Understanding Market Cannibalization and How It Works?
Market Cannibalization refers to the loss in sales or reduction in market share of a product, occurred due to the same company’s introduction of a new product line that wipes out the existing market for its own current products. Instead of appealing to a new segment of the market, the product line appeals to the company’s existing customer base leading to a reduction in the sales volume and demand of its established products. This implies that market cannibalization is a case where two product lines of the same brand compete against each other. Let’s understand this more clearly with an example. For instance, a company ABC is famous for its desktop computers. Now they decide to introduce a new line of laptops with the aim of attracting a considerable segment of the market. Now soon, ABC notices that regardless of the great launch and successful increase in the sales volume of its latest laptops, the sales volume of its desktop computers has taken a crash-dive simultaneously. This...