Great Business Ideas: Cannibalizing

Great Small Business Ideas to Start: Cannibalizing

Instead of allowing other companies to eat into your market, consider bringing in new products to compete with your existing ones. This may sound like suicide, but handled expertly it allows you to remain on the cutting edge and ahead of the competition.

The idea

When there is a limited market for a particular product or service, any new competitors may consume the market. A possible response to counter this is cannibalization—bringing in new products to compete with your existing offering. This is a tactic used by a surprisingly large number of businesses, from the café franchise Starbucks to the technology manufacturer Intel.

Starbucks’ well-known tendency to open branches within minutes of each other represents a fierce desire to keep competition at bay.
Even though these branches will be competing with each other for a limited number of clients, Starbucks has recognized that this is preferable to competing with other potential market leaders, such as Costa Coffee and Caffè Nero.

Manufacturers of computer hardware and software, such as Apple, Intel, and Microsoft, are other well-known examples of cannibalization. By regularly bringing out upgraded versions of their products (ie faster computers or more virus-resistant software) they not only remain at the cutting edge of the industry; they also persuade customers to purchase new products, and allow less room for competitors to encroach into their market. This works well in fickle markets with limited loyalty (for example, Starbucks may feel that people wanting a coffee may be prepared to get it from anywhere). It also works when people want, for whatever reason, to keep up to date—for example, with the latest technological developments.

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In practice

  • Judge market conditions in order to decide precisely when to cannibalize a particular product. Developing a product often takes time and money—if the existing product is highly profitable and not at risk from competitors, postpone the introduction of a new offering to a time when it is necessary or desirable.
  • Cannibalize when it is anticipated that a competitor will introduce a potentially popular new product.
  • When sales are stagnating, cannibalizing your older products with more cutting-edge offerings can radically stimulate overall sales.
  • Do not be afraid of competing with yourself. Although it may seem daunting at first to risk cutting off the market for your older products, it should be recognized as a positive way to handle the cut-throat, dynamic nature of modern business. Also it will force you to innovate and overcome complacency.