An ideal result of any new product is growth, be it for the brand or for the sales of that product. There is a risk though…
If a company already has a product in that market a consequence could be customers buying this new product instead of the original offering, customers may see this as an improved product or be using it as an unpredicted substitute for the other offering (Bendle et al. 2016).
Bendle et al. (2016) defines this as cannibalisation which results in the company not attaining as many new customers as they would of if cannibalisation hadn’t occurred. It is measured by dividing the sales lost from existing products by the sales of new products to give you a percentage of cannibalisation (Bendle et al. 2016).
This occurrence is less likely to happen in markets that are going through a growth stage due to the nature of the time of that market’s life cycle. Cannibalisation may also be customers simply moving to an upgraded or improved version of the product which is often ideal for a company (Bendle et al. 2016).
The ideal alternative of cannibalisation is drawing in customers from competing firm’s offerings by meeting their needs more effectively or at a lower price point, this is far more likely in a differentiated market (Bendle et al. 2016).
References
Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey.
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