Cannibalization

Cannibalization occurs when a new product, feature, or offering reduces demand for an existing product within the same company's portfolio. This represents the dilemma of innovation potentially undermining current revenue streams. Product managers must carefully evaluate whether cannibalization is strategic, acceptable, or problematic. Sometimes cannibalization is intentional and necessary. Companies may deliberately launch disruptive offerings that cannibalize existing products to capture emerging market trends before competitors do. For example, Apple cannibalized iPod sales with the iPhone, recognizing that someone would disrupt the market and preferring to disrupt themselves. Netflix cannibalized its DVD rental business with streaming. In these cases, the new offering addresses changing customer needs and prevents competitive displacement. However, unintended cannibalization can be harmful when a lower-priced product erodes higher-margin sales without expanding the total market or when poorly differentiated offerings confuse customers and split demand. Product managers analyze cannibalization by examining whether the new product attracts primarily existing customers or new ones, comparing profit margins between products, assessing total market expansion versus share shifting, and evaluating strategic positioning. Managing cannibalization requires clear product differentiation, thoughtful pricing and packaging, targeted marketing to distinct segments, and acceptance that protecting legacy products may sacrifice future growth.