The measurement of cannibalization

Abstract

Notes that the risk of cannibalization is a very real threat for many new product launches and that the risk becomes even more significant if the new product is launched under the same brand name as an existing product. Points out that, since line extension is by far the most common branding strategy for new products, it is important that managers develop their understanding of the effect and that little empirical work has been published on the subject. Defines cannibalization and examines three techniques which managers might use to measure it. Tests gains loss analysis, duplication of purchase tables and deviations from expected share movements on consumer panel data relating to three line extensions in the UK and German detergent markets. Presents results showing cannibalization of the parent brand by all three extensions and suggesting the need for managers to use multiple methods when evaluating the degree of cannibalization. Emphasizes the need to sample over time, since the extent of cannibalization is shown to be dynamic.

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