Sunday, February 3, 2013

Should You Cannibalize Your Own Products?

Not so long ago, cannibalization was generally a no-no. When planning a new product, you tried not to take sales away from your current products (think of it as "a bird in the hand" marketing).

These days, the mandate to go ahead and cannibalize comes from the top, as a way to preempt competitors from stealing sales away.
  • John Donahoe, CEO of eBay, says yes: "In technology, either you cannibalize yourself or someone else is going to do it." So eBay made changes, including pushing into mobile marketing for autos, among other big-ticket items. Today, eBay says it sells 8,000 cars a week via its mobile app. Ka-ching.
  • Tim Cook, CEO of Apple, says yes: "I see cannibalization as a huge opportunity for us." Witness the iPad Mini, which is sure to cannibalize some of the iPad's sales. But if the Mini prevents rivals from getting Apple's customers, it's worthwhile to accept lower revenue/margins rather than lose the entire sale. Let's see how Apple reacts to Samsung's strong competition on the smartphone side.
  • Toyota's Prius may have cannibalized some of the Camry's sales, yet it also became the frontrunning pioneer (and category prototype) of hybrid gas-electric cars. In fact, the exec who championed the Prius is in line to become Toyota's next CEO.
The equation will be different for every product and company. Look at how cannibalization is likely to impact your product lines, overall sales, customer loyalty, and market share. Sometimes the answer may be in the timing of something new.

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