cannibalisaation

Cannibalisation, in a business context, refers to the reduction in sales volume, revenue, or market share of an existing product or service due to the introduction of a new product or service from the same company. This can occur when a new offering directly competes with an older one, appealing to the same customer base. For example, a company launching a new smartphone model might see a decrease in sales of its previous model as consumers opt for the newer version.

This phenomenon is not always negative. Companies may strategically introduce new products that cannibalise existing ones as part of a product lifecycle management strategy. This can be done to capture a larger market share, cater to evolving customer needs, or preempt competitors. A well-managed cannibalisation can lead to an overall increase in the company's total sales and profitability if the new product is more successful or has better margins.

However, uncontrolled or unintentional cannibalisation can be detrimental. It can dilute the company's resources, confuse customers, and ultimately lead to a net loss if the new product does not sufficiently compensate for the sales lost from the older product. Therefore, businesses often conduct market research and strategic planning to assess the potential for cannibalisation and to mitigate its negative effects, perhaps by targeting different market segments with the new product or by phasing out older products gradually.