Cannibalization, in a enterprise context, refers back to the discount in gross sales quantity, gross sales income, or market share of 1 product because of the introduction of a brand new product by the identical firm. An evaluation of this impact includes quantifying the lower in gross sales of the present product that immediately correlates with the rise in gross sales of the brand new product. For example, an organization launching a brand new mannequin of a smartphone may even see a decline in gross sales of its older fashions as shoppers go for the up to date model.
Understanding and quantifying this potential gross sales discount is vital for correct forecasting, useful resource allocation, and total strategic decision-making. It helps in figuring out the true profitability of a brand new product launch by accounting for the related losses in current product strains. Traditionally, companies have underestimated this impact, resulting in inflated projections and in the end, disappointing monetary outcomes. Correct measurement allows knowledgeable choices relating to pricing methods, advertising and marketing efforts, and product positioning to mitigate destructive impacts.
