Brand cannibalization is an advanced science in the brand marketing battle. It is a process of creating different sub-brands (organizations) of the parent brand so that the parent brand can grow its customer base by targeting large numbers of customers.
It’s an art of brand extensions to benefit the brand owner, customers, and end-users. For example, Marriot group runs hotel-like “The Ritz-Carlton”, “Sheraton”, “Le MERIDIEN” etc. Another good example of brand cannibalization is Coke which has already launched some sub-products like Minute Maid, Sprite, Fanta, etc. They target different types of audiences.
In the case of brand cannibalization sometimes organizations eat their own products’ market share by launching a new product in the market. After launching a new product, the new product “eats” up the sales and demand for an old popular product. By doing this they do not capture new customers but they convert existing customers to buy their new product. which ultimately reduces the demand for the old product and puts a negative effect on the sales volume of the old product.
Negative Impact on Company
Brand cannibalization can have a negative impact on a company’s bottom line. As an example when Apple introduced some new and more amazing features into products like iPhone and iPods, then this action ate up sales for their lower-end iPhone and iPods including Shuffle and Classic series.
Why Companies Do This:
Brand cannibalization is very risky which leads to sales losses that come out when customers buy a new and latest functional product at the same price as the existing product. Some of the main reasons why small or big organizations do this:
– Companies want to increase their sales and market share. So they take a gamble by introducing a new product in the market with extended functionality. And they hope that the new product with harm other competitors but instead of this new product harm its own existing product.
– Companies want to increase their customer base and want their new product to reach a different class of customers.
