Analysis of the Effects of Product Cannibalism

determine STRATEGY CANNIBALISM AND NEW PRODUCT DEVELOPMENT R. A. KERIN M. G. HARVEY J. T. ROTHE 1. My choice I confuse chosen to work on this topic for these reasons. For many years now, and in the main because of the economic crisis, a lot of premium and mid-range brands contribute to compete against affordable wizs. In order to do this, some of these companies decided to launch affordable brands to grow back lost customers.But I have already versed that this dodging flush toilet sometimes become a actually terror for their premium brands in fact, companies who do this can think that they bring juvenile customers but unfortunately these customers ar coming from their premium brand. Some real life examples are coming to me such as Coca- skunk Company who launched Coca-Cola get by and Coca-Cola zero which was successful. How to avoid or reduce the brand cannibalization? What kind of strategy to develop? I hope that this word, even if its a very older one, can ans wer these disbeliefs. . The summary The article starts be giving a definition of the cannibalization performance we consider 2 diametrical harvests (A and B) belonging to the afore tell(prenominal) play along cannibalization means that (all other things equal), decreasing the price of product A will bring the gross revenue decreasing of product B. This undesirable effect is occurring when the lodge, instead of launching a bran-new product, prefer to reformulate one which already exists in an already created market. Authors are putting lights on cardinal main consequences of cannibalistic strategy.The first one is substantiating, it allows to the company, through the new product, to clear a new market, and thus gain market shares. The entropy seems to be negative, because customers of the first companys product can switch to the second, and it will not bring any additional revenue to the company. But, as authors underline, sometimes its better for the company to see cust omers moving from the first product to the second one within the akin portfolio than reaching the competitors product.So, cannibalism strategy can be a well behaved counseling for the company to kill competitors, but the risk is huge if the new product creates an artificial segmentation which implies artificial needs. The distortion effect of cannibalism is the second main part of the article. Basically, it means that in order to appreciate the positiveness of the new product, you must take in account cannibalization of the first one. Authors are talking about Pyrrhic Victory when ones overestimate the growth of the sales volume and market share due to the new product.Authors provide a solution to avoid this bas effect of cannibalism the market test. For them its the best order to fill in what need(s) the new product will fulfill when it will be launched. This method can help managers to identify (the most early as possible) what nub of the new product should be produced i n order to reduce the cannibalization. The question of the acceptable level of cannibalization is evoked the two main drivers to compute it are according to the authors the cost structure and market maturity. 3. My opinionOne of the main lessons I conditioned reading this article is that cannibalism can really be a positive thing for companies. Even if customers of the new product are indeed customers who switched from the previous(prenominal) one, they still not competitors customers. Far to be a threat, the cannibalism strategy can really be useful and great for companies, especially, as I said in my first part, in time of crisis. Then I think, the article could provide more examples of positive or negative cannibalization. The example of Coca-Cola provided at the beginning of this memo is revelatory of the positive cannibalization.In fact, a lot of different soda beverages belong to the Coca-Cola company (such as for instance Fanta, Minute wet-nurse or Coca-Cola). In 1983 , Coca-Cola company launched Coca-Cola light, which tastes different from the original Coca-Cola but mark free and then, at the beginning of 2000, Coca zero was launched which was supposed to have the same taste as Coca-Cola original, and still sugar free. Even if Coca- Cola light lost many customers who switched to Coca zero, they still inside the same company and not moved to competition.This kind of strategy was learned in our Brand management course that sometimes it consists in creating a uniform product can extend the market share of both products. Named the flanker back strategy, the two products are belong not only to the same company but also to the same product category. This strategy has many advantages its ofttimes almost free to market, as its very close to the first product and using the same brand, and it was noticed that its also a good way to promote both products and brands.