Analysis of the Effects of Product Cannibalism

PRICING STRATEGY CANNIBALISM AND NEW result DEVELOPMENT R. A. KERIN M. G. HARVEY J. T. ROTHE 1. My choice I have chosen to work on this topic for these reasons. For legion(predicate) years now, and mostly because of the economic crisis, a make out of premium and mid-range brands have to compete against low-cost ones. In order to do this, some of these companies decided to launch low-cost brands to bring back muddled customers.But I have already learned that this dodge green goddess sometimes become a real threat for their premium brands in fact, companies who do this hindquarters think that they bring crude customers but unfortunately these customers ar plan of attack from their premium brand. Some real life examples are coming to me such as Coca-Cola Company who launched Coca-Cola light and Coca-Cola zero which was successful. How to avoid or reduce the brand cannibalization? What kind of strategy to develop? I entrust that this article, even if its a very old one, can answer these questions. . The abstract The article starts be giving a definition of the cannibalization rear we view 2 different products (A and B) go awaying to the equal friendship cannibalization mode that (all other things equal), decreasing the price of product A impart bring the gross sales decreasing of product B. This undesirable effect is occurring when the alliance, instead of launching a new product, prefer to reformulate one which already exists in an already created market. Authors are putting lights on two main consequences of cannibalistic strategy.The head start one is affirmatory, it allows to the company, through the new product, to open a new market, and therefore gain market trades. The second seems to be negative, because customers of the foremost companys product can switch to the second, and it will not bring any additional tax revenue to the company. But, as authors underline, sometimes its better for the company to see customers moving from the first product to the second one inside the same portfolio than reaching the competitors product.So, cannibalism strategy can be a good way for the company to crop up 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 profitability of the new product, you must rail 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 method to know what need(s) the new product will fulfill when it will be launched. This method can help managers to unwrap (the most early as possible) what amount of the new product should be produced in order to reduce the cannibaliz ation. The question of the acceptable level of cannibalization is evoked the two main drivers to compute it are according to the authors the cost social system and market maturity. 3. My opinionOne of the main lessons I learned 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 one, they still not competitors customers. out-of-the-way(prenominal) to be a threat, the cannibalism strategy can really be serviceable 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 low gear of this memo is indicative of the positive cannibalization.In fact, a lot of different soda beverages belong to the Coca-Cola company (such as for instance Fanta, Minute maid or Coca-Cola). In 1983, Coca-Cola company launched Coca-Cola light, which tastes different from the original Coca-Cola but sugar free and then, at the beginning of 2000&8242, 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 go to competition.This kind of strategy was learned in our Brand management get over that sometimes it consists in creating a similar product can get going the market share of both products. Named the Flanker 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 often almost free to market, as its very close to the first product and using the same brand, and it was observe that its also a good way to promote both products and brands.