Western Governors University (WGU) BUSI3731 VZT1 Marketing Applications Practice Exam

Product cannibalization refers to the situation where a new product introduced by a company takes sales away from one of its existing products. This phenomenon occurs when the new offering is similar enough to the existing product that it attracts customers who would have otherwise purchased the older item. Understanding this concept is crucial for organizations when they are deciding to launch new products, as they need to evaluate the potential impact on their existing product lines.

When a company launches a new product that successfully attracts the same customer base, it can lead to a shift in sales from one product to another rather than increasing overall sales. This is particularly common in companies that offer a range of products that can fulfill the same need or serve the same market segment.

By identifying that product cannibalization involves sales coming from existing buyers of your own products, the focus shifts to managing this phenomenon strategically. Companies often analyze market demand and customer preferences carefully to mitigate potential negative impacts on their overall sales when introducing new products.