What is Cannibalization?
Cannibalization is a marketing term that refers to a situation in which a company’s new product or service competes with an existing one, resulting in decreased revenue for the company. In a sense, it is a form of self-competition, where one product or service is competing with another within the same company.
What Causes Cannibalization?
There are a few common causes of cannibalization within a company. The most common cause is when a company releases a new product or service that is too similar to an existing one. This can cause customers to choose the newer product over the existing one, resulting in a decrease in revenue for the company. Another common cause of cannibalization is when a company fails to differentiate its products or services. For example, if two products are too similar, customers may choose the cheaper option and the company may suffer as a result.
How to Avoid Cannibalization?
There are a few ways to avoid cannibalization within a company.
- Ensure that products or services are properly differentiated: Companies should ensure that their products or services are differentiated in order to avoid customer confusion and eliminate any potential for cannibalization.
- Use segmentation: Companies should use segmentation to target different customer groups and ensure that products or services are aimed at different groups.
- Create a pricing strategy: Companies should create a pricing strategy that takes into account potential cannibalization. This may involve setting different prices for different products or services.
- Monitor customer feedback: Companies should monitor customer feedback in order to assess the potential for cannibalization. If a product or service is receiving negative feedback, it may be time to reconsider the product or service.
Cannibalization can be a serious issue for companies, but it can be avoided if companies take the right precautions. By properly differentiating products or services, using segmentation, creating a pricing strategy, and monitoring customer feedback, companies can avoid the risk of cannibalization.
Conclusion
Cannibalization is a form of self-competition that occurs when a company’s new product or service competes with an existing one. It can be caused by releasing a new product or service that is too similar to an existing one, or by failing to differentiate products or services. Companies can avoid cannibalization by properly differentiating products or services, using segmentation, creating a pricing strategy, and monitoring customer feedback.