Market Cannibalization


DEFINITION of 'Market Cannibalization'

The negative impact of a company's new product on the sales performance of its existing related products. 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 occurs when a new product intrudes on the existing market for the older product, rather than expanding the company's market base. Rather than appealing to a new segment of the market and increasing market share, the new product appeals to the company's current market, resulting in reduced sales and market share for the existing product.

Also called corporate cannibalism.

BREAKING DOWN 'Market Cannibalization'

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. At times, market cannibalism is used as a strategy (called a cannibalization strategy) if the company wants to increase its market share, and hopes that the introduction of the new product will harm its competitors more than it will harm itself. Market cannibalization occurred, for example, when Apple introduced the more feature-rich iPhone and iPods that ate up sales for its lower-end iPods, including the nano, shuffle and classic series.

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