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1 Cannibalisation can cause carnage NO Cannibalisation cant cause carnage Vasanthan Manoharan 2929643 MSc. Mar Comm International Product and Brand management & Strategy Unit:

Does Cannibalisation cause carnage to brands?

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Does Cannibalisation cause carnage or not? with few Indian market/brands as examples. *Presented by LSBU student for academic purpose

Text of Does Cannibalisation cause carnage to brands?

  • 1. Cannibalisation can cause carnage Cannibalisation cant cause carnage Vasanthan Manoharan 2929643Unit: MSc. Mar CommInternational Product andBrand management & Strategy 1
  • 2. Agenda Introduction Cannibalisation Academicians say Line stretching Product proliferation Brand Extension Early Majority Laggards Look forward Success Stories Conclusion Exceptions are not examples. - Anonymous 2
  • 3. Cannibals: An animal that feeds on flesh of its own species. (online source - oxford dictionary -) Cannibalism: In Zoology, cannibalism is the act of one individual of a species consuming all or part of another individual of the same species as food. In business, cannibalism is the act of one product of the Brand consuming all or part of market share of another product of the same brand. (online source - Encyclopaedia Britannica)Cannibalisationthe loss of sales of an existing product to a new offering in the product line http://www.babylon.com/definition/Cannibalisation/English 3
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  • 5. First order cannibalisation - loss in parent brands revenue. Second order cannibalisation - share loss by other brands in the corporate portfolio. Cannibalisation and trial are both potential consequences of line extension strategies with, normally, the former to be controlled and the latter encouraged. Line extensions may also play an important defensive role as Me too products, designed to match a competitors breadth of range and, as such, are more likely to gain volume from competitor brands. (Quelch and Kenny 1994).P.S. In the UK (Somji 2000) shows that, over the period 1995-1999, 95% of new product launches, in selected fmcgcategories, were line extensions. Source Wendy Lomax and Gil McWilliam (2001) Journal of Marketing Management, 17, 391-406 (online) 5
  • 6. Origin of cannibalisationLine StretchingWhen a company lengthens its product line upward or downward in the sameproduct category. Kotler P, Keller KL et al (2007) Marketing Management Pearson New DelhiDown - Market Strategy Up - Market Strategy Middle Up-Market Market Down- Middle market market Product proliferation Product proliferation is the expansion of the number of product offerings in a product category. http://american-business.org/672-product-proliferation.html 6
  • 7. Brand ExtensionAs Kotler states, brand extension is when a company introduces newproducts under a same brand name. e.g. Dettol Antiseptic lotion, Soap, Hand wash. Laggards and Early Majority. I call them Life savers.Early MajorityThose who adopt a product/service after it has been established.LaggardsThose who adopt the product/service as it reaches the end of its lifecycle. Theyusually pay a competitive price for the benefit of waiting. http://www.learnmarketing.net/glossary.htm 7
  • 8. Look forwardIf the planners always look on what might disrupt current sales, nothingwould get kick started with a fear of upsetting the status quo.One may occasionally cannibalize its own product, but that is a price thata company practising incremental innovation can afford to pay. Smith P G & Reinertsen D G (1991), Developing Product in half the time. Van Nostrand Reinhold (pg 78), NY. Apple is doing its best work ever, and were very happy with the products in the pipeline. We feel very very confident about the future of our company Cook T, COO, Apple Support Argument To move forward - its better to start with an optimistic approach over being pessimistic and stand still. 8
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  • 10. Success Story Hero Honda, India 1994 Splendor 2001 Passion For February 2003, The company derived over 80% of its revenues from the Splendor-Passion combine in the executive segment the most crowded section of the motorcycle market http://www.herohonda.com/media_archives02.htm#02http://www.fadaweb.com/two_wheeler_industry.htm 10
  • 11. Planned CannibalisationThe expected loss of sales of a product in a line to a more recent productintroduction; planned cannibalisation might occur when a company wants itscustomers to switch to another of its own products rather than to a product ofa competitor. http://www.salesopedia.com/ Either you put your product out of business or your competitors will do it for you. Ted Levitt (1960s) Support Argument When the competitors throw your product out, you are defeated and hence it causes carnage to the brand. The market share is eaten by competitor. But cannibalization helps in defending the market share and brand image. (even if its not planned) 11
  • 12. Success story - Toyota - Planned Cannibalisation June 2010 - Toyota introduced the Innova Special Edition to commemorate five successful years of the Innova in India.Between 2000 and 2004, Qualis was the The Innova has continued its marketprimary driver of a 31% market share leadership with growth in the MPVsegment, increasing the 2009 and has in the MPV segment in market shareof the segment in the Indian automobile maintained the No. 1 status since itsindustry from less than 9% in 2000 to launch.over 11% in 2003. Source: JD Power survey http://www.toyotabharat.com/inen/news/inn_ special_edition.asp 12
  • 13. http://www.siamindia.com/scripts/market- share.aspxToyota had registered 77% increase in its sales in April 2010. http://www.toyotabharat.com/inen/news/inn_special_edition.asp Support Argument Inspite of passenger cars lesser market share in automobile sector, Toyota has shown a tremendous growth. With the launch of Fortuner in same category as Innova, Innova is still the number 1 in MPV. 13
  • 14. Success story inevitable exampleOctober 4, 2010sales of laptops had halved since Apples slate was launched. - CEO of Best Buyhttp://www.techwatch.co.uk/2010/10/04/npd-claims-ipad-not-cannibalising-notebook-market/October 30, 2010Kelkoos findings - 35% of UK consumers would buy a tablet instead of a laptop.Also 69% said they would go for Ipad.18 January 2011the ipad eating PC sales is good for Apple.with low share in the PC market, if the competitors lose share, we gain.they call it cannibalisation, but I think there is some halo effect from Appleproduct to Apple product Cook T, Apple http://www.pocket-lint.com/news/38001/apple-to-increase-attack-market 18 January 2011, Pocket-lint 14
  • 15. Success Story - Titan IndustriesIn 1995, the company launched its first jewellery brand, Tanishq,in India.In 2005, the company launched its second jewellery brand, GoldPlus, to capitalise on opportunities in small towns and rural India.In 2011Tanishq: 118 outletsGold plus: 29 outlets28th Jan,2011.Despite a 19% increase in gold price this year in Q3, Tanishq hasrecorded high sales growth in both plain and studded jewellery. http://www.titan.co.in/press-releases/titan-industries-ltd-%E2%80%93- income-grows-469-and-net-profit-824-q3 15
  • 16. Finally All the stories that we discussed have shown that cannibalisation is good for any brand. It could be a strategy. Cannibalisation prevents the brand from being a late entrant in the market. Cannibalisation adds value and profit to the brand. Cannibalisation helps in being an innovator. It will never cause carnage to the brand but will cause to the competitors 16
  • 17. References 1. Smith P G & Reinertsen D G (1991), Developing Product in half the time. Van Nostrand Reinhold (pg 78), NY. 2. Crawford M & Benedetto A D (2008) New Product Management, McGraw-hill, Singapore 3. Christensen C M (1997) The innovators Dilemma when new technologies cause great firms to fail, Harvard, USA. 4. Kotler P, Keller KL et al (2007) Marketing Management Pearson, New Delhi 5. Wendy Lomax and Gil McWilliam (2001) Journal of Marketing Management, 17, 391-406 (online) 6. http://www.titan.co.in/press-releases/titan-industries-ltd-%E2%80%93-income- grows-469-and-net-profit-824-q3 7. http://www.britannica.com/EBchecked/topic/92695/cannibalism 8. http://www.learnmarketing.net/glossary.htm 9. http://american-business.org/672-product-proliferation.html 10. http://www.toyotabharat.com/inen/news/qua_withdrawl.asp 11. http://www.siamindia.com/scripts/market-share.aspx 17
  • 18. 12. http://fadaweb.com/review_06.htm13. http://www.surfindia.com/automobile/industry-growth.html14. http://ia.rediff.com/money/2003/mar/26hot7.htm15. http://www.pocket-lint.com/news/38001/apple-to-increase-attack-market16. http://www.articlesbase.com/cars-articles/five-top-selling-suvs-in-india- 1034248.html17. http://www.techwatch.co.uk/2010/10/04/npd-claims-ipad-not-cannibalising- notebook-market/18. http://www.titan.co.in/press-releases/titan-industries-ltd-%E2%80%93-income- grows-469-and-net-profit-824-q319. http://autonews.indiacar.com/news/n1052.htm20. http://www.herohonda.com/media_archives02.htm#02 18
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