How to Avoid Cannibalization of Products

Published Jun 22, 2021

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Launching a new product is an exciting process that should result in generating greater profits for your company. However, you can only maximize new product development when the offering’s revenues aren’t gained at the expense of your existing portfolio. Without the right market and consumer insights, you may soon find a promising new product leads to losses in profits and market share. Learn more about how to introduce new products to existing customers without product cannibalization with insights from Toluna. 

What Is Product Cannibalization?

Imagine your business produces a cleaning solution that keeps screens crystal-clear. Your market share is large, your brand is well-respected, and company revenues are high. Introducing a new product should be a smart move, and your team works hard to bring an additional offering to market: a coating that prevents smudges and marks with no cleaning needed. 

Ideally, both products flourish in the market, attracting a share of existing customers and winning a flood of new consumers. However, if product cannibalization occurs, you can expect the opposite. Users of your initial offering switch to the new product, decreasing demand for your original solution and cutting revenues. Over time, you experience a reduced market share and smaller profits. This product cannibalization can occur in any sector of any industry, and only in-depth market intelligence and a careful product development process can prevent it. 

How Can Businesses Prevent Product Cannibalization? 

Research shows that introducing new products to existing markets is a primary growth strategy for many businesses – so much so that 45% of chief marketing officers (CMOs) planned for it in 2021. While you could safeguard against product cannibalization by maintaining the status quo, that’s likely to be bad for business. Instead, organizations need comprehensive strategies to introduce new offerings without diminishing current success. 

Fortunately, there are several ways to prevent product cannibalization. First, due diligence is key. The launch of any new product should be guided by comprehensive market analysis that gathers information on consumer preferences, competitors, market and segment opportunity, and other key factors. With a clear understanding of how new products will enter the market, your company can gain a realistic understanding of potential demand for all your offerings. 

This includes understanding the most appropriate market for existing and emerging products. Does the new offering fill a genuine unmet need? Or does it align too closely with the needs met by other products in your portfolio? If your product development team is retreading familiar ground, launching the new product is likely to result in cannibalization. 

You must also weigh the cost of developing, producing, and selling the new product against its potential revenues. The dual impact of high production costs and cannibalization could prove disastrous for your organization. In contrast, efficient costs and a welcoming market will spell success for new offerings and your full lineup. 

Introducing New Products to Existing Customers without Cannibalization

With the right approach, it’s possible to grow your portfolio without the risk of product cannibalization. So what’s the best way to achieve an agile, informed product development process that delivers profitable results? With agile consumer insights. Understanding consumer needs, behaviors, and preferences can answer a variety of essential product development questions that include: 

  • What unmet needs exist in the market category? Identifying new opportunities helps prevent offerings that cannibalize predecessors.  
  • Which ideas have the most potential? Prioritizing winning ideas via concept testing helps maximize efficiency and your investment.
  • Does our message resonate with consumers? Claims tests can help ensure messaging differentiates offerings and attracts the appropriate audience. 
  • What are consumer preferences for this offering? By using a trade-off survey technique for choice optimization, you can determine where consumers find value in your product. 
  • Is pricing appropriate? You must know what the market will bear. That’s why our end-to-end new product development research suite includes price optimization to shape pricing strategy. 
  • How many units can we expect to sell? Your product may be purchased once, regularly replenished, or bought in multiples. Understanding the sale volume with pre-launch forecasting helps evaluate potential sales and revenues and ensure your new product generates sustainable volume without cannibalizing others in your portfolio. 

Full predictability is impossible when introducing new products to the market. Despite this, in-depth research and a thorough market analysis provide as much certainty as possible to protect current revenues while exploring new opportunities. 

Learn More about Informed Product Development 

Don’t let product cannibalization diminish revenues and cut your market share. With real-time insights, award-winning research design, and a panel of more than 36 million consumers, Toluna delivers the market intelligence needed to introduce new products and grow profits successfully. Schedule a demo today to learn more about Toluna Start and other tools for new product development. 

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