Tuesday, January 31, 2006

New article: Fighting cannibalization

Imagine my excitement at this e-mail subject line: New article: Fighting cannibalization. I receive daily updates from The McKinsey Quarterly, a business journal. Perhaps the article was about how to do business in developing countries where workers ran the risk of being made the main course at a "business luncheon"?

No such luck. Here's the full title of the article: Fighting cannibalization: Optimization techniques used to plan operations can also be applied to sales and marketing.


The article is about cannibalization of the business sort:

In marketing, cannibalization refers to a reduction in the sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer.

For example, if Coca Cola were to intoduce a similar product (say, Diet Coke or Cherry Coke), this new product could take some of the sales away from the original Coke. Cannibalization is an important consideration in product portfolio analysis.


Oh well, back to my lunch.

1 comment:

Kanwar Oberoi said...

Hi John,

I got the same email today. I believe that you have overlooked a point in your Coke example.

Your example would qualify as an instance of cannibalization only if the new products (Diet Coke and Cherry Coke) were priced lower than the price of regular Coke.

Thanks,
Kso.