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Brand Cannibalization – A Threat or an Opportunity

Author: ResearchFox

Brand cannibalization is a very commonly used term in the modern business world which denotes sales reduction of a particular product due to launch of new similar product in the market by the same company. In other words, brand cannibalization leads to loss of customer base or demand for an existing product through customer diversion to a new product. It is very often used as a strategy to increase overall number of customers and capture a larger market share.

Brand Cannibalization can be deliberate or incognizant. In the first case the company attempts to remove some older brands in order to capture substantial market share of competitors and retain its own existing customer base. On the other hand, in case of unplanned cannibalization, older brands automatically gets removed from the market due to unstructured repositioning of new brand in the market. Therefore, brand cannibalization can only help when it is well thought of.

Many companies believe that when similar products are pushed into the market, the tendency of existing products to face a premature eradication becoming high. This can be attributed to drastic shifting of consumer’s interest to a new product rather than creation of new consumer space for the same product. Deliberate cannibalization strategies are often adopted by lot of organizations as they believe that if they do not cannibalize, some of their competitors may execute the same and gain more market penetration. So, brand cannibalization in a way help organizations to protect its customers’ loyalty from getting influenced by their competitors.

There can be a negative impact if Market Cannibalization is used as a strategy. Especially in the technology industry, whenever there exists a conflict of the offered service with nature of another. One such example is Google’s introduction of the Chrome Extension Google Quick Scroll. Google Quick Scroll is a browser search tool that allows users to execute a faster “find-on-page” query. Google’s Advertisement Platform is one of their most profitable business and Google Quick Scroll is jeopardizing Google’s advertising business model by allowing fast search, hence reducing the average time users spend on a web page. This Chrome Extension has since seen to be “abandoned and unmaintained” by Google. An alternative search tool to Google Quick Scroll according to alternativeto.net is Twinword Finder, which helps a user to find and highlight what the user needed on a web page without having to skim through all the text.

Brand canalization as a part of strategic action are risky as it directly hampers the company’s bottom line despite its potential revenue generation capability. Therefore any company which has strong liquidity base or has stable working capital structure can only go for it. Although brand cannibalization is adopted to counter peer competitors, initially it eats up the company’s sales and profit. Therefore those companies capable of bearing temporary loss can only sustain profits in the future through brand cannibalization.

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