Marketing Cannibalization Strategies – Facts and How to Handle

• August 12, 2012
• Jesandy
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It is important to market leader uses cannibalization as a defense, just as burning sections of a building creates firebreaks to stop a building fire

Deliberate cannibalization can be key element of Product Strategy. For the attackers, the fear of cannibalization can be a key element of Product Strategy. Since cannibalization hurts the market leader, it can provide attackers with an advantage. The attacker, either a new market entrant or a competitor with a much smaller market share, has to less to lose than the market leader. It has several strategic alternatives. And for the reluctant defender, controlled Cannibalization may be a neccessary strategy to repel attackers. Cannibalization can also be a defensive strategy for the market leader. In these strategies, the market leader uses Cannibalization as a defense strategy. In these strategy, the market leader uses cannibalization as a defense, just as burning sections of a building creates firebreaks to stop a building fire

Cannibalize the Market to Attack the Market Leader

Cannibalizing an existing market is a successful strategy for attacking an entrenched market leader. By upsetting the market, the attacker erodes the position of the dominant company, although the attacker cannibalizes its own products in the process. The attacker hopes to compensate for its cannibalization loss with increased market share in the redefined market.

Introduce New Technology First

The Market leader has a vested interest in maintaining the current technology as long as possible at the most stable and profitable point in the product platform life cycle. When the market leader considers introduce replacements technology, cannibalization usually makes the financial return and risk unattractive. So the leade waits. The strategy if attacking a market leader with new features or technology while the leader is trying to hold onto the old ones is common especially in internet or technology industries.

Cannibalize Yourself Before Competitors Do It

Self-cannibalization may be neccessary as a defensive strategy to keep an attacking competitor from being successful. With this strategy, a company choose to cannibalize its own products rather than lets their competitors do the same.

Introduce Cannibalization to Continue as the Technology Leader

The technology leader in a market regularly cannibalizes its existing successful product just as its competitors begin to catch up. Many high-tech company succeed for doing this strategy, Intel for instance, if you noticed there varioud old version that always been subtituted to the new one.

Manage The Rate of your Cannibalization through Pricing

Pricing is used most often as the mechanism to control the rate of cannibalization. Where cannibalization is an issue, the price for the new product is set at a level that encourages a particular sales mix of the existing and new products. If the price of the new product is relatively higher, the rate of cannibalization will be lower. Reducing the price of the new product will usually increased the rate of cannibalization

Restrict Cannibalization to specific Market Segments

The medical device company discussed previously applied the strategy of minimizing cannibalization by restricting introduction of its new product to smaller market segments. Some market segments are less vulnarable to cannibalization, because there is either more to gain or less to lose in them. By tailoring the new product to a particular segment, a company can get the benefits without the loss, as well as the oppurtunity to gain experience with the new product