iPOTT          11-Feb-12                 Getting you there…                                         Cannibalization as a T...
iPOTT                 Getting you there…                                         which could have a cannibalizing effect a...
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iPOTT cannibalization as a tool

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Cannibalization is the process by which an existing mature product gradually loses its demand in market when new, similar products are introduced into market by its vendor. Looking at it from sales perspective it is detrimental to company as the old and the new products will gradually lose their market share.

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iPOTT cannibalization as a tool

  1. 1. iPOTT 11-Feb-12 Getting you there… Cannibalization as a ToolGo Goal Cannibalization is the process by which an existing mature product gradually loses its demand in market when new, similar products are introduced into market by its vendor.Set, Get, Go… Looking at it from sales perspective it is detrimental to company as the old and the new products will gradually loseTo visit this blog Click here. their market share.iPOTT being an end to end Assume a product that is priced and positioned as a premiumprovider of innovative and cost product on shelf by a vendor. It has gained loyal customerseffective services in the areas of over a period of time, the vendor has created a brand imageknowledge management, sales that is now associated with the product and the market baseenablement and consulting offers is gradually expanding. The vendor company now looks ata unique and unbiased platform other prospects to make profit. It decides to come up with afor software product companies new product which is similar to the premium product, but isworldwide to reach their target priced lower and positioned accordingly in the same market.markets Potential customers who could earlier not afford to buy the premium product now target the lower priced product and realize that it has similar features. As more and more www.ipott.com customers realize the benefit of this cost arbitrage, even loyal info@ipott.com customers of premium product shift their preferences to new product. This does not last for long. Sales figures gradually diminish as the lower cost raw materials used to manufacture the new product creates a difference in brand value. The new product on shelf has created a negative influence over brand image and customers now look for alternative vendors selling similar products at lower prices. Many other industries could be affected in a similar way. Retail, Automobile and Computer hardware industries could experience similar effects. For instance recent developments indicate that Tablets may cannibalize PCs, notebooks and mini-notes. The recent trend is growing consumerism resulting in improvements in car designs and changes in components 1|P a g e DN: 009/GG/2012 V1.0 Copyright © 2012 iPOTT
  2. 2. iPOTT Getting you there… which could have a cannibalizing effect as people opt for the most economical solution. But looking at it from technology growth perspective, this is constructive and some companiesGo Goal are adopting this solution to be first-movers and market leaders in innovations. The idea here is that certain playersSet, Get, Go… believe in risking their product brand names to come up with alternatives in market. Many rely on Re-branding strategy inTo visit this blog Click here. later stages if the product brand image is damaged.We have blogs targeting a range of Consider Starbucks which is the largest coffeehouse companyaudience starting from potential in the world offering premium roaster and specialty coffee.product innovators to CEOs The brand value in this case is the ambience of store and taste of coffee. Its strategy to expand its market share in a locality isAudience interested in knowing through Self-cannibalization. They believe in opening moreabout Marketing Strategy, Indian than one outlet in the same locality to attract customers. AllIT trends and Best Practices to be those outlets that do not sell well are cannibalized, and theadopted while kick-starting few that remain are successful in the market.company can utilize theinformation provided in these Applying the same to an emerging Software productblogs development company with only one or few products in its portfolio, it could be a means to target customers at differentTechnology Trends levels. The cost arbitrage and trade-offs in offerings may be used as a differentiating factor in the initial stages toCEO Speak penetrate into market. The important message however is that cannibalization is a process that can be controlled and manipulated by certain players in market to suit their needs depending on their offerings. www.ipott.com info@ipott.com 2|P a g e DN: 009/GG/2012 V1.0 Copyright © 2012 iPOTT

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