In my last post I mentioned that in tough economic times you must consider how the market is treating your customers and adjust your business model accordingly. Sometimes, during economic pressure, customers seek endlessly for better value in your product and therefore they expect your product offered at less cost. There are many different ways to deliver based on that demand and one of them is a business practice called the “Cannibalization” of your brand. It sounds odd and strange but interestingly enough, it works.

Cannibalizing your brand is when you reduce your own sales by introducing a better but similar product at a lower cost, in order to preserve or increase the market share. It is very important to understand that you must run the numbers to determine whether cannibalization simply to maintain market share makes sense. Your new sales has to generate enough revenue that at least covers the cost of cannibalization. There is an exception to this rule and that is, sometimes you have to eat the cost of cannibalization simply to maintain market share.

As a cure to fight the recession or as some people prefer to call it just a down turn of the economy, a lot of the giant brands are considering this business practice.
I am not sure if you read this but Marc Gunther of Huffington Post a few months back reported on Starbuck considering an “un-branding” campaign.
And as a part of that effort, they have started by renaming one of their stores in Seattle to “15th Ave E Coffee & Tea”. Now this decision by Starbucks can not be entirely blamed on the impact of the economy and declining sales, other factors such as acquisition of monopolization of the market had also something to do with it but the overall concept of cannibalization of the brand is something that has become more and more common during these tough economic times.

When we look at Apple and the launch of their iPhone, we can clearly see that along with the iPhone’s launch the sales of traditional iPods declined. Amazon is also reinventing the book industry with its launch of Kindle. They are going after the same concept of cannibalization. Their sales of books and publications are going to follow the rest of the paper based mediums and media but they are hoping they will maintain market share with Kindle.

When should I consider cannibalizing my own brand, you ask? Well, here are a few suggestions:

1) Conduct focus groups asking existing customers/potential customers to review your product and brand marketing communication materials such as your website, print material and advertisements in order to gain feedback.

2) Talk to your past and current clients and find out if there are areas in their business that needs improvement and if you might be able to help them.

3) Survey your target market. Start by asking your target market questions about what they are struggling with and how you can improve your product.

4) Attend forums and networking groups within your industry and keep abreast of the latest in your market.

5) Improve your processes, increase productivity and deliver better quality customer service.

Finally, I like to leave you with this thought. I have heard people say that if you don’t cannibalize your own brand and market when deemed necessary, someone else will. I will leave this one to the readers to chew on.