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Cannibalization refers to a reduction in sales volume or sales revenue / profits or market share of a products due to the launch of another product by the same manufacturer or the marketer.
I believe if you already have a successful brand in market, avoid cannibalization. Though companies did it e.g., Apples' iPAD ....... but the main reason of their was the the technology shift that gives them the success otherwise, iPAD drastically took away the sales Macintosh.
It is a strategy in which a company introduces a new product into a market in which it has already other well established products. Look at mobile phone manufacturers as a good example.
A company that adopts such a strategy is effectively competing against itself.
Some of the reasons why companies do this:
1. The company wants to increase its market share and is taking a gamble that introducing the new product will harm other competitors more than the company itself.
2. The company may believe that the new product will sell better than the first, or will sell to a different sort of buyer.
3. The company wants it's products to reach customers from different classes.
Market cannibalization refers to a situation where a new product "eats" up the sales and demand of an existing product. This can negatively affect both the sales volume and market share of the existing product.
Market cannibalization can have a negative effect on a company's bottom line, forcing an existing product's life to end prematurely because sales shifted to the new product, rather than tapping into a new market as intended.
It refers to the effect of a new product on the patter of the marketing activities of all or any of its existing products in an adverse way. Though it has got negative effects for the time being--if the backfiring are cleverly managed, it may lead to great innovations with intensive research and development strategies, but it will take time and test the patience level significantly.
IMO : Market cannibalism is the recuction of sales of a products because of the new verson of same products .market cannibalization can have a negative effect.