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.

1. iPOTT 11-Feb-12
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Cannibalization as a Tool
Go 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 lose
To visit this blog Click here. their market share.
iPOTT being an end to end Assume a product that is priced and positioned as a premium
provider of innovative and cost product on shelf by a vendor. It has gained loyal customers
effective services in the areas of over a period of time, the vendor has created a brand image
knowledge management, sales that is now associated with the product and the market base
enablement and consulting offers is gradually expanding. The vendor company now looks at
a unique and unbiased platform other prospects to make profit. It decides to come up with a
for software product companies new product which is similar to the premium product, but is
worldwide 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
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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 companies
Go Goal are adopting this solution to be first-movers and market
leaders in innovations. The idea here is that certain players
Set, Get, Go… believe in risking their product brand names to come up with
alternatives in market. Many rely on Re-branding strategy in
To 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 company
audience 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 is
Audience interested in knowing through Self-cannibalization. They believe in opening more
about Marketing Strategy, Indian than one outlet in the same locality to attract customers. All
IT trends and Best Practices to be those outlets that do not sell well are cannibalized, and the
adopted while kick-starting few that remain are successful in the market.
company can utilize the
information provided in these Applying the same to an emerging Software product
blogs development company with only one or few products in its
portfolio, it could be a means to target customers at different
Technology Trends levels. The cost arbitrage and trade-offs in offerings may be
used as a differentiating factor in the initial stages to
CEO 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
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