Product Cannibalization Likely without Innovation
Is there any point in introducing a new product if the additional sales are gained at the expense of the company’s other products? The product line depth may be extended but there may be no boost in revenues. This is what we call product cannibalization and is a risk faced by category and marketing managers across Ireland every day.
On the one hand, product cannibalization may be worth it if the company increases their overall market share within a category. When Ariel Liquid was introduced in the UK, it gained market share rapidly. Although a third of the sales were diverted from the parent powder brand, Ariel was able to increase it’s overall share in the detergent market from 14% to 24% post launch.
The ideal scenario is to introduce a new product and to cannibalize sales only from competing brands. This is very difficult and can only be achieved with groundbreaking innovation. In the cases of Pringles and Pop Tarts, product cannibalization was limited after very successful launches. Consumers loved the unique snacks and a lot of sales were generated from customers who would not typically wander into the snack aisle.
Considering that up to 90% of new product launches in Ireland are the result of line extensions, a certain level of product cannibilisation is to be expected. The key goal for marketing managers is to control this effect and to drive market share growth within the product line.