Cannibalism

Posted in Marketing and Strategy Terms, Total Reads: 551
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Definition: Cannibalism

In the market of established categories of products, company can adopt the practice of introducing new products in the market of these established products or slash the price of its product. This practice is referred to as market cannibalisation, corporate cannibalism or market cannibalism. In this practice, company eats its own market share and aims to get a bigger market share over all.


Cannibalisation is a marketing strategy to reduce sales revenue or sales volume (market share) of one product of the company because of introduction of another similar product by the same company. Prima Facie it looks like an inefficient strategy but in reality it is widely adopted by a number or organization across various product categories.

 

Why does a company want two of its own products compete in the same category? This is the question which one generally asks when it is said that market cannibalisation is a good strategy.


Let us take a situation in which there are 3 competing brands (say Bisleri, Aquafina and Himalaya) with homogenous products (Mineral water in our case). Since there is not much difference in products and all the three products are trustworthy a consumer can choose any one of them. So each of them will get nearly 33.3% market share. Now in such a scenario, Bisleri launches another product in the packaged mineral water category say “Aquapure” and promotes it extensively alongside Bisleri. In the eyes of consumer, Aquapure will a fourth product and the market share will be now 25% each. In this way Aquapure ate 8.33% market of Bisleri which is a product of same parent company but Bisleri overall acquired a 50% market share (25 % - Bisleri + 25% - Aquapure). Similar examples can be found across various products category. For Example – In biscuits, sunfeast has a number of products all on similar line which do eat each other’s market but over all help Sunfeast have a larger share of pie.

 

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