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In most cases this doesn’t make much sense unless it’s a defensive move to
protect the product line from a competitor stealing market share because
the current product line is insufficient.
Case1- Coca-Cola
This is best illustrated by the "Cola Wars" - the marketing fight between
Pepsi and Coca-Cola, which lasted most of the 1970s and 1980s. The soft
drink rivalry pushed Coca-Cola Co. to make one of the most famous
marketing blunders in financial history. In the process of creating Diet Coke,
the company's chemists discovered a new formulation for Coke. The new
concoction was sweeter and smoother than the century-old formula upon
which Coke had been built. In fact, it was similar to Pepsi - the drink that was
eating away at Coke's domestic market share.
Consumers rebelled and flooded Coca-Cola with angry letters and phone
calls. Coke's stock and market share took multiple hits and Pepsi even
proclaimed victory in the Cola Wars now that Coca-Cola had copied its taste.
The influx of complaints led to a "We've heard you" marketing reverse. On
July 11, 1985, mere months after its sudden exit, the old formula was re-
introduced with "Classic" added to the title - probably better than "Old
Coke". Coca-Cola Classic quickly ate up the sales of New Coke in a textbook
case of market cannibalization
Case2- Ponds
FIG 1. When replacement products are introduced too early, they can hurt
overall sales and cannibalize profits.
Market cannibalization typically benefits the attacker rather than the
defender, since the attacker has nothing to lose.
CANNIBALIZATION STRATEGIES:
Case4- Borders
Case5- Le-Sancy
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.
Extending a product line may cause cannibalization not only through self-
competition for market share but also for the limited resources of the
company itself. Cannibalization may also lead to the ineffective and
inefficient use of company’s resources and personnel. Cannibalization starts
as soon as the consumer exhibits brand switching behaviour, or even before
that.
In 2006 Maruti Zen’s market had gradually started disappearing. Its falling
sales, which were cannibalized by Maruti's newer
models like the Swift, Alto and the Wagon-R, are
making Maruti to consider stopping production of
their once best seller B segment car. This may not
come as a surprise to most. Being one of the older
cars on the road, Zen was getting out-dated, and the newer models of Maruti
cannibalized the sales of Zen. It was spruced up to a new look in the year
end 2003, but that was not sufficient.
A seller who faces two customer segments with differing valuations of quality
of a durable product whose demand is stationary and known, the technology
exists to release two products simultaneously, and the seller can commit in
advance to subsequent prices and qualities. He needs to decide whether to
introduce two differentiated products at once or one at a time. Under the
simultaneous strategy, the lower quality would cannibalize demand for the
higher quality. To reduce cannibalization, the seller would have to lower the
quality of the low-end model and reduce the price of the high-end.
Alternatively, he could increase the quality of the low-end model, but delay
its release. Sequential introduction, however, would mean that the profits
from the low-end model arrive later. We show that sequential introduction is
better than simultaneous introduction when cannibalization is a problem and
customers are relatively more impatient than the seller. However, when the
seller cannot pre-commit, sequential selling is much less attractive because
then he cannot use his product designs to alleviate cannibalization.
Case7- Airbus
Businesses still view cannibalization as the most dreaded issue but there is a
counter to it. Many businesses believe they must cannibalize their own
products or the competition will do it for them. You can counter
cannibalization by making your older products unique and desirable to
extend their product life cycle. Many companies cannibalize their own
products at some time in the future. You can definitely create your own little
product niche from older products to counter cannibalization. Your older
products can be reduced tremendously in price to make it cheap and
affordable. This way your old products can capture the low income
consumers while the latest products can capture the high income
consumers. Counter cannibalization by making your older products special
again. You can reduce the old products price tremendously to tap a new
market or make them unique again. Make your old products popular by
making it cheap, reliable and unique in order to extend the product life cycle.
If you can do it, there is little to no cannibalization because your old products
are capturing a new market.
Make new products niche from original products to counter cannibalization.
Old products can tap a new market with just a little innovation.
Case8- TIDE
BIBLIOGRAPHY
Books:
1. Marketing Management -Philip Kotler
Internet:
1. http://books.google.co.in/books?
id=p1xvYvtUJmQC&dq=product+strategy+for+high+technology+com
panies&printsec=frontcover&source=bl&ots=hcpkXJ6Cwx&sig=NmEM
QWuG0UX-
iSpj_2N5pFa8Bk0&hl=en&sa=X&oi=book_result&resnum=3&ct=result
#PPA258,M1
2. http://mansci.journal.informs.org/cgi/content/abstract/38/3/345
2. http://www.investopedia.com/ask/answers/08/market-cannibalization-
coke-cola-wars.asp
3. http://marketingdeviant.com/
4. http://www.emeraldinsight.com/Insight/viewContentItem.do?
contentType=Article&hdAction=lnkpdf&contentId=857620
5. http://mktsci.journal.informs.org/cgi/
6. http://www.people.hbs.edu/besty/Esty_Airbus_Boeing.pdf