KPI of the Day – Sales: % Cannibalization rate of new product offering
Measures the decrease in sales of existing products due to launches of new products.
To indicate the break-even rate of cannibalization (the maximum sales volume of the new offering that could come from the company’s existing offering without incurring a loss).
New product launches ultimately impact the sales of existing products, by pushing forward the sales for the newly released products. The % Product cannibalization rate reflects on the magnitude of new released products on the existing product portfolio. Product cannibalization occurs when newly launched products target the same market segments as the existing ones.
Some recommendations on effectively managing product cannibalization rates include:
- Addressing new market segments for market base expansion;
- Targeting related but different markets with new product offerings;
- Using product cannibalization strategies on competitors rather than one self;
- Forecasting the effects of newly launched products on the existing product portfolio;
- Marketing strategies that alleviate the effects new product launches have on existing company products.
Cannibalization is a consequence of product line extensions, which typically aim to increase the company’s revenues, or to steal market share from competition. A side effect of product line extensions is that in addition to stealing share from competitors, new offerings also take away market shares from the company’s current offering.
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