's a unique product that's attuned to the needs in the market. P&G Asia

President Deb Henretta also noted how you have to make sure you have a go-to market and

marketing approach that's appropriately different. If you use the same marketing vehicles and

distribution arms it's hard to bring new benefits to different customers. Remember,

cannibalization isn't really in your control. Whether due to Adam Smith's invisible hand or

Joseph Schumpeter's gales of creative destruction, if an opportunity is large enough, someone is

going to find a way to realize it. Wouldn't you rather it be you who seizes the opportunity than a

competitor?

Knowing more about cannibalization has at least three managerial benefits.

• Firstly, it may allow better appreciation of the likely profit outcomes of price promotions

– for both manufacturers and retailers.

• Secondly, to identify price promotion tactics that minimize cross-pack cannibalization

and hence preserve profit contribution for manufacturers and retailers.

• Third, to provide better forecasting of the sales of non-promoted SKU’s which could aid

production and inventory planning.

There is also the question of which brands to support. How do you assess which brands in the

portfolio will give best return on investment? Size matters. Established brands with more than 10

percent market share are better positioned to

gain market share than small brands. In addition to operational advantages, large brands drive

market share growth through strong brand equity built over years. The likelihood of increasing

market share is much greater among large brands with high brand equity.An important part of

brand equity is a brand’s customer base. If sales of a brand extension come at the expense of the

original customer base, the extension sales may not compensate for the damage to the brand

equity.

Gillette had a strong shaving cream brand — Right Guard — and wanted to attack Barbasol with

a low-end entry. Gillette’s Good News! line of razors was already positioned as a low-end line.

Gillette thus tested “Good News! Shaving Cream by Gillette.” It took sales from Right Guard.

The problem was partly that consumers felt that they could save money by buying Good News!

and still get a Gillette product.

Campbell’s, after trying a series of extensions such as Chunky, Home Cookin’ Golden Classics,

and Soup-for-One, all of which cannibalized the original brand, introduced a soup line under the

Prego name. The Prego brand is intended to attack the Progresso Italian-style soups (which had

been taking share from Campbell’s) without cannibalizing the basic Campbell’s line.

Funding each brand according to its size or current profitability

may fail to capitalize on brands with potential .There are many factors that play a part in such

decisions, including whether the category is in growth or decline, changing social trends, and

demographic changes. The importance of particular brands to the company is also a factor which

cannot be underestimated. Linchpin brands, large dominant brands, brands with future potential,

and those able to indirectly affect sales may all require support. However, brands with strong

momentum are more likely to provide future profits, and equity analysis of your brands should

be factored in when assessing which of your brands are worth investing in. Additional factors

which need to be taken into account include forthcoming innovations, competitor threats, likely

pricing levels, and the quality of upcoming marketing activity — see our Knowledge Point “Can

copy testing accurately predict advertising effectiveness?”.

Conclusion:

The extent to which cannibalization has occurred, and the nature of its effects, varies

considerably from one industry to the other. Some industries are built on infrastructures that are

more conducive to the process of cannibalization than others. In the beverage industry, for

instance, Coca Cola and Pepsi are the heavily affected firms . These multinationals fight an

inward as well as an inter-companies war of cannibalization.

The telecommunication industry is the other victim, especially when the company wants to

master all forms of telecom services without specialization.

The primary effect of cannibalization can be experienced by a firm through the decline of sales

volumes, market share and customer preference. These are the traditional effects.

The secondary effects of cannibalization can be the negative effects on the intermediaries

(distributors, wholesalers, stockists) thus affecting the distribution channels and an increase in

direct marketing activities as efforts to contain cannibalization effects.

Cannibalization can lead to more price competitiveness and inter-industry conflict.

Cannibalization also leads to an overhaul of market strategy and sometimes greater labour

mobility especially when the effects of cannibalization are intense.. Lastly the retail outlets

operations are greatly affected.

Despite the harshness of the term, cannibalization is sometimes viewed as a good, or at least

necessary, business practice. In these cases, the implementation of new operations or new

business channels at the expense of existing ones is deemed an acceptable means of gaining a

foothold in changing market conditions. This was particularly true in the relatively rapid

transformation from a strictly bricks-and-mortar world to the modern day clicks-and-bricks

economy. Getting products and business operations online often was viewed as an absolute

market necessity in the late 1990s and early 2000s. Because of this, many companies deliberately

cannibalized their existing operations and channels in order to establish an online presence. The

alternative was to be completely squeezed out of the game by more Internet-savvy competitors.

Planned cannibalization, however, must be carefully considered and delicately executed. Eating

away at existing operations may be a necessary step for restructuring. However, if not mediated

the results can quickly devolve into internal chaos that can bring a company's productivity and

earnings tumbling. Even where cannibalization is viewed as an advisable strategy, analysts agree

that over the long run, businesses and industries would do well to limit the degree of household

cannibalization, as it inevitably involves suboptimal efficiency and lower profits.

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