Product Cannibalization Calculator & Formula

Product Cannibalization Calculator

10%

20%

30%

Product Cannibalization Formula

$Cannibalization Rate = \frac{Cannibalized Sales}{Total Sales of New Product} \times 100$

Explanation

Product Cannibalization measures the impact of a new product on the sales of existing products. It is calculated by dividing the cannibalized sales from existing products by the total sales of the new product and multiplying by 100 to get a percentage.

Real-Life Example

Let’s say you launched a new product, and the sales of your existing products decreased by $2,000. The new product generated $10,000 in sales. To calculate the cannibalization rate, you would use the formula:

Cannibalization Rate = (Cannibalized Sales / Total Sales of New Product) × 100

Substitute the values into the formula:

Cannibalization Rate = ($2,000 / $10,000) × 100 = 20%

This means that 20% of the new product’s sales were cannibalized from the existing products.

Benchmark Indicators

Understanding cannibalization benchmarks is crucial for evaluating the impact of a new product on existing sales. Different industries have varying standards for cannibalization rates, and knowing these can help you set realistic goals and optimize your product portfolio:

Low Cannibalization: 0% – 10%, indicates minimal impact on existing products.
Moderate Cannibalization: 10% – 20%, indicates a noticeable impact on existing products.
High Cannibalization: 20% – 30%, indicates a significant impact on existing products.
Very High Cannibalization: Above 30%, indicates a substantial impact on existing products.

0% – 10%: Low Cannibalization, minimal impact.

10% – 20%: Moderate Cannibalization, noticeable impact.

20% – 30%: High Cannibalization, significant impact.

Above 30%: Very High Cannibalization, substantial impact.

Frequently Asked Questions

What is Product Cannibalization?

Product cannibalization occurs when a new product takes sales away from existing products within the same company, leading to a shift in market share without an overall increase in revenue.

Why is Product Cannibalization important?

Understanding product cannibalization helps businesses assess the impact of launching new products on their existing portfolio, enabling them to make informed decisions about product development and marketing strategies.

How can I minimize Product Cannibalization?

Minimizing product cannibalization can be achieved by clearly differentiating new products from existing ones, targeting different market segments, and ensuring that new products offer unique value propositions.

What factors influence Product Cannibalization?

Factors influencing product cannibalization include product similarity, market saturation, brand loyalty, and the effectiveness of marketing campaigns for both new and existing products.

Can Product Cannibalization be beneficial?

Yes, product cannibalization can be beneficial if it leads to overall market growth, strengthens brand loyalty, or allows the company to stay competitive by innovating and offering improved products.

How do I measure Product Cannibalization?

Product cannibalization is measured by comparing the sales of new products to the decline in sales of existing products. It can be quantified using the cannibalization rate formula.