Product cannibalism

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Product cannibalism

  1. 2. Product Line Extensions <ul><li>Are utilized because they: </li></ul><ul><li>Minimal Market Resistance </li></ul><ul><li>Leverage Existing Technologies </li></ul><ul><li>Utilize Manufacturing </li></ul><ul><ul><li>Capability </li></ul></ul><ul><ul><li>Capacity </li></ul></ul><ul><li>Minimize Financial Investment </li></ul>
  2. 3. Product Line Extensions <ul><li>Dominant Firms Utilize to: </li></ul><ul><ul><li>Maintain market share </li></ul></ul><ul><ul><li>Maintain shelf space </li></ul></ul><ul><li>Low Market Share Firms and New Entrants complain they use the strategy: </li></ul><ul><ul><li>Corner Market Shelf Space </li></ul></ul><ul><ul><li>Keep Out Rivals </li></ul></ul><ul><ul><li>Protect Competitive Position </li></ul></ul>
  3. 4. Product Line Extensions <ul><li>Are created by the introduction of </li></ul><ul><ul><li>New Sizes </li></ul></ul><ul><ul><li>New Forms </li></ul></ul><ul><ul><li>New Compositions </li></ul></ul><ul><ul><li>New Flavors </li></ul></ul><ul><ul><li>New Packages </li></ul></ul><ul><ul><li>New Varieties </li></ul></ul>
  4. 5. Product Line Extensions <ul><li>Though they minimize failure risk </li></ul><ul><li>They can create negative impact on exiting products, called </li></ul><ul><li>Product Cannibalism </li></ul>
  5. 6. Product Cannibalism <ul><li>Can be defined as: </li></ul><ul><li>The process by which a firm’s new entry product gains a portion of its sales by diverting sales from a firm’s exiting product(s). </li></ul><ul><li>Therefore, the loss of potential profits from an existing product is a real cost and must be absorbed by the new product. </li></ul>
  6. 7. Product Cannibalism <ul><li>May result from: </li></ul><ul><li>Management Decisions, or </li></ul><ul><li>Competitive conditions </li></ul><ul><li>And becomes a problem when: </li></ul><ul><li>No incremental competitive benefit, or </li></ul><ul><li>No financial benefit result to the firm. </li></ul>
  7. 8. Product Cannibalism <ul><li>Examples of Management Decisions that can result in excessive cannibalism: </li></ul><ul><li>Pressure for sales growth from new offerings </li></ul><ul><li>Increasing product line to dominate a category </li></ul><ul><li>Poor positioning of new products </li></ul><ul><li>Unrealistic market segmentation </li></ul><ul><li>Sales force overemphasis on new products </li></ul>
  8. 9. Product Cannibalism <ul><li>Some positive motivations for creating cannibalism: </li></ul><ul><li>Increasing product line to increase brand equity for the base brand </li></ul><ul><li>To eliminate gaps in existing product line that might be filled by competition, “ pre-emptive cannibalism” </li></ul>
  9. 10. Product Cannibalism <ul><li>Some examples of “pre-emptive cannibalism” : </li></ul><ul><li>Flanker strategy (stop brand switching) </li></ul><ul><li>Fighting strategy </li></ul><ul><ul><li>High market share </li></ul></ul><ul><ul><li>Susceptible brands to price competition </li></ul></ul><ul><ul><li>Wish to preserve profit margins </li></ul></ul>

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