Sri Sharada Institute Of Indian Management - Research

(A unit of Sri Sringeri Sharada Peetham, Sringeri)

Approved by AICTE

Plot No. 7, Phase-II, Institutional Area, Behind the Grand Hotel, Vasant Kunj,

New Delhi – 110070

Website: www.srisiim.org

Assignment on:

“BRAND CANNIBALISATION”

Submitted To:- Submitted By:-

DR. S.N.NANDI ARNAB BANERJEE

ROLL:200090162

SEC:B

PGDM:2009-11
BRAND CANNIBALISATION:

The amount of demand for a new product that results from the erosion of demand for a current
product or service. This has to be taken into consideration when calculating the real return on
investment of a new idea.

Practices in brand management continually evolve and as these occur, irrelevant and outdated
concepts are done away with, while new and better management practices are adapted and suited
to enhance the image of the brand.

Brand cannibalism as the name implies, occurs when two separate product or service brands in
the same market category and from the same mother brand are placed in the market with the aim
of appealing to different target markets but both end up encroaching on the each other’s market
space. This practice though not new is a side and often undesirable effect of a market strategy
which churns out new products into the market to claim the space which will otherwise be
claimed by the competition.

Marketing Management:

In marketing strategy, cannibalization refers to a reduction in sales volume, sales revenue, or

market share of one product as a result of the introduction of a new product by the same
producer.

While this may seem inherently negative, in the context of a carefully planned strategy, it can be
effective, by ultimately growing the market, or better meeting consumer demands.
Cannibalization is a key consideration in product portfolio analysis.

For example, when Coca Cola introduced Diet Coke, a similar product, this took sales away from
the original Coke, but ultimately led to an expanded market for diet soft drinks.

Another example of cannibalization occurs when a retailer discounts a particular product. The
tendency of consumers is to buy the discounted product rather than competing products with
higher prices. When the promotion event is over and prices return to normal, however, the effect
will tend to disappear. This temporary change in consumer behavior can be described as
cannibalization, though scholars do not normally use the phrase "cannibalization" to denote such
a phenomenon.

In e-commerce, some companies intentionally cannibalize their retail sales through lower prices
on their online product offerings. More consumers than usual may buy the discounted products,
especially if they'd previously been anchored to the retail prices. Even though their in-store sales
might decline, the company may see overall gains.

In project evaluation, the estimated profit generated from the new product must be reduced by
the earnings on the lost sales.
Another common case of cannibalization is when companies, particularly retail companies, open
sites too close to each other, in effect, competing for the same customers. The potential for
cannibalization is often discussed[citation needed] when considering companies with many
outlets in an area, such as Starbucks or McDonald's.

Cannibalization is an important issue in marketing strategy when an organization aims to carry

out brand extension. Normally, when a brand extension is carried out from one sub-category (e.g.
Marlboro)to another sub-category (e.g. Marlboro Light), there is an eventuality of a part of the
former's sales being taken away by the latter. However, if the strategic intent of such an
extension is to capture a larger market of a different market segment notwithstanding the
potential loss of sales in an existing segment, the move to launch the new product can be termed
as "cannibalization strategy". In India, where the passenger-car segment is going dramatically
since the turn of this century, Maruti-Suzuki's launch of Suzuki Alto in the same sub-category as
Maruti 800, which was the leader of the small-car segment to counter the competition from
Hundai is seen to be a classic case of cannibalization strategy.

Maintenance:

In maintenance of mechanical or electronic systems with interchangeable parts, "cannibalization"

refers to the practice of removing parts or subsystems necessary for repair from another similar
device, rather than from inventory, usually when resources become limited. The source system is
usually crippled as a result, if only temporarily, in order to allow the recipient device to function
properly again.

Cannibalization is usually due to unavailability of spare parts, due to an emergency situation,

long resupply times, physical distance, or insufficient planning or budget. Cannibalization can
also be due to surplus inventory. At the end of World War II a large quantity of high quality, but
unusable war surplus equipment such as radar devices made a ready source of parts to build radio
equipment.

Diminishing Manufacturing Sources:

Sometimes, removing parts from old equipment is the only way to obtain spare parts, either
because they are no longer made, are obsolete, or can only be manufactured in large quantities.
In logistics, this is known as Diminishing Manufacturing Sources (DMS).

This is often the case in the military, and ships and aircraft, as well as other expensive equipment
that is produced in limited quantities. Such is the case with the aircraft carrier USS Kitty Hawk,
the sole survivor of a class of three ships built during the early-1960s. The ship herself is over
forty years old, and having manufacturers build individual custom replacement parts would be
highly impractical, and thus decommissioned ships, such as the USS Independence, have been
utilized for the necessary parts to keep the Kitty Hawk in operation.
Another example is the Union Pacific's 4-8-4 locomotive 838 is used as a spare parts source for
844 since the type has been out of production for decades and the builder itself is no longer in
existence.

One strategy used to combat DMS is to purchase additional inventory during the production run
of a system or part, in quantities sufficient to cover the expected number of failures. This strategy
is known as a "lifetime buy". An example of this is the many 30- and 40-year-old railway
locomotives being run by small operators in the United Kingdom. These operators will often buy
more locomotives than they actually require, and keep a number of them stored as a source of
spare parts.

Fiction:

Cannibalization in fiction refers to the adapting, borrowing and/or stealing of plots, characters,
themes and/or ideas from one story for use in another and/or from one medium to another, such
as a film adaptation of a book.

Authors Michael Baigent and Richard Leigh alleged that fellow author Dan Brown had
cannibalised their book The Holy Blood and the Holy Grail in writing The Da Vinci Code.

The Doctor Who television episode "Dalek" is an example of legitimate cannibalisation, the
writer having adapted elements of the Doctor Who audio drama Jubilee for this television
episode.

Conclusion:

In essence, brand cannibalism can be used to benefit the parent brand and the target market with
the use of brand extensions, but this has to be done strategically because it also has the inherent
ability to render a sister brand irrelevant in the marketplace. It is an advanced science of brand
marketing warfare which if used strategically can be of enormous advantage to the brand.