“If you don’t cannibalize yourself, someone else will.” – Steve Jobs
Cannibalization refers to a strategically intended slack in market share or revenue of a particular range of products, due to introduction and penetration of new product in the market by the same company.
Companies are the ones who like to cannibalize their own market share through market cannibalism. Mainly to gain an overall market share within the same category of the product at the expense of losing a single well established product market share. This can be simply because they believe that the second product may sell off better than the first one. The first product can have its own market share but the second product may be sold to a different set of consumers further increasing the share in the global market. One of the possible reasons for deliberate cannibalization is to increase the profit margins due to the cheaper production cost of product B over product A.
What should we aim at
- Global market share
- Loyal Customers
- Increased profit margin
Global Market Share
Market cannibalism can be used for some advantage towards the company, in the latter part is used to increase the global market share which are spread through the multiple products. The best example we can take of is the Apple iPhone.
Apple started with 2G phones and then it went on to creating newer versions. As soon as the new versions come up the market share of the older version is taken up by the new one. By doing this it is the intention of the company to harm their competition even more than harming themselves in order to gain the share in global market.
This strategy helps in gaining the loyalty of the customers as they move from one product to the other product marketed by a particular brand to another by the same brand. We can take an example of Gillette sensor razor’s customers where two thirds of them are estimated to already being using them for another model. This example shows us that there is a two-sided impact of market cannibalism on a firm- even though the old razor models become obsolete and lose the market share they have, consumers move on to different models which are marketed by the same company which increases their customer loyalty.
Image Courtesy: cdn.voyager.pgsitecore.com
Shoppers are actually inclined towards the products of a particular brand that they already know.
Increased Profit Margin
If product B is more economical for manufacturing rather than product A, the different materials or the new technology allows cheaper production, a company will definitely attempt to cannibalize product A’s market share by marketing of product B. This is deliberate cannibalization which has a straight forward objective for increasing the product share of the second product so that product A is surpassed by it.
The best example for this can be the IT industry. Every time there are different technologies coming up. The old technology is replaced by the new one due to various reasons. The new technologies are promoted so that the old ones are out.