Be Wary of Cannibalization When Launching New Products
“Exactly,” Marka said. “Because Pegasus was unwilling to risk cannibalization by developing products in line with changing market needs, the company could not stay competitive and went out of business.”
“When you have a high-value product like matches, it seems that accepting the risks of cannibalization is sometimes necessary in order to stay competitive,” Org pointed out. “If we don’t make it into the match market first, however, someone else will, and then we’ll have blown a good opportunity.”
“Glad we agree,” Lucy said. “And, oh, Zoot – the Cyclops just called. He said he’s on his way.”
“That’s not funny,” Zoot snorted.
Today’s FIRE! Point
Before developing new products or product line extensions, printing companies should determine whether this product has the potential to detract from their base of existing sales, and, if so, to what extent. It’s not necessarily a bad idea to enter a new product or service that will compete with an existing one. New products or services that offer distinct value unavailable in your company’s other offerings can be developed despite the risk of cannibalization they may run.
FIRE! in Action
Hindustan Lever Strategically Cannibalizes and Succeeds
After discovering that many of its customers used soap to wash both hair and body, the Indian hygiene products company developed a low-cost combination soap/shampoo to help consumers meet both needs. Though acknowledging that this brand may cannibalize users of Lever’s other discount soaps and shampoos, Lever executive Mukul Deoras said, “Even if there’s cannibalization, it’s OK. Consumers are buying a value-added product, which is likely to increase loyalty.” So far, he’s been right.Lever currently claims more than 70 percent of rural shampoo sales.
Next week: The FEI tribe discusses the topic of intelligent discounting.