•  Market cannibalization occurs when a new product intrudes on the existing market for an older product, rather than expanding the company’s market base. Instead of appealing to a new segment of the market and increasing market share, the new product appeals to the company’s current market, resulting in reduced sales and market share for the existing product.
  • If it is not intentional, market cannibalization can have a negative effect on a company’s bottom line. This forces an existing product’s life to end prematurely because sales shifted to the new product, rather than tapping into a new market as intended.
  •  While this may seem inherently negative, in the context of a carefully planned strategy, it can be effective, by ultimately growing the market, or better meeting consumer demands. Cannibalization is a key consideration in product portfolio analysis.
  •  Cannibalization is an important issue in marketing strategy when an organization aims to carry out brand extension. Normally, when a brand extension is carried out from one sub-category (e.g. Marlboro) to another sub-category (e.g. Marlboro Light), there is an eventuality of a part of the former’s sales being taken away by the latter
  • EXAMPLE: In India, where the passenger-car segment is going up dramatically since the turn of this century, Maruti-Suzuki’s launch of Suzuki Alto in the same sub-category as Maruti 800, which was the leader of the small-car segment to counter the competition from Hyundai is seen to be a classic case of cannibalization strategy.
  •  Large corporations, such as Proctor and Gamble (P&G) have been using this strategy to help maximize profits. It’s a very basic math model, but the hardest part is figuring out the projected sales for a product that hasn’t existed on the market yet.