Cannibalizing existing products can give you indigestion

The thumbnail version:

  • A new product line may appear to be an attractive proposition
  • Just make sure it isn’t going to cannibalize your existing lines

The full version:

Like other shops in this competitive industry, you may be considering ways to expand your business by expanding your product offering. This is of course a good idea but there are pitfalls to avoid—one of those is cannibalizing existing, lucrative offerings.

Don’t cannibalize your existing lines

Let’s say that your shop has a successful line of imprinted hats or maybe even a successful line of imprinted bags. In either case you may consider adding a less expensive version to your existing offering. If the new product appeals to a market you don’t yet have and it actually adds to your sales revenue, that’s good. But what if your existing customers turn to the new cheaper product? This would leave you with lower revenue which would not be good. This is known as  cannibalizing your existing market.

The only circumstances in which the new cheaper product would make sense if your current customers turned to it, would be if the margin per item were bigger or if overall volume and margins increased enough to exceed the cannibalization. This may not be impossible, but ordinarily it would be unlikely.

So, before adding that new, attractively-priced offering, make sure it’s the great idea it at first appears to be.