product cannibalism marketing 5341 chip besio. product line extensions are utilized because they:...
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Product CannibalismProduct Cannibalism
Marketing 5341Marketing 5341
Chip BesioChip Besio
Product Line ExtensionsProduct Line Extensions
Are utilized because they:Are utilized because they:Minimal Market ResistanceMinimal Market ResistanceLeverage Existing TechnologiesLeverage Existing TechnologiesUtilize ManufacturingUtilize Manufacturing
CapabilityCapabilityCapacityCapacity
Minimize Financial InvestmentMinimize Financial Investment
Product Line ExtensionsProduct Line Extensions
Dominant Firms Utilize to:Dominant Firms Utilize to:Maintain market shareMaintain market shareMaintain shelf spaceMaintain shelf space
Low Market Share Firms and New Low Market Share Firms and New Entrants complain they use the strategy:Entrants complain they use the strategy:Corner Market Shelf SpaceCorner Market Shelf SpaceKeep Out RivalsKeep Out RivalsProtect Competitive PositionProtect Competitive Position
Product Line ExtensionsProduct Line Extensions
Are created by the introduction of Are created by the introduction of New SizesNew SizesNew FormsNew FormsNew CompositionsNew CompositionsNew FlavorsNew FlavorsNew PackagesNew PackagesNew VarietiesNew Varieties
Product Line ExtensionsProduct Line Extensions
Though they minimize failure riskThough they minimize failure riskThey can create negative impact on They can create negative impact on
exiting products, calledexiting products, called
Product CannibalismProduct Cannibalism
Product CannibalismProduct Cannibalism
Can be defined as:Can be defined as:The process by which a firm’s new entry The process by which a firm’s new entry
product gains a portion of its sales by product gains a portion of its sales by diverting sales from a firm’s exiting diverting sales from a firm’s exiting product(s).product(s).
Therefore, the loss of potential profits from Therefore, the loss of potential profits from an existing product is a real cost and must an existing product is a real cost and must be absorbed by the new product.be absorbed by the new product.
Product CannibalismProduct Cannibalism
May result from:May result from:Management Decisions, orManagement Decisions, orCompetitive conditionsCompetitive conditions
And becomes a problem when:And becomes a problem when:No incremental competitive benefit, orNo incremental competitive benefit, orNo financial benefit result to the firm.No financial benefit result to the firm.
Product CannibalismProduct Cannibalism
Examples of Management Decisions that can Examples of Management Decisions that can result in excessive cannibalism:result in excessive cannibalism:
Pressure for sales growth from new offeringsPressure for sales growth from new offerings Increasing product line to dominate a categoryIncreasing product line to dominate a category Poor positioning of new productsPoor positioning of new products Unrealistic market segmentationUnrealistic market segmentation Sales force overemphasis on new productsSales force overemphasis on new products
Product CannibalismProduct Cannibalism
Some positive motivations for creating Some positive motivations for creating cannibalism:cannibalism:
Increasing product line to increase brand Increasing product line to increase brand equity for the base brandequity for the base brand
To eliminate gaps in existing product line To eliminate gaps in existing product line that might be filled by competition, “that might be filled by competition, “pre-pre-emptive cannibalism”emptive cannibalism”
Product CannibalismProduct Cannibalism
Some examples of Some examples of “pre-emptive “pre-emptive cannibalism”cannibalism”::
Flanker strategy (stop brand switching)Flanker strategy (stop brand switching)Fighting strategyFighting strategy
High market shareHigh market shareSusceptible brands to price competitionSusceptible brands to price competitionWish to preserve profit marginsWish to preserve profit margins